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How flawed accounting practices, unrealistic baselines and unsound recalculations jeopardize the validity of corporate climate data.
Over the past five years, companies' climate ambitions have increased markedly.
Thousands of companies have committed to net-zero targets, aligned with the Science Based Targets initiative (SBTi), and have made climate targets at the heart of their strategy.
It has been an encouraging and necessary shift - one that deserves recognition. Many of us have applauded the development as a long-awaited signal that business is taking responsibility.
But beneath the surface of the ambitious climate targets lurks an uncomfortable truth.
Even the leading companies in the field, which have followed “best practice” and acted in good faith, are now finding that their goals do not hold up after all. Not because they've stopped trying, but because the tools and assumptions that underpin those goals were never built for the complexity they now face.
In March 2024, the Science Based Targets initiative (SBTi) removed 239 companies, including global giants such as Microsoft, Nestlé and Unilever, from their list of companies with evidence-based climate targets. And as of May 2025, more than 750 companies have been removed from the list.
It's a signal that the system is struggling. Not because companies don't try, but because the methods for tracking progress are flawed and the goals were often built on shaky foundations.
What is it that is going wrong?
At the heart of the problem is how many companies, especially when estimating Scope 3 emissions, calculate their climate footprint.
The preferred method for years has been monetary-based accounting, which uses models such as Exiobase to estimate emissions based on how much a company spends on goods and services.
These models use inflation-adjusted data and reflect changes in economic activity over time. They are based on sector averages, which can lead to deviations — often in the form of over- or under-estimation — when compared to vendor-specific or process-based data.
In practice, this difference can be significant. Based on our experience in SustainX, comparisons between consumption-based and activity-based emission factors often reveal differences of up to 30%, depending on sector and data quality.
When companies grow or invest more, especially during periods of inflation, their reported emissions can increase even if their supply chains become more sustainable.
However, this is only one part of the problem. Another problem is that many companies have set intensity-based targets that measure emissions against economic output.
Unfortunately, such targets can create the illusion of progress: if a company raises prices without changing its purchasing practices, emissions intensity improves, but real emissions remain unchanged.
In short: the numbers can thus look better, while the negative impact on the planet remains the same.
Even well-meaning companies are stuck in a system where economic growth, flawed baselines and accounting loopholes combine to make progress look real - even when it isn't.
A reality check of Danish C25 companies
We see it not only abroad, but also at home in Denmark.
A recent vetting from Dagbladet Børsen showed that several of Denmark's largest listed companies are struggling to meet their climate targets. Not because they have abandoned them, but because new data, stricter reporting rules and deeper insights into supply chains have suddenly revealed much higher emissions than previously calculated.
Many of these companies now face a hard truth: the targets they set for 2020, based on limited Scope 3 visibility or early estimates, are no longer tenable. They need to go back, rebuild their baselines and resubmit reduction plans.
But it's not just a technical issue. It is also the credibility of companies that is at stake.
Why silent recalculations undermine confidence
Some companies respond to this by adjusting or deleting targets in secret.
It's understandable, but unhelpful. Indeed, the reputational risk is significantly greater by remaining silent than by publicly communicating one's recalculations and misestimated climate targets.
Coca-Cola learned that the hard way when they were caught silently removing their 2030 commitment on recyclable packaging from their website. The backlash wasn't just about the goal, it was just as much about the lack of transparency.
If the goalposts have moved, say so, and explain why. From our experience, stakeholders can accept that plans evolve. What they don't accept is being kept in the dark.
How to stay credible when reassessing climate targets
You don't need perfect data to act with integrity. Here are five guidelines for how to revise your climate goals - while maintaining credibility:
- Make projections: Many targets fail because companies did not fully understand what it would take to achieve them before setting them. A stronger approach is to project projected emissions based on business growth, and then map that against known reduction opportunities and their potential. This creates more credible and achievable plans - before public commitments are made.
- Be radically transparent: Communicate honestly about what has changed - and why.
- Educate your stakeholders: Explain the errors in a consumption-based accounting. Explain how intensity goals work and be open about the limitations of the goals.
- Constantly adjust: Reality can change. This also means that you must continually revisit your goals and adjust them based on the latest data and the most realistic assumptions.
- Use milestones, not just end goals: Set annual or intermediate goals to show real progress or setbacks, even if long-term outcomes change.
Rounding
It has never been intended, or possible for that matter, that net-zero should follow a straight line all the way to zero. But somewhere along the way, we started pretending it was.
In recent times, we have seen how difficult the journey towards net-zero is. Progress is not just about goals, but equally about the ability to remain transparent and critical of one's own calculations on the path to climate neutrality.
The companies that will succeed in the next phase of its reduction strategy will not be the ones that never adjust. They will be the ones who adjust with integrity, explain their decisions and continuously adapt to reality and latest data.
Because credibility is not about being flawless. It's about staying honest when things get tough.
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