What do enforcement bodies, lawyers and companies think about missed climate targets?

Paul Verney talks to firms that have revised their goals, consumer watchdogs and legal experts about what to do with unachievable commitments

When a lawyer says you’re under no obligation to do something, it usually brings relief. 

And that’s the situation, for now at least, that Martin Prohaska-Marchried says companies are in with their climate targets. 

“There is no cross-sector obligation for companies to correct a [climate] target, like the sort we see in the financial sector,” explains Prohaska-Marchried, a senior lawyer specialising in unfair competition and sustainable branding at Taylor Wessing in Austria. 

He’s referring to Article 12 of the EU Sustainable Finance Disclosure Regulation, “which requires the quick correction of statements if a point is reached where a target is not achievable anymore”.

But compliance isn’t the only motivation companies have for updating climate targets. 

Australian travel operator Intrepid Travel ditched its Scope 3 goal in October, saying it was “not comfortable maintaining a target that we know we won’t meet”. 

“The honesty really paid off, because we made sure people understood we still believe in targets” – Susanne Etti, Intrepid Travel

The firm’s climate manager, Susanne Etti, tells Real Economy Progress that, by 2024, Intrepid’s board realised it couldn’t retain its 2019 targets in good faith anymore.   

“We didn’t want to continue with the same targets and repeat the same story every year: ‘sorry, we’re still on the hump’,” she says. 

“And then get to 2034 and admit we’ve missed it.”

Intrepid is registered as a B-Corp, which Etti believes makes honesty and transparency “particularly important” for its brand, too. 

But, she adds, compliance was also a factor: the company was keen from a legal standpoint to avoid being accused of misleading its stakeholders.  

Etti admits she wasn’t sure how October’s announcement would be received, but ended up being pleasantly surprised.  

“I think the honesty really paid off, because we made sure that people understood we still believe in targets,” she tells REP.  

Intrepid replaced its Scope 3 target under the Science Based Targets initiative (SBTi) with a less ambitious but more “feasible” alternative, which involved it adding all customer flight in for the first time. 

Environmental and engineering services company Ricardo also dropped an SBTi target recently, saying that, while it had achieved a significant amount of decarbonisation already, there was no “economic or technically viable” way to fully achieve the goal. 

Intrepid and Ricardo are among just a handful of companies that have braved the potential media skewering and customer backlash in order to clarify their position on achieving net zero. 

“If a company continues to advertise that they will be net zero by whenever, when it’s clear they won’t, there is a duty to correct it” – lawyer Martin Prohaska-Marchried

As discussed in a previous article, most are currently keeping quiet – a move Prohaska-Marchried cautions against.  

“If a company continues to advertise that they will be net zero by whenever, when it is clear that they won’t, then there is a duty to correct it,” he says. 

It would be “unwise” to discreetly drop targets, Prohaska-Marchried continues, because it is “just a question of time before this issue goes to court”.  

A 2023 document from Pinsent Masons states that, while there is no overarching duty for firms to disclose missed environmental targets, (translated from German): “woe-betide anyone who has prominently advertised their company or product with a specific environmental target and then fails to meet it.”

And the legal risk is likely to increase for companies covered by the EU’s Unfair Commercial Practices Directive from September, when it be amended to require environmental claims to be backed up by an implementation plan and financial resources, and to be certified by a third-party body. 

“We’d really have to be convinced that it influences the average consumer and distorts their economic behaviour” – Joris Ruigewaard from the Dutch consumer protection authority

Joris Ruigewaard, an enforcement official at Dutch consumer protection authority ACM, says the incoming rules “might make companies more aware of what they say”. 

But, he notes, a claim only becomes a consumer protection issue if it is connected to the promotion, sale or supply of products.

Recent greenwashing cases against Dutch airliner KLM and France’s TotalEnergies, for example, both focused on claims made in adverts.  

If information is “a few mouse clicks away” on a company’s website, or in a sustainability report, the case can be harder to make, Ruigewaard says. 

“We’d really have to be convinced that even though this is on its website, it does in fact influence the average consumer and distorts their economic behaviour,” he tells REP. 

Supervisors are also being cautious on the investor-protection side of the discussion. 

Guilain Cals, a senior policy officer at the European Securities and Markets Authority (ESMA), says nuance is required when it comes to missed climate targets, to ensure issuers don’t just walk away from their goals. 

“ESMA and national regulators need to have a balanced approach” – Guilain Cals, senior policy officer, European Securities and Markets Authority

“Having fewer companies with targets would not be a positive outcome [for investors that want to support the climate transition],” he says. 

“So ESMA and national regulators, we need to have a balanced approach.”

This means taking action against the most “serious misstatements and omissions”, but also having a “constructive dialogue to avoid discouraging companies from making climate commitments, when they are still learning how to set their targets and how to substantiate them”.

Cals adds that ESMA does not see the achievement of a climate target as binary. 

“As time passes, it can become clearer where a company’s management has made assumptions that are proving to be wrong, or things have not unfolded as expected,” he says. 

What is important, he stresses, is that “companies communicate in a timely and transparent manner about the progress and potential delays, explain their efforts, and contingency plans to address issues that arise”.