Zeroing in on Net-Zero:Matching Hard Law to Soft Law in Corporate Climate Pledges

One hundred and ninety-seven nations endorsed a target of net-zero greenhouse gas (GHG) emissions by midcentury in the 2021 Glasgow Climate Pact. As countries around the world have begun to develop their plans for deep decarbonization, it has become evident that the private sector will need to deliver much of what is required for the transition to an environmentally sustainable economy. The commitment to net-zero emissions by the year 2050 has therefore cascaded to the corporate world, leading hundreds of major companies to make their own net-zero GHG pledges. What constitutes a meaningful net-zero corporate pledge, however, remains unclear—and what must be done to implement these commitments remains similarly opaque. In the absence of regulatory mandates, corporate pledges could become little more than empty optimism and may harm companies’ reputations if perceived to be greenwashing. But while governments have long dithered, other stakeholders—notably investors, consumers, NGOs, and the media—are scrutinizing corporate net-zero commitments and pressing companies to explain their climate strategies, business transformation intentions, investment plans, and reporting schedules in search of credible metrics, methodologies, and interim targets.This Article explains why the scramble to make sense of corporate net-zero emissions targets matters—arguing that these pledges may emerge as a critical point of leverage in the effort to transition toward a sustainable economy, especially in the absence of comprehensive government climate change policies. It provides an analytical framework to highlight what net-zero pledges could—and should—mean. It identifies key considerations and challenges that must be addressed in corporate GHG reduction strategies. And it documents how stakeholder demands for more robust disclosure regarding corporate net-zero pledges, as part of a broader push for more rigorous Environmental, Social, and Governance performance reporting, might establish de facto global climate change rules for major companies—creating a self-regulatory “soft law” structure of emissions reduction guidelines and incentives anticipating future regulation and government action

Zeroing in on Net-Zero: From Soft Law to Hard Law in Corporate Climate Change Pledges

One hundred and ninety-seven nations endorsed a target of net-zero greenhouse gas (GHG) emissions by midcentury in the 2021 Glasgow Climate Pact. As countries around the world have begun to develop their plans for deep decarbonization, it has become evident that the private sector will need to deliver much of what is required for the transition to an environmentally sustainable economy. The commitment to net-zero emissions by the year 2050 has therefore cascaded to the corporate world, leading hundreds of major companies to make their own net-zero GHG pledges. What constitutes a meaningful net-zero corporate pledge, however, remains unclear—and what must be done to implement these commitments remains similarly opaque. In the absence of regulatory mandates, corporate pledges could become little more than empty optimism and may harm companies’ reputations if perceived to be greenwashing. But while governments have long dithered, other stakeholders—notably investors, consumers, NGOs, and the media—are scrutinizing corporate net-zero commitments and pressing companies to explain their climate strategies, business transformation intentions, investment plans, and reporting schedules in search of credible metrics, methodologies, and interim targets. This Article explains why the scramble to make sense of corporate net-zero emissions targets matters—arguing that these pledges may emerge as a critical point of leverage in the effort to transition toward a sustainable economy, especially in the absence of comprehensive government climate change policies. It provides an analytical framework to highlight what net-zero pledges could—and should—mean. It identifies key considerations and challenges that must be addressed in corporate GHG reduction strategies. And it documents how stakeholder demands for more robust disclosure regarding corporate net-zero pledges, as part of a broader push for more rigorous Environmental, Social, and Governance performance reporting, might establish de facto global climate change rules for major companies—creating a self-regulatory “soft law” structure of emissions reduction guidelines and incentives anticipating future regulation and government action

Facing the Coming Storm:The ECB’s Supervision of Climate & Environmental Risks

With climate change running unabated, the most remarkable development of the Banking Union over the past ten years certainly relates to the pioneering role of the European Central Bank in the supervision of climate-related and environmental financial risks that banks are facing. As soon as 2020, the ECB issued a comprehensive guide for the supervision of such risks and has since carefully monitored the financial institutions’ compliance with its supervisory expectations, even waiving on occasion the threat of administrative sanctions. While there is now an international consensus among supervisory authorities for the supervision of climate risks, the ECB continues to lead by example, and has in the process opened new avenues for the legal rethinking of its broader constitutional obligations