Corporate emissions targets can do more than burnish a company’s green credentials. New research from Harvard Business School suggests they can also act as a powerful market signal, encouraging suppliers to invest in climate solutions even when the eventual demand is uncertain.
The study, led by assistant professor Shirley Lu, argues that when large customers announce emissions-reduction goals, they may create the commercial certainty suppliers need to develop and sell low-ca...
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rbon products and services. That matters because supply chains account for a substantial share of many firms’ emissions, yet the smaller businesses embedded in them are often less exposed to direct regulation than their big corporate buyers.
Lu and her co-authors examined more than two decades of global supply-chain data, drawing on millions of contract-year observations and using machine-learning methods to identify climate-related business activity. They focused on around 8,000 corporate climate announcements made between 2006 and 2023 that were visible to suppliers, such as those reported in news headlines and tied to a target year. The researchers found that suppliers were more likely to take on climate-related contracts after their customers set emissions targets.
The effect was not trivial. According to the paper, the likelihood that a supplier would engage in climate-related products and services rose after a customer made a target announcement, and increased further when multiple customers did the same. The researchers say the response was strongest where the customer relationship mattered most economically and where suppliers faced more uncertainty about future demand.
Importantly, the findings suggest that credibility is not a strict prerequisite for influence. Even targets that may appear weak from the outside still seemed to shift supplier behaviour, indicating that the announcement itself can function as a useful demand signal. In other words, the promise of future purchasing can be enough to move markets.
The study also found spillover effects beyond the firms directly linked through contracts. Other suppliers in the same industry, even those not currently tied to a target-setting customer, appeared to respond by investing in climate solutions of their own. That broader effect could help accelerate the scaling of technologies such as green steel and sustainable aviation fuel, both of which depend on early demand from major buyers.
The research arrives at a time when corporate climate pledges are under increasing scrutiny. By 2025, more than 10,000 companies worldwide had set emissions-reduction targets through the Science Based Targets initiative, but critics have argued that some goals amount to little more than public relations. Lu’s work offers a more nuanced view: even imperfect targets may still help coordinate investment across supply chains.
Other recent research points in the same direction. Studies on Scope 3 emissions, which typically make up the bulk of a company’s carbon footprint, have argued that supply-chain transparency and primary data sharing are essential for meaningful decarbonisation. European company data also suggests that investment in Scope 3 reduction strategies can improve ESG performance, reinforcing the idea that climate action in the supply chain is becoming a strategic issue rather than a purely compliance-driven one.
For businesses, the practical lesson is straightforward. Targets should be treated not only as internal commitments, but also as procurement signals that can reshape supplier expectations. The Harvard researchers say that companies do not need a flawless plan before acting: progress can start with visible commitments, particularly when customers move together and reinforce the signal.
That may be the deeper significance of the study. Climate targets are often judged by whether companies hit them on time. But according to Lu’s research, their value may also lie in what they set in motion long before the deadline arrives.
Source: Noah Wire Services
