Setting climate targets for companies: how to develop well-founded reduction goals

The carbon footprint is complete. For many companies, the next step seems obvious: setting climate targets.

In practice, however, this step is often more challenging than expected. Because between a completed carbon footprint and robust climate targets lies a key question: what is actually realistic, effective, and strategically meaningful for our company?

Many companies define CO₂ reduction targets before they fully understand their potential. This leads to targets that are either too cautious or unrealistic. Neither is helpful.

In this article, you will learn how companies can set well-founded climate targets, why the base year of the carbon footprint is crucial, and how to develop a reliable emissions reduction pathway.

Common mistakes when setting climate targets

When setting climate targets, many people initially think in terms of a target year and a percentage. This is exactly where the first mistake often begins. A target such as “40 percent fewer emissions by 2030” may sound concrete, but it is only robust if it is clear what it refers to and how it will be achieved.

In practice, three typical mistakes occur when defining targets:

1. Reducing climate targets to a single number1. Klimaziele auf eine Zahl reduzieren

Strong climate targets for companies consist of more than a target year and a reduction value. They also answer key questions:

• What is the company’s starting point?
• Which emissions are included?
• How ambitious yet realistic is the target?
• How can progress be measured later?

Only then does a target become a manageable foundation for climate management.

2. Defining reduction targets before understanding the potential

A carbon footprint is the foundation for any target setting. Without reliable emissions data, no well-founded climate targets can be developed.

However, the footprint alone is not sufficient. It shows where emissions occur, but not automatically where real reduction potential exists.

The biggest lever is not in the same place for every company. Depending on the business model, it may lie in energy supply, vehicle fleets, production processes, logistics, or the supply chain.

This is why it is important to clarify before defining targets which emission sources are most relevant, what potential arises from them, and what is realistically feasible from an operational perspective.

3. Focusing only on the target year instead of the reduction pathway

Many companies focus heavily on the target year. However, a target for 2030 or 2040 alone says little about how emissions will decrease along the way.

This is why a robust emissions reduction pathway is essential.

A reduction pathway describes how emissions should evolve over several years. It helps define interim targets, measure progress, and avoid pushing achievement to a distant endpoint.

A meaningful reduction pathway helps to

• make development over time transparent
• assess interim results more effectively
• identify deviations earlier
• manage climate targets more strategically

This turns a climate target from a future promise into a manageable development pathway.

What makes strong climate targets

Robust climate targets consist of more than a number and a target year. They are formulated in a way that provides guidance, is understandable internally, and can be managed reliably over time.

This requires more than ambition. Strong climate targets are primarily defined by clarity and measurability. Key elements include:

• a clear base year
• a defined target year
• a specific reduction value
• a clearly defined scope
• a transparent data foundation
• a realistic reduction pathway

Especially for CO₂ reduction targets, it is important not only to define the target itself, but also to make the underlying logic understandable. Only then can targets be communicated internally, embedded strategically, and monitored reliably.

The base year of the carbon footprint: what companies should consider

To set climate targets, companies need a clear reference point. This is where the base year of the carbon footprint becomes critical.

The base year is the year against which future reductions are measured. If a company aims to reduce emissions by 50 percent by 2030, it must be clear which year serves as the reference.

A suitable base year should:

• be based on reliable data
• be methodologically sound
• be representative of the company
• not be heavily distorted by one-off effects

This is more important than it may seem at first glance. An unsuitable base year can make target achievement appear artificially easier or unnecessarily difficult. For robust climate targets, this foundation is essential.

CO₂ reduction targets for companies: ambitious but realistic

In practice, companies often face a tension: climate targets should be ambitious but must remain grounded in reality.

A target that is too cautious fails to leverage existing potential. A target that is too ambitious quickly loses credibility if it is not viable internally. Strong target setting lies somewhere in between.

Key questions include:

• What level of reduction is plausible based on emissions data?
• Where are the biggest levers?
• Which conditions limit implementation?
• What developments are realistic in the short, medium, and long term?

For sustainability managers, striking this balance is critical. Climate targets should not only sound good, but also provide real guidance within the company.

Science-based climate targets for robustness and credibility

In principle, companies are free to choose how they define their climate targets. However, more and more companies are aligning with science-based standards. Science-based climate targets, such as those defined by the SBTi, are characterized by the following:

• alignment with the 1.5°C pathway
• clear and measurable structure (base year, target year, reduction percentage, clearly defined scope (1, 2, 3))
• use of real emissions data
• inclusion of Scope 3 (if relevant)
• immediate implementation of measures
• limited reliance on offsetting

Not every company needs to adopt science-based targets. However, it is often worthwhile to align with the core principles of such frameworks. For companies seeking particularly robust and credible targets, this can provide valuable guidance. Those interested in exploring this further should take a closer look at SBTi requirements.

Setting climate targets in companies: a five-step process to an effective reduction pathway

A practical process for defining targets typically looks like this:

Understand the carbon footprint

The carbon footprint shows where emissions occur and which areas are most relevant.

2. Assess hotspots and potential

Before defining targets, it is essential to understand where realistic reduction potential exists.

3. Define the base year and target framework

Determine which year serves as the reference and which emissions are included in the target.

4. Evaluate target options

Only at this stage should decisions be made about target ambition and time horizon.

5. Align targets internally

Climate targets should not be developed in isolation, but in alignment with strategy, data, and operational realities.

Conclusion: setting climate targets means making reduction manageable

Companies that want to set climate targets should not start with an isolated percentage. The key starting point is a robust carbon footprint, combined with a realistic understanding of internal potential.

A strong target system requires a well-defined base year, a transparent emissions reduction pathway, and a target definition that is ambitious yet achievable.

This turns CO₂ reduction targets into more than a communication statement. They become the foundation for effective, strategically managed climate action.

If you want to develop well-founded climate targets and take the next steps in a structured way, feel free to reach out. We support you with practical and expert guidance.

* This information is summarized editorial content and should not be construed as legal advice. VERSO accepts no liability.