Skip to content

24 June, 2025

  • Saved Articles
  • My Account
  • Subscribe
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • long-term stewardship

      Stewardship strategies

      In times of uncertainty and growing risk complexity, boards need to evolve beyond stability. Here...

    • clear cyber risk

      UK companies face a clear cyber risk

      Boards need a laser focus on digital risks—and the UK needs stronger audit, governance and...

    • public markets

      How can we boost public markets?

      Growing companies need adequate liquidity, together with smart regulation and corporate governance that is not...

  • Comment
      • View all
    • clear cyber risk

      UK companies face a clear cyber risk

      Boards need a laser focus on digital risks—and the UK needs stronger audit, governance and...

    • Warren Buffett CEO succession: what boards can learn from Warren Buffett

      The billionaire investor is handing the reins to Greg Abel, after a long, strategic succession...

    • gender pay gap Act now to close the gender pay gap

      This month, it is 55 years since the Equal Pay Act, yet pay inequality persists....

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • UK Corporate Governance Code Board meetings ‘are not up to scratch’

      Nearly three-quarters of board members believe the board’s performance in meetings needs improvement, an expert...

    • financial sanctions Tariffs chaos drives boardroom focus on resilience

      Business leaders will prioritise the resilience of their organisations in the face of economic upheaval...

    • ai boards Corporate world has a ‘huge appetite’ for artificial intelligence

      AI could change boardrooms to the extent that directors’ duties would change too, a panel...

  • Board Careers
  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Board Advisory & Corporate Services
    • Korn Ferry CHRO 2025 (Copy)

      On The Highwire: Being a CHRO in 2025

      Korn Ferry surveyed 750 senior HR leaders (including 450 CHROs) to understand their key priorities...

    • Boardroom Bellwether CGI 2025 cover

      Boardroom Bellwether 2025

      Boardroom Bellwether is the annual survey by The Chartered Governance Institute UK & Ireland (CGIUKI),...

    • ACCA sustainability reporting 2025 cover

      Sustainability reporting: risk and materiality 2025

      ACCA’s sustainability guide takes a practical approach to helping businesses with sustainability reporting.

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Careers
    • Board Expertise
    • finance
    • Technology

Companies fail to credibly commit to net zero pledges

by Gavin Hinks on September 5, 2022

Corporate governance needs a booster of ‘green pill’ obligations to hold organisations to account over their promises, write academics.

Net zero green pills

Image: FrancescoScatena/Shutterstock.com

Traditional corporate governance measures are failing to keep big companies to their net zero pledges, according to a team of Oxford University academics.

The answer to shareholder concerns, they argue, is the introduction of “green pills”—contractual obligations that would trigger penalties should managers fail to keep to their emissions promises.

The view comes in a new paper from the team of three professors at Oxford—John Armour, Luca Enriques and Thom Wetzer—who all believe that corporate governance practices allow companies too much wiggle room when it comes to upholding their net zero pledges.

They say that whilst many big corporates make public net zero statements, most fail to stand up to close scrutiny. “Allegations of widespread corporate and investor greenwashing cast doubt on the credibility of laudatory net zero pledges,” they write.

Part of the problem is governance. Disclosures to shareholders fail because they focus on “financial” terms and leave out the “value climate-conscious investors place on emission reduction”.

Other traditional measures fall short too because a company’s shareholder mix might change, leaving a register balanced in favour of those less concerned with meeting emissions targets.

On the university’s blog, the team write: “Governance-based mechanisms such as executive compensation, board structure, say-on-climate votes and tweaks in the company’s purpose rest ultimately on the board’s discretion for their effectiveness, but shareholders elect the board.

“Hence, such mechanisms are not robust to the problems caused by changes in the mix of shareholders and their preferences.”

Green pills could fill the governance gap, argue the trio. One example might be sustainability-linked bonds that trigger higher interest rates if emissions commitments remain unfulfilled.

“Contract-based mechanisms,” they write, “deliver a degree of commitment that can be tailored to the firm’s circumstances. Once a green pill is in place, standard corporate governance mechanisms work to support transition, instead of creating potential obstacles.”

There has been growing concern in some quarters about the credibility of transition plans. Last year, amid much controversy, Shell, the energy giant, saw its transition plan supported by shareholders in a say-on-climate vote (though with some opposition) but heavily criticised in a Dutch court, when campaigners followed through with legal action.

The company continues to face further court action over its approach to climate change as campaigners bring further legal proceedings alleging directors have failed in their fiduciary duties.

Say-on-climate voting is proving increasingly popular among companies eager to display their climate credentials. Though currently not mandatory in any jurisdiction, the numbers at AGMs across Europe have increased this year, with the UK leading the way.

Of the 16 held this season, five garnered enough opposition (20% or more) to win a spot on the Investment Association’s Public Register of shareholder revolts.

However, the Oxford writers cast doubt on the ability of say-on-climate votes to hold companies to their emissions intentions, even if they were to become mandatory, as some have called for.

The climate and emissions landscape for companies is still evolving. While disclosures have increased, voting practices have evolved and shareholder engagement intensified, there remains some debate about how best to encourage companies to reach net zero. This paper suggests the debate has some way to run: let’s hope we have time for a resolution.

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • News round-up: this week in governance
    January 19, 2023

    Musk and Edelman trade jibes; communication is key to investor relations; "green hushing" in the US; BlackRock speaks up for sustainability.

  • Corporate disclosures improved after Covid-19
    August 18, 2023
    Employee returning to the workplace holding a mask

    Although the pandemic devastated economies, companies got better at corporate reporting, researchers in New Zealand found.

  • Governance experts call for change in corporate law
    November 21, 2023
    governance law

    Board duties should go ‘beyond their traditional role of representing shareholders’ interests’, writes a group of 15 academics.

  • Good governance boosts companies' CSR performance
    July 5, 2021
    Board members looking at corporate reports

    Study concludes that “corporate board reforms... appear to have a positive spillover for non-financial stakeholders”.

Search


Follow Us

Register Free

Stay in the know! Register to access the latest governance news; plus receive updates about our events and podcasts – Sign up here

 

Most Popular

Featured Resources

wef global risks 2025

The Global Risks Report 2025

The 20th edition of the Global Risks Report reveals an increasingly fractured global...
Supply chain management cover

Strategic Oversight in Supply Chain Management: A Guide for Corporate Boards 2025

Supply chains have become complex, interdependent and opaque and—according to research...
OB-Cyber-Security

Cyber Security: What Boards Need to Know

Maintaining firewalls, protecting servers and filtering malicious emails rarely make...

The IA’S Principles Of Remuneration 2024 2025

This guidance from the Investment Association is aimed at assisting remuneration...
Diligent 2024 leadership tech cover

Leadership, decision-making & the role of technology: Business survey 2024

This research report by Board Agenda and Diligent sheds light on how board directors...

Director Reference Guide: Navigating Conflict in the Boardroom

The 'Director Reference Guide' on navigating conflict in the boardroom provides practical...
Nasdaq 2024 governance report cover

Nasdaq 2024 Global Governance Pulse

This Nasdaq survey gathered data from more than 870 board members, executives, and...

Becoming a non-executive director (4th edition)

Board composition is the subject of much debate, while the role of the non-executive...
art & science brainloop new cover

The Art & Science of Creating an Effective Board

Boards are coming under more scrutiny and pressure than ever before from regulators,...
SAA First time NED guide

First Time Guide for Non-Executive Directors

The role of the non-executive director has never been more vital: to advise, support,...

Register Free

Stay in the know! Register to access the latest governance news; plus receive updates about our events and podcasts. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Board Advisory & Corporate Services
  • Media Marketing Solutions
  • Contact Us
  • About Us
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
|

Copyright © 2025 Questor Media Group Ltd.

  • Terms & Conditions
  • Privacy Policy
  • Sitemap