Net zero targets are no longer optional aspirations. They have become critical commitments that are reshaping how businesses operate and compete. As regulation continues to evolve, it is moving from a compliance-driven exercise to a powerful catalyst for long-term transformation. For business leaders, the challenge is no longer whether to act, but how to turn regulatory expectations into strategic advantage.
During a recent conversation, Steve Gibbons - Head of Advisory for the UK & Ireland at LRQA and founding director of Ergon Associates - and Thomas Zumbühl, Associate Director for Sustainability Consulting at LRQA Advisory in Zurich, examined how regulatory frameworks, leadership accountability, and integrated planning are driving more effective net-zero strategies. Drawing on Steve’s expertise in business and human rights, and Thomas’s background in climate change mitigation and sustainability consulting, they highlighted why success depends on more than technical compliance or emissions reporting. It requires companies to embrace complexity, consider social and environmental interdependencies and take responsibility for managing a just and holistic transition.
Regulation is not just rules. It is direction.
One of the first points raised by Thomas was that regulation is increasingly setting the direction for corporate climate strategies. It is no longer just a matter of compliance. Regulatory frameworks are shaping how businesses define and structure their approach to net zero, embedding expectations around transparency, target-setting and long-term planning.
While many frameworks began as voluntary initiatives, such as the Science-Based Targets initiative, they are now widely adopted and often referenced within binding requirements.
This is particularly evident in the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), which are being rolled out across Europe. Together, they are reshaping expectations around climate disclosure and accountability.
"It’s really the ESRS standards that become the rulebook," according to Thomas. "Companies have to disclose emissions, but also outline a clear pathway for how they will reduce them, with short, medium and long-term targets."
Regulation is no longer just a set of rules to follow. It provides the framework and direction for how businesses are expected to manage the transition to a low-carbon future.
Transparency as a performance driver
The key shift introduced by these regulations is the requirement to disclose net zero targets and progress publicly. This does not mean authorities will penalise companies for failing to meet targets, at least not yet. But failure to disclose or demonstrate progress carries reputational risk.
"Transparency is the main requirement," Thomas explained. "Authorities won’t necessarily check if companies meet the targets, but they will check if they’ve set targets and are being clear and open about their progress."
This emphasis on transparency moves net zero from the margins of a company’s ESG reporting to the centre of strategic planning. As Steve put it, the act of publishing a plan puts it into the public domain and embeds it within internal decision-making.
"Because you have to disclose it and report on it, you are committing to it, both externally and within the company."
From climate strategy to business strategy
It is not enough to have a climate strategy that sits alongside business operations. If net zero ambitions are not embedded in the core business model, they are unlikely to succeed. Thomas emphasised this repeatedly.
"It’s not just about having a climate strategy. You have to integrate it into your business strategy. If it remains separate, it probably won’t work. Operations, procurement, and even the business model may need to change."
Leadership has a vital role to play in setting this tone. It is about more than signing off on a report. Leaders must articulate the commitment, take ownership, and ensure alignment across all levels of the organisation.
"This is about long-term direction," said Thomas. "Employees, investors, and stakeholders need to see that leadership is serious about the transition."
Risk, resilience and the importance of a just transition
One of the most thought-provoking parts of the discussion focused on the risks of unintended consequences. Companies often approach net zero as a technical challenge. But changes in operations, sourcing or energy use can have wide-reaching impacts on workers, communities and markets.
Steve put forward an example from a leading shipping company where a simple change - switching to a different type of paint - had a significant impact on fuel consumption.
"It made the ships glide more efficiently, so the engines worked less. These are small operational changes that deliver real emissions reductions."
But even positive changes can create risks. For instance, transitioning away from carbon-intensive processes can lead to job losses or economic disruption in certain communities. Thomas noted that if a company switches suppliers to reduce emissions without considering the local impact, it could damage local communities and their lifelihoods.
The biofuels case: a cautionary tale
To illustrate the complexity of transition, Steve shared a real-world example from a major biofuels project. The company had encouraged local communities to switch from food crops to biofuel crops to support renewable fuel production. The unintended consequence was food inflation.
"Communities started buying food instead of growing it because there was more money in growing fuel. That led to shortages and inflation. We had to recommend ensuring food was still being grown locally to maintain balance."
Thomas expanded on the risk to community resilience:
"If farmers rely on a single crop, they are more vulnerable. A change in weather or pests can wipe out their entire income. A diverse farming model is more stable. These social and economic aspects must be part of transition planning."
Linking pay to progress: the role of accountability
An emerging trend is the alignment of executive compensation with sustainability performance. Thomas noted that while not all companies link pay directly to net zero goals, many now include ESG performance in short-term incentive plans.
"Most of my key accounts include ESG performance in their executive pay structures. It’s not always specific to climate, but it signals that leadership is being held accountable."
Steve cited research showing that nearly 80 percent of large companies now tie some part of executive pay to sustainability goals. This trend is expected to grow as investors, employees and consumers demand more meaningful action.
Another useful tool is the introduction of an internal carbon price. This assigns a monetary value to emissions, which can help guide investment decisions and prioritise technology upgrades.
"When emissions have a financial cost attached, businesses can make better long-term decisions," said Thomas.
Practical guidance for business leaders
Based on the conversation, five key actions emerge for companies looking to improve the effectiveness and credibility of their net zero strategies.
- Make the plan real
- Develop a climate plan that is specific, time-bound and aligned with global targets like the Paris Agreement.
- Ensure the plan is integrated into the core business strategy.
- Embrace transparency
- Publicly disclose emissions targets and progress through recognised frameworks and standards (e.g., ESRS, ISSB, SBTi).
- Treat reporting as a tool for improvement, not just compliance.
- Anticipate and manage transition risks
- Assess social and economic consequences, including impacts on jobs and communities.
- Engage with stakeholders early to understand and mitigate risks.
- Build accountability
- Link sustainability outcomes to executive pay and performance metrics.
- Use internal carbon pricing to guide strategic investment.
- Communicate with conviction
- Leaders must be vocal and visible in their support for net zero goals.
- Use consistent, honest communication to build trust and momentum.
The path forward: from reporting to responsibility
As regulations evolve, the pressure to disclose becomes the pressure to act. But the most successful companies will not simply report on targets. They will treat regulations as a starting point for broader transformation.
Thomas summarised the key message for Net Zero Week:
"Technical solutions are not enough. Companies must consider the social context, the business environment and their communities. That is the only way to create a transition that truly works."
Steve added a final call to action:
"Have a plan. Review the plan. Own the plan. Communicate it. Live it. Because this isn’t just about your company. It’s about your role in building a sustainable future."
By turning rules into roadmaps, businesses can lead the way toward a more resilient, responsible and competitive future.
