Emissions Targets in Transition: From Voluntary to Mandatory
Why emission reduction targets are becoming a new norm – and how companies can turn compliance into opportunity
29 September 2025
case study
Contents
- The current state of target setting within regulatory frameworks
- Target setting within key regulations
- European regulations
- North American regulations
- Australian regulations
- How Anthesis can help
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Climate change is now recognised as a systemic financial risk, causing regulators and standard setters alike to accelerate the development of disclosure and accountability frameworks. This expanding global assortment of climate regulations – CSRD, CSDDD, RD 214/15, PPN 06/21, LCI, SB 261, AASB S2, and more – reflects a global push to ensure corporate transparency, protect economic stability, and align private capital with decarbonisation goals.
The question now becomes: how do these regulations impact corporate emission reduction targets and associated strategies?
In this article, we provide context for navigating this evolving regulatory environment and unpack how emerging rules are shaping corporate approaches to voluntary target setting. We explore what’s required, what’s optional, and, most importantly, how companies can strategically align compliance obligations with credible, forward-looking emission reduction goals.
The current state of target setting within regulatory frameworks
Until recently, most climate regulations focused on disclosure—requiring companies to measure, report, and govern climate-related risks and opportunities. In that context, emission reduction targets typically appeared in two ways:
- Reporting requirement: Companies disclose their targets if they exist, and
- Strategic context: Companies explain how they intend to meet those targets or how they will transition to a low-carbon economy.
However, several regulations, notably those in Europe, now explicitly require companies to set emission reduction targets. For example, firms in scope of CSDDD must set science-based, time-bound absolute reduction targets for Scopes 1-3, with a 2030 milestone and five-year reviews to 2050. The UK’s Procurement Policy Note (PPN 06/21) obliges suppliers on large government contracts to publish a Carbon Reduction Plan with clear targets. Spain’s Royal Decree 214/2025 mandates targets for large companies. Further, for sectors facing material climate risks—such as banks, insurers, and asset managers—target setting is fast becoming a de facto regulatory baseline rather than an voluntary practice.
Target setting within key regulations
Below, we break down key pieces of legislation by region and their connection with emission reduction target setting. Note that regulations are frequently updated or changed. This information is current as of September 2025. Further, the EU Omnibus Proposal may change the information below.
For a quick snapshot, the table below summarizes the key regulations, their regional scope, and the extent to which they require emission-reduction targets.
| Regulation | Region | Emissions Target Requirements |
|---|---|---|
| CSRD | European Union | Report-only (Paris-aligned, all scopes) |
| CSDDD | European Union | Yes (Paris-aligned, all scopes) |
| RD 214/25 | Spain | Yes (Paris-Aligned, scope 1 and 2) |
| Switzerland Ordinance on Climate Disclosures | Switzerland | Yes (country-aligned, all scopes) |
| PPN 06/21 | UK | Yes (Net-zero, all scopes) |
| SB 261 | California | Indirect (risk mitigation, that may include targets) |
| Greenhouse Gas Emissions Disclosure Standard | Canada | Yes (Paris-Aligned, all scopes) |
| AASB S2 | Australia | Indirect (risk mitigation, that may include targets) |
EUROPE
1. Corporate Sustainability Reporting Directive (CSRD)
Context
CSRD makes sustainability information a mandatory, audit-ready part of corporate reporting in the EU, backed by the European Sustainability Reporting Standards (ESRS). Climate change has a special consideration across sustainability topics and companies shall disclose a detailed explanation if this topic is deemed not material. CSRD does not mandate behavior, only how and what to report.
Target requirements
Companies must disclose whether they have set GHG reduction targets across Scopes 1-3, the base year and trajectory (including 2030 and 5-year milestones until 2050), and whether those targets are science-based and compatible with 1.5°C-aligned pathways. Furthermore, companies must report on whether they have a transition plan for climate change mitigation covering targets, actions, financing, relation to overall business planning, and annual progress.
Scope
Phased application covers large EU companies and certain non-EU firms with significant EU activity, with mandatory assurance and digital tagging; Member States will enforce penalties.
Explore our CSRD Resources
2. Corporate Sustainability Due Diligence Directive (CSDDD)
Context
CSDDD ties corporate due diligence to human rights and environmental impacts in operations and supply chains. It also contains obligations around climate action.
Targets requirements
Firms in scope must set science-based, time-bound absolute reduction targets for Scopes 1-3, with a 2030 milestone and five-year reviews to 2050, aligned to the Paris Agreement and EU climate neutrality goals. However, the EU Omnibus process may remove the need to develop and implement a transition plan. Both the European Commission and the EU Council suggested removing the requirement to implement a transition plan, while proposing to keep the requirement to develop one. However, according to the European Parliament’s draft position, the climate transition planning requirements should be removed from the CSDDD scope altogether.
Scope
Current thresholds target very large companies (e.g., >1,000 employees with turnover >€450M, and franchisors with >€22.5M in turnover); breaches can trigger significant penalties and civil liabilities, up to 5% of turnover. Note that these thresholds could increase further as a result of the EU Omnibus process. For example, the European Parliament is proposing to raise them to more than 3,000 employees and a global net turnover of over €450 million, while the EU Council is proposing thresholds of more than 5,000 employees and a global net turnover of over €1.5 billion.
Explore our CSDDD Resources
3. RD 214/2025 Spain’s GHG Reduction Plan regulation
Context
Royal Decree 214/2025 strengthens Spain’s carbon-reporting framework, elevating national obligations on carbon footprint calculation and mitigation planning. It requires GHG calculation and reduction plans for companies and public sector organisations.
Targets Requirements
Requires large companies to calculate and establish GHG reduction targets for scope 1 and 2 from 2026, and scope 1, 2 and 3 for public sector organisation from 2028. Companies must set targets in 5 years periods and be in line with the Paris Agreement and EU Regulation. Companies must also disclose and make public the measures implemented and plans to achieve the targets.
Scope
Applies to large companies (for GHG calculation and targets for scope 1 and 2 only) and State departments (for GHG calculation and scope 1 and 2 targets starting in 2025 and scope 3 in 2028).
Access our FAQ on RD 214/2025 (in Spanish)
4. UK’s Procurement Policy Note (PPN 06/21)
Context
PPN 06/21 requires suppliers bidding for major UK central government contracts to demonstrate climate action, embedding net zero alignment into public procurement.
Targets requirements
Suppliers must commit to achieving net zero by 2050 and publish annual GHG emissions data (Scopes 1 and 2, and a subset of Scope 3). Bidders must provide a Carbon Reduction Plan that sets out measures and milestones toward achieving their net zero target, updated regularly and aligned with procurement requirements.
Scope
Applies to contracts awarded by central government departments, executive agencies, and non-departmental bodies valued at £5 million or more per year.
5. Switzerland Ordinance on Climate Disclosures
Context
The ordinance requires large companies to be transparent on the climate impact of their activities on the climate and the impact of climate change in its activities, including developing a climate transition plan with GHG reduction targets aligned with Swiss climate goals.
Targets requirements
Companies will be required to report on climate-related disclosures aligning with the Task on Climate-related Financial Disclosures (TCFD). In particular, companies will be required to develop a transition plan in line with Swiss climate goals with quantitative targets and disclosures of methods and standards used.
Scope
Applies to public companies, banks and insurance companies with >500 employees and >CHF 20 million in assets or >CHF 40 million in turnover. Note that the thresholds and/or the requirements of the regulation may change as the Federal Council is revising the ordinance because of the EU Omnibus proposals and the requirements are paused for all companies.
North America
6. SB 261 (Climate-Related Financial Risk Disclosures)
Context
CA SB 261 is part of California’s package to force corporate climate transparency at the state level, focused on climate-related financial risk reporting. It mandates a biennial disclosure of climate-related financial risks.
Targets requirements
SB 261 itself does not prescribe specific emission reduction targets, but it requires disclosure of climate-related financial risks and adopted measures to reduce and adapt to those risks. One of the important reporting recommendations in the two standards accepted (TCFD and IFRS S2) is the GHG reduction targets disclosure. No third-party assurance is required.
Scope
Applies to companies with >$500M in revenue that “do business” in California.
Explore our SB 261 Resources
7. Canada’s Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets
Context
The standard requires large government contractors to join the Net Zero Challenge (NZC) or an equivalent initiative or standard, including the establishment of targets and identification of mitigation strategies.
Targets requirements
To comply with the NZC minimum requirements, government suppliers are expected to set a long-term net zero target by 2050 and at least 2 interim targets. Furthermore, the regulation requires these companies to also identify mitigation strategies to achieve the targets, as well as reporting their GHG inventories and climate-related disclosures based on TCFD.
Scope
Applies to government suppliers of individual contracts of more than $25 million, that are not government agencies, military or emergency contracts.
Australia
8. Australian Sustainability Reporting Standard: Climate-related Disclosures (AASB S2)
Context
AASB S2 is Australia’s first mandatory climate-related financial disclosure standard, effective for annual reporting periods beginning on or after 1 January 2025. It aligns with the ISSB’s IFRS S2 but is designed to work as a standalone climate-only standard. AASB S1, covering broader sustainability topics, remains voluntary.
Targets requirements
While AASB S2 does not mandate specific GHG reduction targets, it requires entities to disclose any climate-related targets they have set, along with the metrics used to track progress toward those targets—whether voluntary or regulatory. This forms part of its “Metrics and Targets” pillar.
Under the “Strategy” pillar, entities must describe how they plan to manage climate-related risks and opportunities, including the existence and details of any transition plan, such as assumptions, dependencies, actions, and resource allocations. Entities are also required to conduct climate-related scenario analysis, including at least one 1.5°C-aligned scenario and one “higher-warming” scenario to assess resilience.
Scope
AASB S2 applies to entities subject to the Corporations Act’s sustainability reporting regime. Reporting is phased: Group 1 entities (largest listed companies and large financial institutions) begin from 1 January 2025, with others phased in through mid-2026 and mid-2027. The standard covers climate-related governance, strategy, risk management, and metrics & targets across Scopes 1, 2, and 3.
Explore our AASB S2 Resources
How Anthesis can help
Emerging climate rules signal alignment on a global path forward, positioning emission reduction targets as a chance for companies to turn compliance into long-term value creation.Forward-looking companies will not simply follow evolving rules as they are rolled out; they’ll use them as a blueprint for ambitious, credible, and value-creating climate action.
Anthesis partners with organisations at every stage of their sustainability journey, helping translate regulatory expectations into actionable strategies. Our support ensures your climate commitments are credible, science-aligned, and designed to strengthen resilience and long-term business value.
Explore our resources for sustainability regulations, standards & frameworks
