How to Set Realistic ESG Targets

Most ESG targets fail in one of two directions. They are either too vague to be actionable ("we will reduce our environmental impact") or too cautious to be credible (a 5% emissions reduction over ten years when the business is growing at 15% annually). Neither type drives change. Both create disclosure liability.

Investor scrutiny on target quality is intensifying. ISSB IFRS S1, published June 2023, requires companies to disclose the targets used to manage sustainability-related risks and opportunities, including the metrics and time periods involved. CSRD's ESRS 2 requires targets to reference material impacts and the company's sustainability strategy. Setting a target is no longer sufficient; demonstrating that it is credible and connected to business reality is the new standard.

This piece explains what makes a target genuinely useful, how the major frameworks define ambition, and the four disciplines that separate targets that drive real performance from ones that fill a disclosure section.

A useful ESG target has three properties. First, it is grounded in a verified baseline: a documented, methodology-backed starting point against which progress can actually be measured. Without this, the target cannot be tracked, restated when the business changes, or verified by a third party.

Second, it is connected to a pathway: a defined set of initiatives, with cost estimates, deployment timelines, and identified accountabilities, that explain how the reduction will be achieved. The pathway is what converts a target from a statement of intent into a plan.

Third, it has interim milestones. A 2050 net zero target with no milestones before 2040 is not a governance tool. Companies with credible targets set annual or biennial checkpoints, link those checkpoints to management KPIs, and report progress against them in their annual disclosures. The milestone structure is what makes a long-dated target governable.

Ambition level is defined by reference to an external standard. For climate targets, SBTi defines ambition scientifically, GRI Universal Standards define ambition relative to the significance of material impacts. ISSB IFRS S1 requires targets to be consistent with the company's stated strategy and risk management. The reference framework is the first decision in target-setting, not the last.

The tension between ambitious and realistic is not a trade-off to be managed. It is a false choice that disappears when targets are set correctly: from a verified baseline, backed by a costed pathway, owned below the sustainability team, and disclosed with the assumptions they rest on. A target built this way is ambitious because it reflects what the evidence supports, and realistic because the capital and accountability to achieve it are already in place.

For companies building or rebuilding their ESG target frameworks, ESG Astraa works across sectors to design target-setting processes that are grounded in emissions data, aligned to the relevant framework requirements under SBTi, ISSB IFRS S1, and ESRS, and connected to the capital and governance structures that make targets achievable.