State of Decarbonization 2026: PwC

The business case for decarbonization has strengthened. Leaders are proving sustainability action improves margins, growth, and resilience.

For sustainability leaders, the last year didn't just feel like a storm. It was one.

Federal funding that catalyzed a generation of clean energy projects? Axed. Some sources were outright eliminated. Others were sunset, forcing companies to quickly get shovels in the ground or lose out.

Sustainability programs built over years were suddenly treated as liabilities, questioned both for impact and for optics. Landmark disclosure regulations were challenged as the ink was drying. And all the while, the threats some of these programs were designed to address, like extreme weather, geopolitical volatility, and fractured supply chains, kept intensifying.

The narrative wrote itself: sustainability had peaked. Time to move on.

Except that's not what happened.

This report draws on AI-enabled insights of millions of data points from across thousands of corporate disclosures and related documents. What we found tells a different story. Many companies changed how they talk about sustainability but not what they do about it. Commitments were persistent even as the ground shifted beneath them.

Eight in ten (82%) companies held steady or accelerated the timeline they needed for achieving their ambitions.^1,2

More companies are increasing ambitions (23%) compared to those decreasing (18%).^1,2

Progress held, with more organizations on track to meet their targets than in prior years.^1,2

Let’s be clear: this does not mean the world is on track to meet its climate goals. It does suggest, however, that corporate decarbonization efforts among disclosing companies are more durable than expected.

This staying power is predicated on corporate sustainability entering its next era, defined by financial discipline and strategic precision. Companies are sharpening capital allocation and pressure-testing every move against resilience, risk exposure, growth and profitability. Organizations are treating sustainability the way they would any other strategic lever and a harder-edged question is being asked: Can sustainability improve business economics?

The findings outlined throughout this report say yes: decisively.

As companies approach decarbonization through this new lens, five observations are coming into clearer focus:

Commitments are getting serious and that’s exactly what decarbonization needs. New targets grew by just 7%,^1,2 but quality outweighed quantity as commitments were increasingly science-based. Execution and progress on targets improved as more companies were on track against Scope 1 and 2 targets than in prior years.

Geopolitical energy shocks and surging demand caused electricity prices to spike, and policy changes phased out clean energy tax credits. Companies are spending less on decarbonization yet are getting more from it.^3,4 And it's not by investing in supply, but by cutting waste and prioritizing high-return initiatives, especially reducing energy demand. Investors are watching: In some hard-to-abate sectors, companies allocating higher shares of capital to climate transition-aligned activities are realizing stronger valuation premiums.

Most companies are operating with limited visibility where it matters most. Just 18% are consistently tracking supplier activities and emissions beyond tier 1.⁵ While supplier engagement enables Scope 3 emissions reductions, high-impact sources often sit outside an organization’s line of sight. Leaders are gaining competitive advantages by mapping supply networks, prioritizing engagement with high-impact suppliers, and establishing incentives and accountability to support their performance.

Scope 3 decarbonization is increasingly won or lost at the product level. Companies that are on track with their Scope 3 targets are more likely to have integrated sustainability practices across the product life cycle; 31% of on-track companies demonstrate strong adoption of product sustainability practices compared to 19% of those that are off track on Scope 3.^1,5 The commercial case is also compelling: products featuring sustainability attributes can achieve a revenue uplift of 6% to 25%+ over products without such emphasis.^6,7,8,9,10

Companies are sitting on a potential game changing solution. While 60% of companies are starting to use AI for decarbonization, less than 1% report measurable results. Companies that wire sustainability directly into AI systems can spot and capture emissions reduction opportunities at a scale and speed previously thought impossible.⁵

Use the navigation bar on the righthand side of the screen to explore these observations, including the steps leading companies are taking to navigate this business environment. For a deeper dive and analysis of the implications for your business, access the full report.

Download the full report

Now, let’s get into where progress is holding steady, where the business case is strongest, and which levers you can focus on now to drive resilience and returns.

Shifting from ambition to disciplined execution

In a year that tested many organizations, resolve on decarbonization endured. Eight in ten companies (82%) kept their climate commitments steady or accelerated the timelines for achieving them. Progress held, too: more companies reported they’re on track to achieve their targets than in prior years.

Still, nearly one in five companies (18%) decreased their climate ambitions against a backdrop of higher costs, tighter capital, and policy uncertainty.^1,2 While some stepped back from prior commitments or reduced the absolute quantity of emissions they plan to abate, not every pullback signaled retreat. In some cases, it reflects healthier discipline—organizations recalibrating with better data, tighter governance, and more realistic execution plans. The result may be fewer headline-grabbing promises, but commitments that are more credible, financeable, and deliverable.

In 2025, the number of companies announcing new decarbonization targets grew 7%, stabilizing after a 29% increase in 2024 and a 45% increase in 2023.^1,2 After years of rapid adoption, the pool of large public companies that have not established targets is naturally shrinking. While the number of new targets being set is declining, new targets are increasingly rigorous with most companies setting science-aligned or externally validated science-based targets.

As large companies engage their supply chains, we see growth in target-setting in the Asia and Oceania region, accompanied by a decrease in median revenue for companies setting Scope 1 and 2 targets from $4.1 billion in 2020 to $1.1 billion in 2025.^1,2,3

Steady progress, but hard work remains on Scope 1, 2 and 3 emissions reductions

Despite energy supply constraints and changes in US policy, the steady march on emissions reductions continues.

Scope 1:

Reductions to on-site emissions are capital intensive, operationally complex, and slow to execute, requiring asset-level analysis of fuel and refrigerant sources and clear pathways to electrification or alternative fuels. Only 46% of companies are on track from a Scope 1 perspective, unchanged from the prior year.^1,2 Leaders are tackling this by tying decarbonization to asset replacement cycles, using natural reinvestment points to reduce fuel demand and associated costs and emissions.

Scope 2:

Companies continued to address Scope 2 emissions. They are developing more detailed and actionable plans to achieve their targets, and many have moved aggressively on Scope 2 and renewable energy efforts, whether building their own onsite renewable energy sources or purchasing renewable energy from others.

Despite progress to date, Scope 2 decarbonization may become more challenging in the future as hyperscalers’ energy demand swells to accommodate AI and data center capacity, while US clean energy production and investment tax credits have been eliminated and large scale wind projects have been stalled.

Scope 3:

Scope 3 dominates most companies’ emissions profiles, far exceeding operational emissions.^1,2 Progress, however, remains uneven. Fifty-six percent of companies are currently on track against the Scope 3 emissions reduction pathways they have set, reflecting the complexity of influencing emissions that sit outside companies’ direct control.¹Leading companies are evolving products to consume less energy and natural resources, enable electrification, and reduce upstream material and manufacturing inputs.

Achieving energy resilience through sharper capital allocation

Amid rolling blackouts, rate spikes, and supply chain risk, 2025 was the year energy resilience became a widespread board-level priority.

Policy shifts accelerated the phasing out of clean energy tax credits while introducing new domestic content requirements. The impact is clearly visible in the market: total US and Europe contracted power purchase agreement (PPA) volumes fell 19% and deal counts dropped 26% in 2025.¹¹ While there has been an uptick in clean energy deals in early 2026, that revival has been driven almost entirely by data center developer matching new AI-driven demand.¹²

To date, companies benefited from tailwinds that kept capital expenditures light: cleaner grids, renewable energy credit and contracts, low effort efficiency gains like LED conversions and supportive policy initiatives.

Going forward, the equation shifts. Tailwinds weaken or disappear, while pressures tied to energy resilience, regulation, and shifts in customer demand grow more immediate. The companies that outperform will be those that respond with focused, disciplined investment in climate transition–aligned activities.

In 2025, companies allocated slightly lower CapEx toward climate transition-aligned activities.¹ Yet we also saw more companies making progress against their climate targets, while holding or strengthening their climate ambitions.^1,2 Together, these trends suggest that companies are becoming more rigorous and thoughtful about where and how to invest in decarbonization—avoiding low-impact initiatives in favor of projects that feature lower marginal abatement cost of carbon.

In several hard-to-abate sectors—metals and mining, oil and gas, and construction and real estate—transition-aligned CapEx is consistently higher and companies that allocate higher shares are commanding stronger valuations. In these sectors, where transition risk and adaptability are material and capital requirements are highest, investors are differentiating between decarbonization leaders and laggards.

What are leading companies doing different on energy to build resilience?

As energy costs rise, grid reliability becomes less certain, and policy support shifts, companies are under growing pressure to manage energy more strategically. Leaders are moving beyond isolated projects to strategically allocating capital that reduces exposure, protects operations, and supports resilient decarbonization.

Leading companies are grabbing quick wins in energy efficiency and then moving to targeted investments to lower cost and risk. Energy management systems, smart building technologies, and industrial sensors help pinpoint where interventions can drive the greatest benefits.

Leaders prioritize mission-critical sites based on downtime costs and local grid conditions. They map critical loads, shift flexible demand, and deploy onsite assets such as battery storage and generation to support continuity of power.

In a more volatile energy environment, leading companies focus on applications where cost, performance, and emissions benefits are durable. They maximize capital efficiency by planning electrification retrofits around end-of-life timelines for existing assets. They factor the value of reliability and reduced risk into capital decisions, while stress-testing investments against local grid conditions.

Rather than relying on one-off contracts, leading companies combine procurement approaches that reflect when and where they use power. Renewable energy sourcing is integrated into this strategy, with careful attention to hedge value, basis risk, and the credibility of sustainability claims.

They govern energy as a strategic function and communicate it clearly to the market. Leading companies elevate energy to the board level while distributing decision rights across procurement, operations, finance, and sustainability. Externally, they link energy and decarbonization investments to cash flow, resilience, and competitive positioning, helping investors distinguish execution from ambition.

De-risking supply chains

The ability to map suppliers and track material flows across the supply chain is increasingly important as geopolitical disruption, shifting tariffs, energy market volatility, and climate-driven raw material shortages increase uncertainty. With stronger visibility, companies can not only respond to disruption with greater agility but also identify and address their most impactful sources of supply chain emissions.

Even as risks grow more acute and geopolitical crises more frequent, many companies are still navigating with limited maps of their supply chains.

In a cross-sector sample of 158 Fortune 500 companies, 25% of companies analyzed lack visibility beyond tier 1 suppliers, while 58% report partial tier 2 visibility, and just 18% are consistently tracking supplier activities and emissions beyond tier 1.⁵ This gap can create mismatches between effort and impact for companies who make and sell physical products and rely on complex supply chains. These companies act on what they can see and measure, while high-impact sources of emissions often sit outside their line of sight.

What defines leadership in supply chain decarbonization?

As supplier visibility improves, emissions data becomes more actionable, and engagement practices mature, companies are building the foundational capabilities to unlock Scope 3 progress—and strengthen the resilience and cost performance of their supply chains.

Leading companies expand supplier mapping beyond tier 1 by requiring suppliers to disclose upstream partners, by tracing material and product flows, and by using data platforms to extend visibility into their supply chains—creating the transparency needed to act with precision rather than react under pressure.

Leaders prioritize supplier data collection and quality to help surface key risks and quantify embedded emissions more accurately. They often require suppliers to disclosure their 2 suppliers, set emissions reductions targets, and report emissions in a standardized way.

Leading companies recognize that suppliers often need more than expectations; they need support. Companies train suppliers on decarbonization approaches, collaborate on improvement initiatives, and often incentivize supplier action by providing access to funding for decarbonization investments ranging from renewable energy and equipment upgrades to regenerative agriculture.

Rather than spreading attention evenly across the supply base, leaders prioritize the suppliers, materials, and production processes that account for the largest share of emissions and operational risk. This allows companies to accelerate progress while reducing exposure to energy volatility, constrained materials, and supply disruption.

Designing decarbonization into products

Design decisions, spanning material selection to product functionality, can determine up to 80% of a product’s life cycle environmental impact.¹³ That makes product development one of the most powerful levers for reducing emissions, improving resource efficiency, and competing on environmental performance.

The commercial case is also compelling: studies show that products with differentiated sustainability attributes are realizing a 6% to 25% revenue uplift, depending on sector and product type.^6,7,8,9,10 As a result, companies that embed sustainability into their products are not only able to reduce emissions, costs, and risks; they are creating opportunities to differentiate their products, capture price premiums, and new revenue streams.

The influence of product efforts on decarbonization performance is already visible. Companies that are on track with their Scope 3 targets are more likely to have integrated sustainability practices across the product life cycle. For the subset of Fortune 500 companies studied, approximately 31% of on-track companies demonstrate scaled adoption, compared to 19% of those that are off track on Scope 3, and 14% of companies without Scope 3 targets.^1,2,5 Product sustainability is emerging as a key mechanism for translating ambition into measurable progress.

In consumer goods and retail, these offerings are increasingly linked to financial performance. Companies in this sector that are advanced in the integration of sustainability into product design are realizing 8% to13% greater levels of profitability than less-mature peers and trade at higher valuation multiples.^3,4

What differentiates product decarbonization leaders?

While many companies are experimenting with low-carbon product transformation, leaders are building the capabilities needed to turn sustainability into a product advantage.

While product sustainability initiatives are often managed as isolated projects, leading companies connect it to enterprise priorities and align incentives accordingly, treating it as a cross-functional driver of revenue growth, margin enhancement, and risk reduction.

Leading companies embed life cycle thinking and circular design principles into R&D and development processes. Decisions on materials, performance, and durability are made with both emissions and customer outcomes in mind.

Product decarbonization depends on understanding the effects of upstream materials selection and manufacturing processes across the product life cycle. Companies with greater visibility into their supply chains and stronger supplier engagement are better positioned to quantify product impacts and identify opportunities for design improvements.

Consistently reliable product, manufacturing, and sales data, supplemented by life cycle assessments, product carbon footprints, environmental product declarations, and traceability tools, allow companies to quantify emissions, identify hotspots, and credibly demonstrate impact.

Leading companies equip their sales teams with clear, data-backed value propositions that translate decarbonization into business value for customers often in the form of energy and waste cost savings, regulatory compliance, reduced emissions, and improved reporting. In B2B markets especially, decarbonization becomes a competitive asset when organizations can show how it helps customers cut costs, improve margins, and meet their own sustainability commitments.

Translating AI into decarbonization impact

The adoption of AI is accelerating with 60% of companies using AI for operational decarbonization.⁵ Yet only one in five companies strategically use next-generation AI for decarbonization, and fewer than 1% have quantified emissions reductions from AI initiatives.⁵

For all the focus on advanced AI use cases, the biggest near-term opportunity is more fundamental: addressing sustainability data challenges.

Many companies still struggle with fragmented emissions data, manual reporting processes, and limited visibility beyond their own operations. This constrains both decision making and disclosure quality. Yet, as of August 2025, only about 14% of companies publicly report using AI to improve sustainability or emissions reporting, despite data quality being the biggest constraint on progress.⁵

That gap is becoming harder to defend. As regulatory expectations around climate disclosure continue to rise, emissions data is no longer confined to annual reports; it is increasingly observable, verifiable, and comparable across companies. Investors can triangulate reported numbers against independent, high-frequency datasets. This shifts the role of sustainability data from compliance exercise to performance signal, one that will become more pronounced as investors, regulators, and companies place greater weight on verifiable emissions information.

So, where is AI delivering value now?

Utilities and electrical equipment companies are deploying AI to advance grid performance, forecast renewable generation, and manage energy demand. Industrial manufacturers are applying AI in smart factories to reduce energy use, improve process efficiency, and minimize waste. Transportation and logistics companies are using AI to improve routing and fleet utilization, reducing both fuel consumption and operating costs. Technology companies are applying AI to data center energy management, improving cooling efficiency and hardware utilization. Across these sectors, AI is delivering the greatest decarbonization value where companies have direct operational control and rich streams of real-time data.

What sets AI decarbonization leaders apart?

As companies experiment with AI, leaders are standing out through greater discipline and strategic focus in how they apply it.

Rather than chasing experimental use cases, leading companies prioritize applications of reliable data that often pertain to energy use, production efficiency, and logistics performance.

Instead of layering it in after decisions are made, they embed emissions, energy, and cost considerations directly into models and decision logic.

AI initiatives are evaluated not only by productivity gains, but by their ability to deliver measurable energy savings or emissions reductions.

By automating emissions tracking and sustainability reporting, companies improve the accuracy of disclosures while generating the visibility needed to support operational improvements.

Among leading companies, AI is becoming a practical tool for improving operational efficiency, strengthening climate data systems, and accelerating measurable decarbonization progress.

Looking ahead—don’t bet on the future, build for them all

In a rapidly changing world, yesterday’s trendline is an unreliable forecast. Assumptions change. Volatility shows up where there used to be none. Extreme weather can cripple assets and operations. Energy demand can spike in places you didn’t model. The next decade of decarbonization won’t feel like a straight line. It will feel like a sequence of forks in the road. In that environment, the smartest question isn’t “What happened last year?” It’s better to ask, “What will hold up over the next five to ten years?” and “How can the business be resilient when conditions inevitably change?”

That’s why sustainability is being framed in financial terms. Taken together, the findings show: sharper capital allocation is driving better outcomes, energy is now a board-level strategic priority, supply chains are a competitive unlock, product sustainability is emerging as a growth engine, and AI holds tremendous promise in enabling decarbonization. But knowing where value sits is only half the equation. What separates leaders from the rest is how they execute.

The practical implications are straightforward: build and execute a strategy that performs across scenarios where transition pressures, physical asset risks, supply chain constraints, and policy signals don't move in sync. Leading companies are deploying capital more efficiently, managing their products and their supply chains more effectively, and taking various no-regrets actions that translate into revenue growth, margin improvement, and risk reduction. These moves make the organization more investable.

Those actions include:

Redesign products to use fewer, lighter, or alternative materials.

Embrace a circular business model that focuses on recyclability and modularity.

Communicate credible and transparent sustainable product claims.

Outcome: Products with authentic sustainability attributes are becoming a growth engine, commanding 6% to 25%+ revenue uplift over conventional alternatives.^6,7,8,9,10 At the same time, resource-smart product design can help insulate margins from raw material price swings, supply shortages, and tariff escalation.

Invest in high-impact energy efficiency innovations such as smart buildings and process optimization.
Enhance energy management and load shifting, reducing peak demand charges.
Use AI to detect inefficiencies, optimize equipment, anticipate maintenance requirements, and enhance material sourcing and resource efficiency.

Outcome: Every unit of excess energy and raw materials eliminated is a unit permanently removed from exposure to price volatility, grid instability, and carbon pricing exposure. That supports more stable margins and cash flows.

Increase transparency across the value chain to avoid regulatory exposure, hidden costs, and inefficiencies.
Engage suppliers to set clear expectations on emissions, data, and performance as scrutiny rises.
Use AI and analytics to identify concentration risk, geopolitical exposure, and compliance gaps early.
Monitor external signals such as energy constraints, raw material volatility, disruptions, and evolving regulations.

Outcome: Greater visibility and alignment help buffer against operational and value chain risks while improving cost control.

The past year tested whether decarbonization would bend under pressure. It didn’t. Ambition held because value held. And the companies that continue to act on that reality are turning decarbonization into a durable source of resilience, margin protection, and growth.