Discussion Papers
Innovation and Entrepreneurship Research
Innovation and Entrepreneurship Research
Mapping the Dynamics of Corporate Climate Innovation Strategies
(2026). Mapping the Dynamics of Corporate Climate Innovation Strategies.
With the adoption of the Paris Agreement, 194 countries pledged to keep global temperature increases well below 2°C, requiring net-zero emissions. Firms are key actors in achieving these net-zero targets, given their control over research and development, technology deployment, production processes, and supply-chain emissions. Standard indicators that measure firms' progress towards net-zero emissions, such as changes in scope 1 and 2 emissions, ESG scores, and green patenting activities, are limited in their ability to assess the adoption and diffusion of clean innovation activities and to evaluate whether companies implement the radical change that is required to reach net-zero emissions. These indicators have been widely adopted in large-sample studies since evaluating firms' climate innovation activities at a granular level was infeasible due to the volume and complexity of unstructured corporate disclosures. Here, we leverage large language models to construct a granular measure of firms' climate innovation activities. Drawing on 8,390 sustainability and annual reports covering 500 companies between 2013 and 2024, we extract and classify individual climate innovation initiatives by their degree of radicality, from incremental improvements to operations to fundamental transformations of core products and processes. We find strong evidence that firms' climate innovation activity, including both incremental and radical initiatives, sharply accelerated after the Paris Agreement in 2015. However, post-2022, only incremental initiatives continued to rise, while those entailing radical change stagnated. We argue that a subset of innovation activities implemented during the high-ambition period between 2016 and 2022 is particularly sticky. These include activities in the automobile sector, where alternatives to the internal combustion engine are technologically mature and innovation activities are deeply integrated in companies' core production systems, making rollbacks costly. In contrast, 83% of innovation activities in the oil and gas sectors can be easily reversed due to their low integration into firms' core production systems.