Breach of the 1.5°C Threshold – Corporate Impact and the ESG Imperative

Introduction

The industrial revolution, beginning in the late 18th century, marked a turning point in human history. Rapid industrialisation and the harnessing of fossil fuels powered economic growth, technological advancement, and globalisation. However, it also initiated a sustained trajectory of greenhouse gas (GHG) emissions that fundamentally altered the Earth’s climate system. Today, scientific consensus recognises that the planet is dangerously close to breaching the 1.5°C global warming threshold, a critical benchmark identified under the 2015 Paris Agreement. Breaching this limit is not merely symbolic—it carries catastrophic consequences for ecosystems, human health, economies, and global stability.

Corporates, as both contributors to climate change and central actors in economic systems, face increasing scrutiny. Litigation risks, shareholder activism, regulatory obligations, and reputational pressures are converging to make environmental, social, and governance (ESG) frameworks not optional, but essential. This article analyses the significance of the 1.5°C threshold, the role of corporates in contributing to and mitigating climate change, and why ESG compliance is not only important but inevitable in the future of business.

The 1.5°C Threshold: Science and Significance

The Intergovernmental Panel on Climate Change (IPCC) has repeatedly warned that exceeding a 1.5°C rise in average global temperatures above pre-industrial levels will result in severe, widespread, and potentially irreversible impacts. These include intensified heatwaves, sea-level rise, loss of biodiversity, crop failures, and public health emergencies. The Sixth Assessment Report (2021) of the IPCC found that even at 1.5°C warming, approximately 14% of terrestrial species face high risk of extinction, while at 2°C the risks nearly double.

The Paris Agreement seeks to hold warming to “well below 2°C” and pursue efforts to limit it to 1.5°C. Yet, current corporate-driven emissions trajectories suggest that the world is on track for between 2.4°C and 2.7°C warming by the end of the century. This makes urgent corporate engagement with sustainability not a choice, but a legal, ethical, and existential imperative.

Corporate Contributions to Climate Change

Corporates have historically been among the largest contributors to climate change. According to a landmark Carbon Majors Report (2017), just 100 companies are responsible for over 70% of global industrial GHG emissions since 1988. These emissions primarily stem from:

Fossil Fuel Production – Oil, coal, and natural gas companies have supplied the majority of carbon-intensive energy.
Manufacturing and Industrial Processes – Cement, steel, and chemical industries contribute heavily to carbon dioxide and methane emissions.
Agribusiness – Deforestation, livestock production, and monoculture farming account for large-scale methane and nitrous oxide emissions.
Technology and Consumption – Data centres, logistics, and mass production of consumer goods increasingly add to the corporate carbon footprint.

Even beyond emissions, corporations indirectly exacerbate climate change by financing carbon-intensive industries, lobbying against stricter environmental laws, and promoting unsustainable consumption.

Legal and Regulatory Risks for Corporates

Corporates face a new landscape of climate accountability, driven by litigation, regulatory frameworks, and investor expectations:

Climate Litigation: Cases such as Urgenda Foundation v. State of the Netherlands (2019) established state obligations to reduce emissions, influencing corporate accountability. Similarly, Milieudefensie v. Royal Dutch Shell (2021) ordered Shell to cut its global emissions by 45% by 2030, signalling direct corporate liability.
Disclosure Regulations: Jurisdictions such as the EU, UK, and US are mandating climate-related disclosures through instruments like the Task Force on Climate-related Financial Disclosures (TCFD).
Investor and Shareholder Activism: BlackRock, Vanguard, and other institutional investors increasingly condition investment on credible ESG commitments.
Indian Framework: In India, the Securities and Exchange Board of India (SEBI) requires top listed companies to submit Business Responsibility and Sustainability Reports (BRSR), aligning corporate conduct with sustainability.

Why ESG is No Longer Optional

Environmental, Social, and Governance (ESG) frameworks encompass environmental responsibility, social equity, and corporate governance. The rising prominence of ESG is due to:

Market Demand – Consumers are increasingly favouring sustainable brands, while unsustainable companies face boycotts and reputational damage.
Financial Imperatives – ESG-compliant companies enjoy easier access to green financing and lower capital costs.
Regulatory Compliance – Governments worldwide are embedding ESG reporting into mandatory requirements.
Litigation Avoidance – Companies that fail to act risk costly lawsuits and penalties.
Talent Retention – Younger professionals prefer working for purpose-driven, responsible companies.

For corporates, ESG has shifted from being a public relations tool to a strategic necessity for long-term survival.

ESG in Practice: Corporate Responsibilities

Carbon Reduction – Corporates must adopt science-based targets (SBTi) to align operations with the 1.5°C trajectory.
Supply Chain Accountability – ESG compliance requires monitoring emissions across supply chains, including suppliers in developing economies.
Social Dimension – Beyond climate, ESG includes diversity, inclusion, labour rights, and community impact.
Governance Mechanisms – Transparent board structures, anti-bribery measures, and whistle-blower protections strengthen ESG credibility.
India’s Context – The Indian Companies Act, 2013 mandates Corporate Social Responsibility (CSR) spending, increasingly directed towards environmental and social impact initiatives.

The Future of ESG: Inevitable Compliance

The future of corporate regulation lies in mandatory ESG compliance. The EU’s Corporate Sustainability Reporting Directive (CSRD), effective 2024, expands ESG reporting obligations to thousands of companies, including non-EU entities with significant EU presence. Similarly, India’s BRSR framework is expected to deepen over the coming years, creating binding ESG standards.

Corporates that fail to align with ESG risk exclusion from global supply chains, regulatory penalties, and investor withdrawals. By contrast, early adopters of ESG not only mitigate risks but also capture opportunities in renewable energy, circular economy models, and sustainable innovation.

Conclusion

The breach of the 1.5°C threshold is not merely an environmental crisis; it is a corporate accountability crisis. With overwhelming evidence that corporate emissions are central drivers of climate change, businesses face mounting legal, financial, and reputational risks. ESG frameworks provide a structured pathway for corporates to align with global sustainability imperatives while ensuring long-term profitability. Far from being a passing trend, ESG compliance is here to stay—corporates that fail to comply risk not only irrelevance but also existential threat in the rapidly transforming global economy.

References (OSCOLA)

Intergovernmental Panel on Climate Change, Climate Change 2021: The Physical Science Basis. Sixth Assessment Report (IPCC 2021).
Paris Agreement, opened for signature 22 April 2016, UNTS Registration No. I-54113.
Carbon Disclosure Project, Carbon Majors Report 2017 (CDP 2017).
Urgenda Foundation v. State of the Netherlands [2019] ECLI:NL:HR:2019:2007.
Milieudefensie v. Royal Dutch Shell [2021] ECLI:NL:RBDHA:2021:5337.
Task Force on Climate-related Financial Disclosures, Final Report: Recommendations of the TCFD (2017).
Securities and Exchange Board of India (SEBI), Business Responsibility and Sustainability Reporting Guidelines (2021).
European Commission, Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464).