The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.​

Developing and implementing a strategic and aligned sustainability program across a large company is difficult enough. But when you’re a holding company — with dozens of wholly or partially owned subsidiaries under one umbrella — creating a successful ESG strategy becomes even more challenging and complex. Complicating things further, these portfolios are often geographically distributed and face differing regulatory or cultural expectations regarding sustainability performance, goals and disclosures.

Companies such as Microsoft, Costco and Switzerland-based Partners Group manage large portfolios of smaller companies that operate in many sectors. Costco, for example, has 31 subsidiaries and operates 905 warehouses worldwide. To streamline its sustainability efforts, Costco has implemented the STAR (Sustainability Technical Assistance Review) program, which helps warehouses manage compliance, energy, water, waste and emissions. 

On the other hand, Partners Group, a global private markets firm, has an overarching sustainability strategy but delegates operational control of its sustainability efforts to local “champions” responsible for ensuring sustainability processes and initiatives are tailored to each business unit.  

From our work advising holding companies, we’ve identified three issues that, if well thought through and implemented, can lead to more successful sustainability strategies and outcomes.

Understand the pressures businesses face 

Just like any business, holding companies face inside and outside pressures on business operations that inevitably influence ESG strategy. If anything, holding companies may face more pressure simply because of how large and diverse they are. Portfolio companies in the software sector have fundamentally different issues to deal with from manufacturing or healthcare companies. 

Holding companies must consider the inputs and perspectives of a wide range of stakeholders, who can exert pressure to act in a certain way or address their specific interests. They must decipher what pressures require a corporate-wide response and which are concentrated at the portfolio company level and can simply be addressed there. 

For example, one European-based holding company we work with leaves ESG strategies to its portfolio companies and doesn’t attempt to develop a coherent corporate-level approach. Operationally, this means there’s no overall guidance on priorities such as goal setting from the parent company, which only requests for performance (such as GHG emissions) data. In other instances, the parent company will provide specific directions for its portfolio firms to support an overall top-down strategy. 

Analyze leadership styles and culture

How a holding company manages its portfolio companies is another major factor to consider. Whether the company uses a hands-off or hands-on approach will affect how sustainability performance is addressed.

Take the example of two multinational holding companies. One has a hands-off approach, where corporate leadership at the holding company prefers to let the portfolio companies have a wide degree of autonomy in day-to-day activities. In this “bottom-up” approach, each portfolio company is responsible for designing and implementing its own approaches to ESG issues to reflect its sector and the internal and external pressures it may be facing. 

This may mean that each portfolio company is responsible for determining its own material issues, data collection efforts and producing its own ESG reports. Contrast that with holding companies involved in a “top-down” approach, in which the holding company has clear priorities for overall ESG strategy and expects its portfolio companies to operationalize those priorities. This can mean all its portfolio companies have a common approach to materiality (if not the same list of material topics), data collection, reporting and disclosure. 

In either instance, setting and clearly communicating expectations and delineating responsibilities between the corporate level and the portfolio level is important. 

Align and collect data

It’s not uncommon for firms in a holding company’s portfolio to have independent data systems that aren’t aligned and don’t communicate with one another. This can make aggregating disparate data sets difficult, as each portfolio company may use different methods of collecting data or measure different kinds of data altogether. 

The holding company needs to determine what specific sustainability challenges its portfolio firms are facing and whether data collection at the subsidiary level or the entire holding company is the best strategy. 

For example, a tech holding company that uses a bottom-up approach to gather sustainability data for each of its portfolio companies asks each of its approximately 25 portfolio companies to manage their own ESG data collection independently and then report back to holding company top management. This provides more localized operational freedom but can result in disparate datasets that are difficult to compile and compare across the entire portfolio. 

Another multinational company with a portfolio focused on manufacturing industrial equipment takes the top-down approach, with an aligned set of material issues and datasets that it requests from its subsidiary firms. The holding company offers training sessions to its portfolio companies to enhance data quality and has an executive in charge of each portfolio company who supports the annual data collection process. This means that data is more easily centralized and cohesive across all companies, thanks to the holding company’s leadership coordinated effort. 

When in doubt, focus on the business case 

The reasons holding companies develop ESG strategies vary — customers, investors and market pressures all play a role. No matter the reason, the impact of a strong ESG strategy is what remains constant. If a holding company gets its sustainability strategy right, it becomes integral to its overall business strategy. It provides a lens for performance evaluations for portfolio companies and future acquisitions, creating a baseline and measurement for future success.

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The 2024 emissions numbers released this past February by Nestlé would have been the envy of many companies. The world’s largest food manufacturer’s first milestone on its journey to net zero — a 20-percent emissions reduction relative to a 2018 baseline — was due to be reached this year. But the Swiss company, which generates more than $90 billion in annual revenue through flagship brands such as Nescafé and KitKat, said it hit its target a year early.

For the first installment in Trellis’ Chasing Net Zero series — a company-by-company look at progress toward 2030 climate goals — we examined Nestlé’s emissions data and spoke with sustainability experts who have studied the company. Several praised Nestlé for its sustainability work, particularly its focus on agricultural emissions. But others raised concerns about its use of carbon removals, a central pillar of its decarbonization strategy. A review of statements made to investors raised additional questions about Nestlé’s future plans. 

Compared to its peers, Nestlé has done much to earn its reputation; but the full story of the company’s journey to net zero is more fraught than its emissions data implies.

Track record

Nestlé’s net-zero target was validated relatively early — in 2020 — by the Science Based Targets initiative (SBTi). Five years later, many in the sector are still trying to catch up: Only 44 percent of the largest food, beverage and agriculture companies have net zero targets, and 23 percent have no target of any kind, according to the Net Zero Tracker, a data source maintained by four research organizations.

Other sector comparisons are similarly positive. In a benchmarking exercise released in May by Ceres, a nonprofit focused on the business case for climate action, researchers found that Nestlé was following several best practices that are rare in the sector, including setting climate requirements for suppliers. The company is also one of just three peers — with Campbell Soup and Danone — to have set targets for methane and other non-carbon dioxide agricultural gases in its supply chain.

The work behind this progress is overseen by Chief Sustainability Officer Antonia Wanner, a 24-year company veteran who moved from procurement into an ESG role in 2020 and joined the C-suite in January of this year. Wanner and other leaders have short- and long-term compensation bonuses that are tied to emissions reductions.

Wanner’s boss, CEO Laurent Freixe, took the helm last August; his predecessor was ousted after what The Wall Street Journal described as “slowing sales growth and a slumping share price.” Nestlé stock has fallen slightly since Freixe’s arrival and is now down close to 30 percent from a January 2022 peak.

Nestlé’s biggest challenge: Scope 3

Like many other food and beverage companies, particularly those that source dairy and livestock ingredients, Nestlé faces an emissions challenge that is essentially a Scope 3 challenge: Of the 75 million metric tons of CO2 equivalent emissions (tCO2e) the company generated in 2024, 71 million tCO2e — 95 percent — stem from the company’s value chain. These include 13 million tCO2e of methane emissions from its ingredient sourcing.

Nestlé’s Scope 3 emissions have fallen steadily since 2021, the earliest year for which the company provided data in its most recent sustainability report, as have direct emissions from the company’s facilities and its electricity purchases. If progress continues at the current rate, Nestlé will achieve its goal of halving emissions by 2030.

The reductions are notable given that decarbonizing dairy and livestock emissions ranks among the “toughest tasks” for food companies, according to David Linich, a sustainability partner at PwC. Linich declined to comment on Nestlé specifically, but a 2024 PwC survey of emissions disclosures shows that just over half the company’s peers are not on track to hit Scope 3 goals. 

Nestlé has achieved these reductions using tactics that include training producers to improve the productivity of their farms, preventing deforestation in its supply chain and reducing methane emissions from cattle, according to its most recent Net Zero Roadmap, which was published in 2023.

Achieving the remaining cuts that Nestlé needs to stay on track for 2030 — notably lowering emissions from sourcing ingredients by 5 million tCO2e, were the company to reduce all greenhouse gases in proportion — will be challenging. The company is pursuing this on multiple fronts, including the use of food additives for cattle, which the company projects will reduce methane emissions by 3.2 million tCO2e by its target date. 

Nestlé is also a member of the Dairy Methane Action Alliance, a collaboration between Ceres and the Environmental Defense Fund, which requires members to create action plans for reducing methane emissions. “We think Nestle is demonstrating that they’re putting plans and steps in place in order to make progress,” said Carolyn Ching, director for food and forests research at Ceres. 

More uncertain: The role of removals

A second component of Nestlé’s past and future progress is more controversial. The company hit its 2025 target a year early in part because it removed 1.6 million tCO2e from the atmosphere in 2024 and deducted this figure from its total annual emissions. Nestlé did not break this total down, but removal mechanisms highlighted in its latest sustainability report include planting vegetation around water sources, no-till and other regenerative practices, and integrating trees into cropland. 

The approach is particularly pertinent for Nestlé because the company’s use of removals will increase eightfold to hit 13 million tCO2e by 2030, according to its Net Zero Roadmap. 

SBTi rules allow removals to be subtracted from total emissions in this way, but the practice has been contested because of uncertainties surrounding the reliability of nature-based removals. The science on the ability of soils to sequester carbon remains unsettled. Carbon stored in vegetation can also be released back to the atmosphere if farmers stop following regenerative practices. 

“This is not a permanent emissions removal,” said Sybrig Smit, a policy analyst at the NewClimate Institute in Germany. “It’s going to be released into the atmosphere if the land is mismanaged.”

In an emailed response to questions from Trellis, Nestlé said it collects data directly from farms, including soil sampling and measurements of tree height, and places 20 percent of credits in a buffer pool to insure against losses. The company is also collaborating with Ofi, a major ingredients supplier, to monitor close to 3 million trees planted by 25,000 farmers in Nigeria, Côte d’Ivoire and Brazil. Ofi said that a combination of remote sensing and machine learning enables it to track changes in carbon stocks at the farm level.

What Nestlé tells investors

Smit and colleagues at NewClimate, who studied Nestlé for recent editions of the organization’s Corporate Climate Responsibility Monitor, question another removal line item in Nestlé’s 2030 plans: 6 million tCO2e the company subtracted from its anticipated 2030 total and attributed to “Portfolio transformation.” Tactics under this heading include switching to plant-based ingredients and “evolving our product offering to include more sustainable options.” 

A Nestlé spokesperson declined to provide a detailed breakdown of where these cuts will come from, but did highlight recent implementations of this strategy, including with its Nescafé Alta Rica instant coffee brand. The emissions associated with each jar have fallen 11-14 percent since 2018, according to the Carbon Trust, an independent verifier of environmental projects.

Yet Nestlé has deemphasized its commitment to more sustainable products in at least some conversations with investors. A 2022 presentation at a Consumer Analyst Group of New York meeting, for example, included multiple slides on environmental issues and products; in this year’s presentation at the same event, CEO Freixe devoted just two sentences to the topic.

Given the Trump administration’s dismissal of climate issues and attacks on anything considered “woke,” this could be interpreted as prudent green-hushing. But Nestlé’s willingness to invest in sustainability, a metric that can be used as a proxy for a company’s commitment to emissions reductions relative to other priorities, is also unclear. 

Nestlé does not share the amount it expects to invest in order to hit its 2030 target, but in a 2024 presentation to investors Freixe said that “we have done the heavy lifting” on sustainability and “we will need to continue to invest, probably at a lower pace” relative to the period up to 2025. 

This stands in contrast to other food and beverage companies, which expect to increase the portion of their capital spending that goes to climate transition projects to an average of 20 percent by 2030, according to the PwC survey of emissions disclosures.

The next five years

To understand the complexities of Nestlé’s efforts to halve emissions by 2030, consider the position it now finds itself in.

On one side are investors, who are often more concerned with quarterly returns than long-term sustainability. Freixe’s “heavy lifting” comment, for instance, came in response to an investor analyst asking about the drag of sustainability initiatives on operating margins. 

At the same time, the food sector likely cannot reach net zero without fundamental changes that no company can completely control. Decarbonizing would be easier, for example, if consumers swapped dairy milk for soy — but that doesn’t seem likely. Policy support is also an issue: one recent report found that current policies in the EU would decrease emissions by just 1.5 percent between 2020 and 2040.

These pressures leave Nestlé’s leaders with little room to maneuver. They’ve charted a course to net zero that is relatively transparent and ambitious, at least when compared with many sector rivals. At the same time, that roadmap is incomplete and relies on carbon accounting that’s open to question. As the climate crisis intensifies, these shortcomings leave critics of the world’s largest food company frustrated. They are also indicative of where the sector is on its journey to net zero.

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In March 2024, the Science Based Targets initiative (SBTi) revealed it had removed 239 companies, including Microsoft, Procter & Gamble, Unilever and Walmart, from the list of those committed to setting net-zero targets. The companies had timed out: SBTi rules give businesses 24 months to submit targets for validation after the initiative finalizes a standard or receives a commitment, and the companies missed the deadline.

Trellis reached out to SBTi and several companies that had commitments removed to understand what happened next. Here’s what we discovered.

Very few subsequently had targets validated

According to SBTi data, as of last week just 17 of the 239 companies have had net-zero targets validated since their commitments were removed. The list includes British American Tobacco, Gap and S&P Global. 

The remaining 222 companies — 93 percent of those that had commitments removed — includes many large businesses, from the large French utility EDF to JBS, one of the food giant, together with United Airlines, Johnson & Johnson and Unilever. (Some of these companies may be in the process of having net-zero targets validated. SBTi does not comment on targets that are being assessed.)

It’s worth noting that SBTi offers companies the option of committing only to a near-term target, which is often set for 2030. Of the 239 companies that had commitments removed, 14 subsequently had near-term targets validated, including Unilever and Johnson & Johnson. Many of the others, including Microsoft, Walmart, United and EDF, already had near-term targets validated.

Looking across the economy as a whole, slightly more than 1,900 companies have had net-zero targets validated by SBTi and close to 2,900 have committed to doing so.

Companies are exploring other options

Trellis reached out to 10 of the companies that have not subsequently had net-zero targets validated for updates on their strategy. The majority — Carrefour, Procter & Gamble (P&G), United, JBS, Elevance Health (formerly known as Anthem), Engie and Johnson & Johnson — did not return our inquiries.

The replies we did receive, together with press releases from companies on our list, reveal that some companies are exploring other options for guiding their net-zero journeys.

Unilever, for instance, said it remains committed to reaching net zero by 2039 — more than a decade ahead of many other companies. A company spokesperson said the plan “aligns with the Intergovernmental Panel on Climate Change’s definition of net zero, which differs from the SBTi’s definition,” but did not return a follow-up request for clarification on how Unilever interprets the difference.

Carrefour, a retailer with more than 14,000 stores in 40 countries, has since had the interim targets in its transition plan validated as in line with 1.5 degrees Celsius of warming by the ACT Initiative, a standard originally developed by the French government and now hosted by the World Benchmarking Alliance. Carrefour has begun using the methodology to assess the plans of its suppliers in its home country of France. However, the company’s existing net-zero commitments would likely not qualify for SBTi approval because, according to a review by the investor initiative Climate Action 100+, the targets do not cover Scope 3.

Several companies that had net-zero commitments removed, including Microsoft, P&G and Unilever, are signatories to The Climate Pledge, which commits companies to reaching net zero by 2040. (Amazon, a co-founder of the pledge, had its net-zero commitment removed by the SBTi in 2023.) 

The Climate Pledge encourages companies to make commitments but is not intended as a standard. As such, it offers significant flexibility, particularly around the use of offsets.  SBTi’s methodology permits the use of carbon removals to offset around 10 percent of residual emissions at the end of a company’s journey to net zero; the Climate Pledge does not specify an upper limit and allows a broader range of offsets to be used.

Asked whether alternative frameworks risk splintering corporate action on climate, SBTi noted that net-zero submissions have grown nearly 30 percent so far in 2025 and by more than 100 percent in 2024.  

“These back-to-back increases send two clear messages,” a spokesperson said. “Firstly, companies continue to be committed to climate action. Secondly, they see the SBTi as the trusted roadmap to guide impactful implementation.”

Keeping an eye on SBTi’s plans

SBTi is updating its net-zero standard, and some of the companies that have not had net-zero targets validated told Trellis that they’re watching the process closely.

“Our approach will be informed by science and reflect our position in the overall value chain as a global multicategory retailer,” Walmart said in a statement.

“As the [standard] continues to mature, we are thoughtfully evaluating how its evolving requirements align with our broader decarbonization strategy,” a Microsoft spokesperson said, noting the company is particularly interested in the SBTi’s rules on residual emissions and use of removals.

“We are following this process closely and have submitted our feedback on the draft standard,” the Unilever spokesperson said.

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The U.S. budget reconciliation bill spared some tax incentives for solar and wind plants and carbon capture projects, but the rules have changed dramatically and a new executive order published July 7 will make it harder to qualify for credits.

The new spending law enacted July 4, a.k.a. One Big Beautiful Bill Act, retains existing production and investment tax incentives for solar and wind projects but only if construction begins by July 2026 and the facility is in service by the end of 2027. That’s eight years earlier than what was allowed under the Inflation Reduction Act. 

The law also tightens restrictions against using materials acquired from certain “foreign entities of concern,” particularly China. It requires projects to increase the proportion of equipment and technology that isn’t tied to those countries, starting in January 2026 and ramping quickly over the next four years. 

The tougher domestic content requirements (also called “material assistance”) apply across all of the revised incentives and vary depending on the type of technology. “The question isn’t who this will affect, it’s who will this not affect,” said Astrika Adams, an environmental attorney with law firm Beveridge and Diamond. “We are looking at a very different marketplace here.” 

President Donald Trump’s related mandate, “Ending Market Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources,” aims to make qualification even tougher for solar and wind developers. It was written to appease hardline House Republicans unhappy with Senate rewrites that spared some tougher cuts for solar and wind projects. 

Expect more rule changes

The executive order requires the U.S. Treasury to issue guidance by late August to “build upon and strengthen the repeal of, and modifications to, wind, solar and other ‘green’ energy tax credits.” It also asks the Department of the Interior to review policies for putting energy projects on federal land to make sure they don’t provide “preferential treatment” to wind and solar installations.

The net effect: It will become more complicated for developers to claim incentives, as Trump has promised. “It’s a signal to the solar and wind project developers that there likely will be more bad news,” said Adams. “There will be a higher burden that they will have to overcome.”

Corporations investing in renewable procurement and carbon removal projects have been bracing for these changes for months, and are already looking for ways to keep them alive with far less federal funding. “The market is still strong and valid,” Adams said. “There are still viable pathways out there for some of these projects.”

A real positive: The final bill preserves a provision that allows project developers to transfer or sell credits, which is important for attracting corporate buyers and other financing. 

What else is buried in the new law

Bad news for EV buyers

The new law eliminates one-time incentives of $7,000 and $4,000 for purchases of new and used electric vehicles, respectively, as of Sept. 30. A commercial version of this credit (45W) that supported larger vehicles such as electric buses or semi-trucks with credits of up to $40,000 was also killed.

Reprieves for battery storage, geothermal, hydro, hydrogen, nuclear 

Emissions-free electricity sources, as well as batteries that can address power demand spikes or stabilize the electric grid, still qualify for 30 percent construction credits set up under the production tax and investment tax credits in the Inflation Reduction Act. The phaseouts vary depending on the technology type — generally the mid-2030s — but the final bill is generally kinder to these advanced sources than the original House version. Clean hydrogen projects are still eligible for incentives, but only if they’re in operation by Dec. 31, 2027. (Details are outlined in the 48C, 48E, 48U and 48Y sections of the U.S tax code.) 

Surprise money for fuel cells

Fuel cell installations, previously excluded from the investment tax credit, are now eligible for consideration. The law applies to projects placed in service after 2025.

Standardized credit values for carbon capture projects

The 45Q tax code, which covers carbon capture and storage projects, used to offer tiered credits depending on the type of technology used. The new law standardizes the credit at $17 per metric ton for carbon capture and storage and $26 per ton for direct air capture. The change is meant to favor approaches where the captured gas is used for industrial application or enhanced oil and natural gas recovery.

Mixed news for sustainable aviation fuels

Section 45Z of the new law extends Clean Fuel Production Credit by two years through Dec. 31, 2029, which affects sustainable aviation fuel. There are some caveats, however. The value of the credit was cut from $1.75 per gallon to $1 per gallon. The credit applies only to fuel made with feedstock from Canada, Mexico or the U.S., and it can no longer be bundled with other incentives.

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