Design continues to contribute to public service reform, systems thinking, and policy innovation, with approaches like design sprints, iterative prototyping, and creative citizen engagement applied to address diverse societal issues. As co-design proliferates as both a celebrated and critiqued method for fostering dialogue, ideation, and action among communities and stakeholders, questions arise about its suitability for addressing complex multi-stakeholder challenges and its potential to mediate effective policy design and delivery. There remains limited understanding of the relational and methodological dimensions that underpin co-design within policy processes, and of how these influence public sector innovation. This paper examines the role, capacity, and limitations of co-design in advancing the net zero policy agenda in Scotland’s northern region. Through presenting a series of five regional-scale cross-sector events, we discuss how co-design, while valuable for fostering engagement and framing challenges, was constrained by systemic and institutional barriers. We present an adaptable framework for assessing co-design’s capabilities within mission-led CPSI and offer three strategic recommendations for applying co-design methods to frame systemic innovation challenges, leveraging co-design principles and practices to create the conditions for collaboration, and positioning co-design as a creative approach to enable mission-led innovation. We argue that co-design is best positioned as a creative facet of a wider collaborative governance approach, one that demands critical attention to institutional conditions, cross-sector alignment, and how power is shared across public sector innovation initiatives.