Briefing: Net zero for corporates

It’s widely used, but do you know what net zero means? We give you the answers to this and other net zero questions.

Image
Two women engineers

What is a net zero target?

For businesses there is a growing consensus on the definition of net zero. 

The Science Based Targets initiative (SBTi) is working on a definition with associated principles and guidelines. In its 2019 discussion paper the SBTi defined net zero as: ‘achieving a state in which the activities within the value-chain of an organisation result in no net impact on the climate from greenhouse gas emissions.’

We have further elaborated on this definition to help organisations take steps now to develop a pathway to net zero emissions. 

'A net zero organisation will set and pursue an ambitious 1.5°C aligned science-based target for its full value-chain emissions. Any remaining hard-to-decarbonise emissions can be compensated using certified greenhouse gas removal.'

There are three key elements to the definition of a net zero emissions company:

  1. The company will set and pursue an ambitious 1.5°C aligned science-based target for its full value chain emissions
  2. The boundary must be global scopes 1, 2 and 3 for the organisation
  3. Any remaining hard-to-decarbonise emissions can be compensated with certified greenhouse gas removals (GGR). These should be restricted to only certified methods of GGR, to increase confidence that the carbon is permanently sequestered. Importantly, the company or organisation should make sure that only truly ‘hard-to-decarbonise’ emissions may be compensated.

Read our insight - 'Net zero: an ambition in need of a definition’ - Andie Stephens  outlines the essential elements for any future definition of net zero for the corporate sector.

Why should my company set a net zero target? 

Rigorous net zero targets carry a promise of strong climate action that is aligned with the Paris Agreement and limiting warming to 1.5°C. 

At a time of climate emergency, setting out a robust pathway to achieving net zero emissions has become a new proxy for climate ambition.

At an organisational level, there are a number of benefits of setting a net zero target. These include: 

  • enhanced credibility and brand reputation
  • the ability to drive innovation and create competitive advantage
  • increased resilience given likely future regulation
  • increased investor confidence

When should we set a net zero target?

Net zero is not a passing trend. It is part of a long term shift to decarbonise economies in response to a climate emergency.

While, in some sectors, innovation is still required in order to achieve science-based targets that are in line with a 1.5°C trajectory, this should not prevent action now to minimise greenhouse gas emissions while also actively considering significant shifts in their business model.

Setting a target date for net zero emissions is an important step for a company. However, the route the company takes to net zero is important as well. 

Some companies, particularly those in ‘hard-to-decarbonise’ sectors, will also have to use greenhouse gas removals (GGR) to reach their net zero ambitions. There is still much discussion around appropriate GGR methods and the markets for GGRs require significant development in terms of volume, market mechanisms, and certification protocols. But again, this should not deter companies from starting their journey to net zero.

What is the difference between carbon neutrality and net zero? 

Carbon neutrality is defined by an internationally-recognised standard – PAS 2060 – which sets out requirements for the quantification, reduction andoffsetting of greenhouse gas emissions. In this standard, the definition of a carbon neutral footprint is a ‘condition in which during a specified period there has been no net increase in the global emission of greenhouse gases to the atmosphere as a result of the greenhouse gas emissions associated with the subject during the same period’.

There are a number of key differences between carbon neutrality and the SBTi draft definition of net zero:

  1. The boundary of a net zero target includes global scope 1, 2 and 3 emissions of the organisation, whereas carbon neutrality for an organisation only requires scope 1 and 2, with scope 3 emissions encouraged but not mandatory. 
  2. The boundary of a carbon neutral claim can refer to a specific product or service instead of encompassing the whole organisation in the case of net zero.
  3. The reduction in reported emissions required differs. Net zero targets must align to a 1.5°C science-based target, whereas the level of ambition of a carbon management plan for carbon neutrality is not specified. 
  4. The approach to residual emissions differs, with specific greenhouse gas removals required for net zero targets, whereas carbon offsets are accepted for carbon neutrality.  

Can offsets be used to achieve net zero targets?

Offsets generally relate to projects that reduce carbon emissions by taking a specified action compared to a reference scenario, whereas greenhouse gas removals take greenhouse gases from the atmosphere and permanently sequester them. For example, offsets could be used to account for replacing kerosene cook-stoves with solar stoves, as it avoids emissions that would have taken place if the cook-stoves had not been replaced, and GGRs could be used to account for afforestation, as this removes carbon emissions from the atmosphere by converts it into organic matter.

Carbon offsets can be used to achieve PAS 2060 carbon neutrality, but cannot be used to achieve net zero targets. To achieve net zero, any remaining emissions should be balanced with an appropriate amount of carbon removals using certified greenhouse gas removals. Possible greenhouse gas removal options include large-scale afforestation, biochar, and bioenergy with carbon capture and storage. 

How do net zero targets differ from science-based targets?

Science-based targets set a trajectory for emissions reduction for scope 1, 2 and 3 emissions, and do not allow a company to use offsets to achieve a reduction. 

Net zero targets bring in a new aspect of compensating for those residual emissions using greenhouse gas removals. Greenhouse gas removals take remaining emissions from the atmosphere and permanently sequester them.

It is important to note that companies are unlikely to achieve a net zero target without large reductions in their scope 1, 2 and 3 emissions, as the greenhouse gas removal market is immature. 

Which internal stakeholders should be engaged when setting and delivering a net zero target?

Operations and finance colleagues will be needed to advise on technical implementation, future energy prices and the price of greenhouse gas removals that the company may be committing to. 

We also recommend you engage your communications colleagues to advise on how the target and your organisation’s progress against it, can be best be externally and internally communicated. 

We recommend engaging with stakeholders at the earliest possible stage and to ensure they are clear on the definition of a net zero target, and agree on what you are trying to do but also, crucially, how you are going to achieve it.

How can our company best communicate our net zero targets?

Net zero targets demonstrate to your clients, employees and other key stakeholders how your organisation is transitioning towards a net zero economy and committing to ambitious action on climate change. But as more and more companies announce net zero targets your communication will be under increasing scrutiny, so it is vital that you are transparent about the work you will be doing to achieve net zero and that your definition of net zero is in line with the growing consensus and the SBTi working definition (see above).

It is particularly important you provide precise information on the reductions the company expects to achieve for scope 1, 2 and 3 emissions, if these reductions are following a 1.5°C trajectory, and whether residual emissions will be compensated for using greenhouse gas removals. 

Publishing information about the target on your website will help support announcements in the media. We recommend keeping communications colleagues informed and ensuring they understand the work you are doing to mitigate any brand risk or greenwashing concerns. 

What is the first step my company should take to setting a net zero target?

The first step is to measure your company’s scope 1, 2 and 3 emissions and set a 1.5°C aligned science-based target for your own operations and value chain. 
You can then consider the options for setting a target to go further, bringing together your internal stakeholders and identifying whether a net zero or carbon neutral target is best for your organisation.

 

Contact us today to start your net zero journey

 

Find out more

Explore more about our work on net zero

Net zero: an ambition in need of a definition (Insight article) 

Webform

获得免费副本

请填写表格,以获取对该资源的免费副本。

国家