By Philippe Pernstich, Founding Footprinting Lead at Minimum
When COP26 was held in Glasgow last year, we saw companies ramping up their net zero pledges. Looking ahead to COP27 in Egypt this November, we will inevitably see companies again announcing their ambitions to reduce carbon emissions. We should applaud companies that are committed to lessening their impact on the environment; but were many businesses simply swept up in the moment, or trying to outcompete each other? Making pledges for targets 10, 20 years or more down the line may be easier to sign off than a challenging short-term target three years down the road. How realistic are their goals? And are businesses fully understanding the full implications of their net zero pledges?
Many companies are pledging to become net zero by 2030. Some are even claiming that they are net zero right now, today. Such claims warrant very close scrutiny. Net zero means to reduce carbon emissions by 90% from a baseline across the entire value chain. Achieving such deep cuts in a mere eight years will not happen without a clear plan and a laser focus on delivery. In the absence of a detailed strategy, such claims could be viewed as ‘greenwashing’ and greatly underestimating how complex the journey is to reach net zero.
It’s important that companies declaring targets without a clear delivery plan are held to account. The Advertising Standards Authority has conducted research on the public understanding of ‘net zero’ and ‘carbon neutrality’ and are focusing on the substantiation of advertising claims made around these topics. It may well be that companies are using the term ‘net zero’ too casually. There are still plenty of companies that simply don’t understand the difference between ‘neutrality’ and ‘net zero’. So, how can businesses better understand the race to net zero?
Sustainability targets, such as becoming net zero, are based on the fact that development or growth must balance social, economic and environmental sustainability. By setting targets, businesses can be seen to be ‘doing the right thing’ but they are also improving business performance – reducing energy costs for example – and, ultimately, reducing risks to the business.
Businesses pledging to reach net zero and achieve 90% reductions, are likely to require a significant rethink of the way the business is run. The structure of the organisation may need to dramatically change and shift to a more circular way of working. Business travel, for example, may have to move to fully electric forms of transport and flying for business would have to be severely or entirely curtailed where this is a major source of corporate emissions.
The risk of a credibility gap in setting relatively short-term net zero targets does not mean companies should kick the can down the road and delay the net zero target date. There is a temptation by boards to pledge to become net zero by 2050. With most major economies now setting this as their own net zero target date, it becomes an unambitious compliance exercise, rather than a sign of leadership.
Having emphasised the importance of delivery plans underpinning any net zero targets, it is always likely that a target that extends beyond normal business planning cycles will have some delivery gaps to be filled in, not least where emerging technology is expected to deliver a significant contribution. There is clearly a fine balance to be struck in relation to new technologies or different ways of working coming along in the future to solve carbon emissions. Companies may be waiting for a ‘silver bullet’ that might not arrive in time or ever.
Many technologies and innovations touted today won’t make it tomorrow, be it down to technologies failing or not being economically viable. A number of key industry sectors are pinning a large part of their reduction strategies on carbon capture and sequestration, which has been the subject of much interest and development for some time. Despite this, the technology has suffered a number of set-backs and there are still only a very limited number of commercial plants in operation, most of which use the captured CO2 for enhanced oil recovery.
Of course, technological innovation will eventually have to play a key role, if we are to achieve our climate ambitions. For companies building their development into reduction plans, one of the key questions must be what level of control they have over their development? An airline must invest in research and development programmes for alternatives to jet fuel (be it sustainable aviation fuel, hydrogen or battery-electric) in order to continue operating as an airline over the long-term. Therefore, new technologies will form a core element of their reduction plans, provided they are backed up by appropriate funding in R&D and build in suitable innovation risk factors. It would not be wise, however, for a global consultancy whose business flights are their main source of emissions to rely heavily on airlines solving the problem for them.
The first step in setting an achievable net zero target for a business is a deep understanding of its carbon footprint across the entire value chain. Minimum’s enterprise carbon management software platform is an all-in-one solution for operationalising climate targets and embedding sustainability excellence in organisations, businesses and investment funds. Its carbon accounting functionality extends well beyond basic public disclosure requirements, offering the opportunity to identify reduction opportunities, model their impact and track their progress. My work at Minimum helps businesses understand their carbon footprint and take effective climate action that is achievable.
Another key aspect of a credible net zero target is its alignment to science-based climate goals. The Science Based Targets Initiative (SBTi) mobilizes the private sector to take urgent climate action and set achievable targets. The SBTi will verify targets set by businesses, that can then report back their progress. The targets are based on a long-term reduction target of 90%, overall, in line with requirements for a 50% chance of keeping global temperature rise to 1.5oC. Certain key sectors have their own specific targets based on a sectoral decarbonisation approach (SDA). It is important to note that net zero targets must cover a company’s full value chain, otherwise the concept of ‘operationally net zero’ or similar is meaningless.
Scientifically robust reduction targets can only be achievable if businesses begin to put all strategic decisions through a ‘carbon lens’. Decisions, such as sourcing new products to changing suppliers, should be made as a result of questioning its impact on carbon emissions. And when looking at board level there should be a director responsible for the company’s impact on the environment.
The rapidly expanding adoption of net zero targets by companies demonstrates the willingness of businesses to play their part in tackling the existential climate crisis. If the challenges of achieving the targets are not fully realised and planned for, we will not only see individual businesses’ reputations tarnished. Achieving our global climate goals requires the collaboration of governments, businesses and individuals, to pull in the same direction. This can only be achieved with a basic level of trust, which could be irredeemably shattered if current business ambitions were not followed through.
