Net Zero Targets: Considerations for All Corporates

October 13, 2020

Contributed By: Benroy Chan, Sustainability Associate, Schneider Electric Energy & Sustainability Services

As the end of 2020 approaches, many companies will see the expiration of their previously set sustainability targets. However, in the time period from when those goals were set to now, the sustainability community has increased its understanding of the ambition required for targets to meaningfully mitigate climate change. Previous goals that targeted arbitrary emissions reductions will no longer cut it as the world looks to prevent climate change’s worst effects.

Over 1,000 companies have already committed to reducing their emissions aligned with criteria set forth by the Science-Based Targets Initiative (SBTi). To limit warming to 1.5°C and prevent these worst effects, the IPCC has projected that total global emissions will have to reduce 45% by 2030 and ultimately reach net zero by approximately 2050 using a baseline year of 2010. While current SBTs represent a next step in limiting warming to this pathway, getting to net zero still looks like a black box to many in the corporate sector as methodologies undergo development

What Does “Net Zero” Mean?

Before diving into the challenges and emerging guidance on how to reach net zero, companies should get clear on what net zero even means. The IPCC defines a net zero emissions scenario as one where remaining greenhouse gas (GHG) emissions are balanced out by an equal amount of GHG removals. In other words, net zero entails companies reducing their generated emissions as much as possible and negating the remainder by funding carbon removal projects in clean energy, reforestation, and more.

Net Zero Guidance

Of the 5 main activities available to companies to reduce the climate impact of their operations, the SBTi notes those that focus on eliminating or removing emissions within a company’s own value chain as the best for long-term mitigation. Once GHGs have been emitted, significant controversy exists on what constitutes credible and sustainable removal. To put it briefly, carbon offsets have a place in the transition to a sustainable economy, but their effectiveness relies on the availability of new projects and only if they outpace the growth of new emissions sources. As finite resources on the way to a 1.5°C world, purchased carbon credits for projects outside a company’s direct control should only be considered once all options to decarbonize internally have been exhausted.

How to Achieve Decarbonization

For guidance on where to decarbonize internally, it helps to look at heavy hitters within your company’s value chain. Embodied carbon is a term used to describe GHG emissions released through value chain activities; from extraction of materials, to transport, to assembly, all the way through use of the product and its end of life profile. Beyond implementing efficiency measures and sourcing clean energy to reduce emissions from operations, companies should also look to reduce emissions from their development activities. For example, embodied carbon emissions stemming from the materials used in construction projects represent a whopping 11% of global energy and process-related carbon emission and have been called for disclosure by both GRESB and CDP.

Further emphasizing the importance of embodied carbon emissions, emerging net zero certification schemes have also required companies to address this emissions source. The International Living Future Institute’s (ILFI) Zero Carbon Certification requires companies to demonstrate at least a 10% reduction in embodied carbon before certifying a project as zero carbon. While the ILFI recommends the sourcing of local products as a proposed initiative, companies can also look towards recycled or alternative construction materials and focus on existing buildings rather than opting for new construction where possible.

While 2020 has been a benchmark year in more ways than one, companies should remember the need for ambitious emissions targets to reduce the worst effects of climate change. As organizations start to solidify the methodology behind a net zero target, companies should strategize as ambitiously as possible to avoid playing catch up once net zero becomes the new standard. As a next step, companies may check out the foundations recently published by the SBTi in developing a new corporate standard for net zero targets.

For further discussion on how to best achieve ambitious climate goals, watch our recent webinar on Funding Carbon Neutrality in the New Normal.

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