In 2014, 197 nations signed the Paris Climate Agreement, marking the first international collective commitment to limit global warming to below 1.5 degrees. But the world would need to transition to net-zero to achieve that goal.
In response to this looming threat of climate change, the U.S. government and more than 400 major U.S.-based companies have set long-term net-zero targets, pledging to cut their GHG emissions in half by 2030 and net-zero emissions by 2050.
Committing to these ambitious goals is one thing, but accomplishing them is another matter entirely. It will be a collective effort that requires each company to build a detailed net-zero road map tailored to its specific emissions profile.
So, if you’re wondering how to set a net-zero target, read on.
What is a net-zero target?
So, why is net-zero important? As the name implies, net-zero requires companies to cut their GHG or greenhouse gas emissions to as close to zero as possible, such that there is no net increase in GHG emissions, and the amount of emissions produced is equal to the amount removed from the atmosphere.
Now, this is no small feat. As the UN notes, “Transitioning to a net-zero world is one of the greatest challenges humankind has faced. It calls for nothing less than a complete transformation of how we produce, consume, and move about.”
Broadly speaking, net-zero focuses on two methods:
- Emissions reduction – Cutting global emissions output—especially the largest contributors to GHG emissions, such as coal, gas, and oil—whether by embracing novel technologies, transitioning to renewable energy sources, or improving energy efficiency.
- Carbon removal – Negating any carbon that a company does emit by physically removing it from the atmosphere. This can be accomplished by natural means, like tree planting, or deploying carbon capture or storage technologies.
Who should be setting net-zero targets?
In order to move the needle and achieve the goal of limiting global warming to 1.5°C or less, net-zero must be a shared, global effort.
For context, in 2020, the top 10 emitters of carbon dioxide by country were:
So far, a growing coalition comprising over 130 countries and 850 major companies has pledged to achieve net-zero emissions. But whether they will abide by these commitments is another matter entirely.
CNN notes, “The watchdog Climate Action Tracker (CAT) analyzed the policies of 36 countries, as well as the 27-nation European Union, and found that all major economies were off track to contain global warming to 1.5 degrees Celsius above pre-industrial levels. The countries together make up 80% of the world’s emissions.”
One of the challenges in pursuing net-zero emissions is the lack of a universally agreed-upon definition and methodology. Targets often vary in quality and scope, with most countries lacking clear implementation plans or insufficient plans to reach the 1.5°C goal.
For instance, the U.S. has made significant strides to reduce its pollution output over the last decade, reducing GHG emissions by .4% per year. In contrast, China, India, and Russia’s emissions have risen precipitously year-over-year, as highlighted in the Emissions Gap Report of 2020.
This lack of a cohesive approach poses a unique challenge, particularly in developing nations where ensuring equitable access to essential resources like electricity, water, and the internet is of primary importance.
Regardless, attaining net-zero will necessitate group buy-in across all countries and sectors worldwide. It will require sustained effort and integration into business strategies for years to come.
For that, organizations need to determine their remaining emissions baseline to then establish a science-based reduction target that will serve as a guide for future progress.
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The path to net-zero: how to set net-zero targets
Now, many companies may not be sure how to achieve net-zero emissions. For meaningful change to occur, companies can’t go about this process blindly. They require a well-defined and actionable roadmap with specific, measurable, achievable, relevant, and time-bound (SMART) goals.
While this process may vary depending on the specific business, its size, and its sector, generally speaking, here’s how to set a net-zero target:
Step 1: Understand your scope
To make this process measurable, we separate GHG emissions into one of three categories: scopes 1, 2, and 3. Each scope addresses a different aspect of an organization’s carbon footprint:
- Scope 1 (Shorthand: Burn) – These emissions are the direct result of an entity’s business activities and come from sources that are owned or controlled by the company. Examples include:
– Fuel to power equipment
– Heating oil and gas
– Gas or diesel in vehicles
- Scope 2 (Shorthand: Buy) – These emissions are the indirect result of the business purchasing energy, such as heating, cooling, electricity, and steam.
- Scope 3 (Shorthand: Beyond) – These are the upstream and downstream emissions associated with the company’s activities, including:
Upstream
– Purchased goods and services
– Capital goods
– Fuel- and energy-related activities
– Transportation and distribution
– Waste generated in operations
– Business travel
– Employee commuting
– Leased assets
Downstream
– Transportation and distribution
– Leased assets
– Processing of sold products
– Use of sold products
– End-of-life treatment of sold products
– Franchises
– Investments
Set organizational boundaries
The categorization of activities across different scope classifications can be nuanced, and the appropriate classification depends on the chosen consolidation approach.
When defining an organization’s boundaries, a company selects an approach to consolidate GHG emissions across its legal and organizational structures. The complexity of a company’s corporate structure—including wholly-owned operations, non-incorporated and incorporated joint ventures, subsidiaries, and other arrangements—significantly influences the definition of organizational boundaries and the selected consolidation approach, ultimately impacting the GHG accounting process and outcomes.
As defined by the Greenhouse Gas Protocol, there are three consolidation approaches to consider in establishing these boundaries:
- Equity share – Accounts for emissions in proportion to the organization’s ownership stake.
- Operational control – Includes emissions from sources an organization controls, even if the business does not own them.
- Financial control – Accounts for all GHG emissions over which an organization has financial control.
Think of establishing your organizational boundaries and consolidation approach as setting up the rules for a board game. Just as it’s essential to develop clear guidelines before starting the game to avoid confusion and ensure fair play, defining your organization’s boundaries and consolidation approach provides a solid foundation for accurate and consistent GHG emissions accounting, enabling meaningful comparisons and progress tracking over time.
Step 2: Establish your baseline
To measure the effectiveness of your net-zero initiatives, you need a starting point—a baseline. For carbon accounting, the baseline represents an organization’s emissions output before implementing any emissions reduction targets or mitigation strategies.
Some businesses may set the base year in the past to demonstrate progress already made, whereas others just starting out on the path toward net-zero may opt for the current year, where they are first able to collect data.
Setting this reference state enables an organization to measure change and progress. But how do you establish an organizational baseline?
For that, adopting high-quality emissions management software, like Sustain.Life, is essential. Equipped with the right platform you can establish emissions baselines by:
- Identifying all relevant GHG sources across scopes 1, 2, and 3
- Selecting a data collection timeframe
- Gathering comprehensive data from each activity source
- Calculating the total emissions for each scope
Step 3: Set your target
Despite the pressing need for a transition toward a net-zero economy and the growing number of “net-zero” commitments, a unified definition and process for determining what constitutes net-zero remains elusive.
To address this issue, the Science Based Targets Initiative (SBTi) developed the SBTi Corporate Net-Zero Standard, which offers clear guidance on establishing science-based net-zero targets. This standardization of protocols promotes consistency and transparency for organizations pursuing net-zero goals and ensures that their efforts are recognized and valued in the market.
Other net-zero standards include:
Generally speaking, each of these frameworks will follow a similar step-by-step process, including:
- Assessing emissions
- Establishing baselines
- Setting targets and dates (Note: Selecting a carbon management platform with science-based target setting aligned to reputable frameworks is crucial in selecting a rigorous technology partner.)
- Developing reduction plans
- Engaging stakeholders
- Monitoring and reporting progress
Step 4: Develop your strategy
After establishing your target goals, you must create a strategy to achieve them. The Science-Based Targets initiative suggests four pivotal requirements to achieve this goal:
- Focus on rapid, deep emissions cuts – Most companies will need to decarbonize at least 90% across scope 1, scope 2, and scope 3 emissions to reach net-zero targets.
- Set near- and long-term targets – To abide by the SBTi net-zero standard, companies must establish both short- and long-term science-based targets to halve GHG emissions by 2030 and produce zero carbon emissions by 2050.
- No net-zero claims until long-term targets are met – A business can’t claim success until it has reduced its greenhouse gas emissions by at least 90% by 2050.
- Go beyond the value chain – Businesses should not settle for their long-term goals but to go beyond their target by making investments for emissions reduction outside the value chain.
Organizations must get buy-in from leadership and relevant stakeholders for this strategy to work. This is especially true regarding scope 3 emissions, which will require collaboration up and down the value chain—with suppliers, employees, customers, and more—for impactful mitigation to occur.
See related: Net-zero vs. Science-based targets
Step 5: Implement the plan
Once the stage has been set, businesses must take immediate actions to aim for their interim (or near-term) target. This may include:
- Increasing investment in clean technologies
- Retiring legacy technologies and processes in favor of cleaner, greener alternatives
- Identifying hotspots in the value chain
- Working with stakeholders to improve processes
As companies put action plans into practice, they must carefully track their progress toward both their near- and long-term climate goals and then provide frequent updates to stakeholders on the success of their efforts.
A reliable carbon accounting platform can prove an indispensable resource, providing a centralized system for tracking emissions scopes, analyzing data, and generating reports. This technology ensures that any net-zero or science-based target initiative is on track and maintains transparency with stakeholders throughout the journey.
Setting net-zero targets with Sustain.Life
Achieving net-zero emissions is an ambitious and challenging goal that will require significant effort from all sectors of society. But, with the clock ticking, we must act now. By pursuing net-zero, individual businesses can play their role in safeguarding the planet for future generations.
Need help setting net-zero targets and then measuring your progress?
For that, there’s Sustain.Life. Our comprehensive sustainability management software is designed for businesses in any sector, helping measure, manage, and report progress in alignment with third-party standards.
If you’re ready to do your part and future-proof your business, book a demo.
Sources
1. Forbes, “The World’s Top 10 Carbon Dioxide Emitters,” https://www.forbes.com/sites/rrapier/2019/12/04/the-worlds-top-10-carbon-dioxide-emitters/?sh=6c71bced2d04 Accessed April 11, 2023
2. CNN, “Not a single G20 country is in line with the Paris Agreement on climate, analysis shows,” https://www.cnn.com/2021/09/15/world/climate-pledges-insufficient-cat-intl/index.html Accessed April 11, 2023
3. UNEP, “Emissions Gap Report 2020,” https://www.unep.org/emissions-gap-report-2020 Accessed April 11, 2023
4. Science Based Targets, “Corporate Net-Zero Standard,” https://sciencebasedtargets.org/net-zero Accessed April 11, 2023
