Are company net-zero targets just green-wash?

This article was written by James Meacher, of recent SLR acqusition Corporate Citizenship. Corporate Citizenship provides ESG strategy, reporting, social and environmental impact and other sustainability consulting services to multi-national companies. Visit the Corporate Citizenship website to learn more.

Net-Zero is the biggest buzz word in the sustainability world right now. In fact, the first goal of COP26 is to “Secure global net zero by mid-century”[1]. As a goal, it may at first appear disarmingly simple, but in truth it will take unprecedented action, collaboration, and societal shifts to achieve.

Businesses are on the front line of this fight, with stakeholders from all sides demanding action. The reaction to this pressure from companies has been a slew of Net-Zero targets, which vary drastically in scope, ambition, timelines and detail, and that have in turn led to significant scrutiny from the media, public and by investors[2]. Questions are being raised about whether these targets are ambitious enough and whether or not they will be supported with real, effective climate transition action[3].

So, the question remains, how can companies demonstrate ambition, without getting called out for green-washing? Below we have put together a brief guide on how to set robust corporate Net-Zero targets which ensure companies can meet their commitments and avoid scrutiny from the public, customers and investors:

1. Address your biggest impacts

Companies must measure and include full Scope 3 (value chain) emissions within a Net-Zero target.

Many companies have been setting “operational Net-Zero” targets, focusing on reducing Scope 1 & 2 emissions, and purchasing carbon credits[4]. However, Net-Zero should be about a global, systematic change; failing to include value chain impacts with a company’s targets will call into question the validity of any Net-Zero claims. This is especially true given that Scope 3 emissions often form 80-97%[5] of total emissions for large companies.

1. Set near-term targets

Companies must target significant gross emissions reductions over the next 5-10 years.

Long-term, 2050 Net-Zero targets seem very distant, and stakeholders immediately assume that companies with such long-term goals are simply pushing the problem down the road[6]. In order to show some immediate ambition, and align with the climate science, companies need to also set short-term, gross reduction targets as we look to halve global emissions by 2030.

1. Publish a long term GHG emissions abatement plan

Companies must demonstrate they have a clear strategy to reduce the majority of their absolute emissions over the short, medium and long term.

It is no longer enough to simply set a target. Increasingly, stakeholders, including governments through regulation, are demanding to see how you plan to get there. The changes required are large & complex, and they will transform the way businesses operate. Stating a target, without developing a clear strategy for achievement, is a recipe for failure.

1. Develop a strategy for residual emissions

Companies must know how and when they will utilise carbon-credits, to finally achieve Net-Zero.

The pace at which we need to transition to a Net-Zero economy means that we will inevitably need to utilise GHG removal and storage technologies to counter the most difficult to abate emissions. However, companies relying on reduction offsets are increasingly getting called out for “paying away the problem” and not taking real action[7][8].

Because of this companies need to think carefully about how and when to use these mechanisms, using reduction offsets in the near term to accelerate the transition outside their value chain, and switching to removals in future to reach the final Net-Zero goal.

1. Get the target validated

Companies must ensure stakeholders can, at a glance, be confident their targets are in line with climate science. Getting external validation, ideally through the SBTi, will ensure these targets can be published with confidence.

One of the main criticisms of Net-Zero targets has been the lack of clarity and consistency within and between companies. The recent launch of the SBTi Net-Zero standard means we finally have a standard from a respected body which companies can align to. The validation of targets gives companies a stamp of approval which can allay any stakeholder fears over target legitimacy.

Our team have extensive experience supporting companies across all sectors and stages to set and achieve ambitious climate strategies. Please get in touch if you would like to talk through how to ensure your target is keeping pace as the climate agenda moves at an ever-quickening pace.