Down to business: What net-zero really means

14th Sep 2020

By Alberto Carrillo Pineda, Director, Science Based Targets, CDP

As the COVID-19 pandemic continues to disrupt and devastate livelihoods, lives and operations worldwide, an ever-growing number of voices are calling for a recovery paired with bold climate action. For the public sector, private sector, and citizens worldwide, the need for resilience is clearer than ever.

This means upholding the climate goals of the Paris Agreement, in order to mitigate and reduce vulnerability to future shocks that are made more likely by global warming. To protect our economies and societies from the worst impacts of climate change, we must limit temperature rise to 1.5°C above pre-industrial levels, which requires hitting net-zero global emissions by 2050.

The path to net-zero must be science-based

The number of businesses committing to reach net-zero emissions is rapidly growing, as they realize the urgency of tackling the climate crisis and future-proofing growth.

But not all net-zero targets are equal. The definition of net-zero itself, as well as the path to get there, are diverse and often inconsistent.

For the private sector to take the rapid, large-scale action so urgently required, businesses need a common, robust and science-based understanding of net-zero. Otherwise, they risk following a pathway that may not be consistent with addressing the climate crisis nor the sustainability goals that the international community has agreed upon.

To address this gap, the Science Based Targets initiative (SBTi) is developing the first global science-based standard for companies to set net-zero targets.

Our new paper lays the foundations. We assess the underlying climate science, analyze the current practices in corporate net-zero target setting, and provide some guiding principles and recommendations for companies to set science-based net-zero targets – and for stakeholders to assess them. We cut through the confusion on key concepts, by defining net-zero and clarifying the role of decarbonization, offsetting and nature-based climate solutions in a business’s net-zero strategy.

What makes a net-zero target credible, robust and science-based?

There are several crucial factors that determine the effectiveness of a net-zero target: from the boundary of the target (the scopes of activity it covers) to the timeframe, and from accountability to social safeguards.

Our ten initial recommendations for net-zero target-setting will give companies the confidence and clarity to start their net-zero journey.

Here are some of the key points to consider:

A clear destination

To halt global warming, the destination for our economy is clear. We need to reach a state in which human activity no longer causes accumulation of greenhouse gases in the atmosphere.

To get there, we need to achieve a deep and profound elimination of emissions across the global economy. Where emissions cannot be eliminated, we must neutralize the impact by withdrawing an appropriate amount of carbon from the atmosphere.

A sustainable transformation

Any credible net-zero target must aim to reach that destination. However, the pathway to get there is just as important. The transition towards achieving a state of net-zero emissions should account for our planet’s bio-physical limits, as well as local and global social and environmental goals.

While we need to limit warming to 1.5°C, we also need to reverse the loss of nature and ecosystems that support life on earth, and eradicate poverty. While some pathways maximize synergies between our climate and our broader sustainability agenda, others create trade-offs, and achieve a state of net-zero emissions at the expense of these goals.

Generally, pathways with rapid and profound emission reductions minimize risks to the climate and minimize trade-offs with other sustainability goals. Therefore, any credible net-zero target should be backed by a plan to cut down emissions in line with science.

A comprehensive target

A credible net-zero target must address the most relevant impacts of the company – that is, it must address the sources of direct and indirect emissions within the company’s value-chain that are most relevant to its overall impact on the climate.

A credible journey

For many, reaching a state of net-zero emissions may be a long-term aspiration, which change in internal governance risks derailing. The average tenure amongst CEOs in companies with large capitalisation (S&P 500) was around 7 years in 2017. Companies setting long-term net-zero goals should also set interim milestones that give certainty to investors, customers, and other stakeholders that they are progressing towards their net-zero goal.

A pathway that delivers value to society

While it is critical that companies take action to eliminate their impact on the climate, businesses can also play a critical role in helping society at large transitions towards a net-zero world. By compensating or neutralizing their emissions while they transition towards net-zero, companies can scale-up much needed finance to help reduce emissions in other parts of the economy and to build resilience against climate impacts. Through their ability to innovate, companies can deploy the products, services and business models that our economy needs to transition towards net-zero.

Join the companies embracing a science-based approach to net-zero

Businesses have a critical role to play in the transition to a sustainable, climate-safe future. Robust and coherent targets grounded in science can ensure their actions lead to the transformation we need.

As the SBTi develops its guidance on setting net-zero targets, we urge companies in all sectors worldwide to join the nearly 1,000 companies already taking climate action through science-based targets. These represent 15% of the global economy, and annual emissions equivalent to that of the United States.

Nearly 300, including Microsoft, IKEA, ENEL and Rolls Royce, have also publicly committed to science-based net-zero through the Business Ambition for 1.5°C campaign.

Now, more than ever, is the time to strengthen commitments for a resilient, sustainable, future — our only future.