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Why Companies Are Racing to Embrace Net Zero Goals

Why are companies making a commitment to be Net Zero?

The twin crises of climate change and biodiversity have come to prominence in the last decade, consistently ranking top of the World Economic Forum’s Global Risks Report (see Figure 1). As climate anxiety sets in, citizens are demanding more action, organizations are realising they must do something to retain a ‘social license’ to do business, and governments tread a tight rope between trying to maintain economic stability and doing the right thing.

Figure 1: Global Long term (10- year) risks ranked by Severity (WEF Global Risks Report 2023)
Figure 1: Global Long term (10- year) risks ranked by Severity (WEF Global Risks Report 2023)

Carbon footprinting allows organizations to track their progress in reducing their contribution to climate change as well as make strategic business decisions on a Carbon-and-Cost Benefit Analysis basis. Those who know their number fare better at winning and retaining business, and even accessing finance. The EU’s Corporate Sustainability Reporting Directive is making it mandatory for large enterprises with over 250 staff to disclose their emissions and energy information.

But it’s not just about “knowing your number”. Stakeholders such as customers, investors, shareholders and NGOs are becoming more climate literate, so a proven track record at emissions reduction, as well as showing credible pathways to zero, are now required.

What is the difference between Net Zero and Carbon Neutral?

Broadly speaking, the term Carbon Neutral arose in the early 2000’s and can be used in relation to a product, a service, an organization or even an event. However, levels of emissions reduction are not specified, and companies can effectively buy their way to carbon neutrality by purchasing verified carbon offsets.

Net Zero is a more recent concept being integral to the goals of the Paris Agreement in 2015, which asserted we must “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”.[1] Net Zero can only be used in relation to an organization but not a product, service or event. The thinking behind this was to avoid a situation whereby a company could greenwash by advertising one “Net Zero” product, for example, when the rest of their products or operations were not. Scope 3 emissions are generally required, meaning organizations must understand the indirect emissions impact throughout their value chains. Targets must be aligned with the science meaning drastic emissions reduction pathways are required. And should carbon offsets be used, they must be from projects that remove greenhouse gases from the atmosphere.

The key differences between the two terms are summarised in the table below with the requirements for Net Zero being far more onerous. Microsoft has an interesting progress report on its Net Zero journey which outlines the challenges that have arisen (see Figure 2).

Are carbon offsets useful?

A carbon offset is a reduction, avoidance or removal of emissions of CO2 or other greenhouse gases made by an offsetting project in order to compensate for an emission made by an organization. Offsets can arise from all sorts of projects ranging from energy efficiency, public transport, renewable energy, waste disposal, destruction of refrigerant gases and forestry and land use. The denomination is one tonne of carbon dioxide equivalent or 1 tCO2e. Carbon offsets range in price depending on the quality, vintage, and type, from less than $1[1] (renewable energy projects) up to as high as $1,300[2] (direct air carbon capture with long term storage) per 1 tCO2e.

While carbon offsets can still be part of a Net Zero pathway, they are becoming more expensive and challenging to source. They should only be used as a last resort and in conjunction with a robust and credible carbon reduction plan.

Figure 2: Microsoft's Net Zero Journey. The dotted black line is net emissions, and note the move from avoided emissions offsets to carbon removal offsets on the negative axis.
Figure 2: Microsoft’s Net Zero Journey. The dotted black line is net emissions, and note the move from avoided emissions offsets to carbon removal offsets on the negative axis.

Companies are being called out for greenwashing

Greenwashing is when a business or a company shares false or misleading information about its sustainable initiatives for the sake of marketing. And there is a host of sustainability terms designed to confuse such as “Carbon Neutral”, “Net Zero” and “Climate Neutral”. Not to pick on a particular profession, but marketing teams of different organizations may mean the same thing when they say they are “carbon negative” or “carbon positive”.

There are many examples of companies being called out for greenwashing, but here are two energy-related ones:

  • Green electricity tariffs: a system exists in Europe whereby energy suppliers can claim 100% renewable energy through purchasing Guarantees of Origin as monitored by the Commission for the Regulation of Utilities (CRU) in Ireland. A recent debacle in Ireland led to the Advertising Standards Authority of Ireland (ASAI) upholding complaints about energy company advertisements stating that they provide 100 per cent green energy, ruling they were misleading as it was not possible to prove that customers received electricity that came completely from renewable sources.
  • Sustainable Aviation Fuel (SAF) usage has also resulted in the criticism of airlines, with Finnair stating that it was reducing its greenhouse gas emissions by 80% over the fuel’s life cycle.  Commentators correctly pointed out that SAF represented a mere 0.1% of overall fuel burn of this particular airline, and that there is only an impact if a significant proportion of overall fuel burn is SAF.[1]

The EU Green Claims Directive of 2023 aims to address greenwashing and introduces stringent requirements on various aspects in tackling false environmental claims.

With all these European Directives being thrown at us, and the increasing push towards zero emissions, it’s going to be an interesting decade for energy professionals on the eastern side of the Atlantic!

Raoul Empey is the Founder and Managing Director at Sustineo, a leading Irish sustainability consultancy that helps businesses take practical and meaningful sustainability actions. He has extensive experience as an energy consultant and a trainer, and he leads Sustineo’s work on carbon footprint measurement and reporting. Over the years, he has worked with many different types of businesses, from bakeries to TV stations, to understand, measure and reduce their energy use and carbon footprint. Raoul is a Certified Energy Manager and was a contributor to the International Organization for Standardization’s Net Zero Guiding Principles which was launched at COP27 in Egypt last November (ISO IWA 42).

In 2023, the Association of Energy Engineers (AEE) in conjunction with Sustineo launched a new 2-day Climate Action Certificate course. This training is open to all professionals tasked with developing credible climate action strategies and plans for their organizations. AEE’s first Climate Action Certificate virtual training program opens to a global audience on 15/16 Nov 2023. Register at https://www.aeecenter.org/event/climate-action-certificate-virtual-training-program/

[1] https://unfccc.int/most-requested/key-aspects-of-the-paris-agreement accessed on 03 Oct 2023

[1] https://blogs.microsoft.com/blog/2021/01/28/one-year-later-the-path-to-carbon-negative-a-progress-report-on-our-climate-moonshot/ accessed on 03 Oct 2023

[1] For example https://offset.climateneutralnow.org/AllProjects?Sorting=102 accessed 03 Oct 2023 [1] For example https://climeworks.com/subscriptions accessed 03 Oct 2023

[1] https://www.linkedin.com/posts/finnair_sustainable-aviation-fuel-has-a-real-impact-activity-7044619968381923329-wO2b/?originalSubdomain=fi accessed 03 Oct 2023