What is Net Zero?

For sustainability leaders, understanding net zero is fundamental. A commitment to net-zero involves guiding your organization through significant changes driven by science, stakeholder demands, and new regulations.

This guide offers a clear path to define goals and implement strategies for net-zero emissions.

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What is Net Zero?

Net zero is achieved when an organization balances the greenhouse gases it releases into the atmosphere with an equivalent amount that it removes for a given time period. 

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This is not primarily an offsetting exercise; it demands changing business operations to minimize emissions first.

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The Science Based Targets initiative (SBTi) further clarifies this with its Corporate Net-Zero Standard. This standard emphasizes that companies must achieve deep decarbonization, meaning reducing emissions across their entire value chain (Scopes 1, 2, and 3) by at least 90-95 percent, before using carbon removals for the small, unavoidable residual emissions, typically 5-10 percent of the original footprint.

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Distinguishing Net Zero: Key Terminology Clarified

Understanding net zero also means distinguishing it from related terms like "carbon neutrality" and "gross zero."

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Carbon Neutrality

This term has often focused more narrowly on carbon dioxide (CO2​) and historically allowed for considerable reliance on carbon offsets to balance emissions. This approach could sometimes come without prioritizing deep internal emission reductions first, and the stringency and scope of "carbon neutral" claims can vary widely.

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Gross Zero

Sometimes referred to as "real zero," gross zero represents a more ambitious goal: completely eliminating all GHG emissions across an organization's value chain without relying on offsets or carbon removals. Achieving gross zero is, however, exceptionally challenging for most sectors with current technologies.

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SBTi-Aligned Net Zero

In contrast, SBTi-aligned net zero is increasingly viewed as a key benchmark. As the primary strategy, it mandates substantial, science-based reductions in all GHGs across all three scopes. Permanent carbon removals are to be used sparingly to neutralize the limited residual emissions remaining after these deep decarbonization efforts.

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This "reduction-first" principle is explicitly aligned with 1.5°C science-based pathways. It marks a shift from earlier strategies that over-relied on offsetting, making net zero a demanding but credible commitment.

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How to achieve net-zero emissions?

Transitioning to net-zero emissions requires a systematic, integrated, and sustained approach. The following roadmap outlines key strategic steps:

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Step 1: Comprehensive Emissions Baseline (Scopes 1, 2, and 3)

The first step is conducting a thorough Greenhouse Gas (GHG) inventory to understand your company's emissions profile. This involves measurement and accounting across:

• Scope 1: Direct emissions from sources your company owns or controls (e.g., fuel burned in company facilities or vehicles).
• Scope 2: Indirect emissions from purchased electricity, steam, heating, or cooling.
• Scope 3: All other indirect emissions in your value chain, both upstream (like purchased goods, services, supplier activities) and downstream (like the use of your sold products). Scope 3 emissions are the largest part of many companies' carbon footprint.

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Establishing an accurate baseline is critical for setting targets and tracking progress.

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Accurately measuring across all scopes, particularly without relying on spend-based methods for product-level footprints and complex supply chains, requires precise carbon accounting. Arbor is a carbon accounting platform that helps companies calculate and reduce emissions to reach net zero.

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Talk to a carbon expert

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Step 2: Setting Ambitious, Science-Aligned Targets

Set clear, measurable, and time-bound reduction targets with your emissions data. These should include:

• Near-term targets: Aim for quick, significant reductions for the next 5-10 years.
• Long-term net-zero target: A commitment to reach net zero by 2050 or earlier.

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Align these targets with 1.5°C pathways. External validation from bodies like SBTi adds credibility and ensures alignment with global best practices.

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Step 3: Decarbonizing Your Entire Value Chain (with a focus on Scope 3)

Addressing Scope 3 emissions is often the biggest challenge. Key strategies include:

• Supplier Engagement: Work with the suppliers that represent the majority of your spend to help them measure and reduce their emissions.
• Sustainable Procurement: Choose suppliers with strong environmental performance.
• Product Design: Create products with lower carbon footprints throughout their lifecycle.
• Sustainable Logistics: Optimize transport and shift to lower-emission options.
• Circular Economy: Implement strategies to reduce waste and improve resource efficiency.

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New net-zero tech

New technologies are important for deep decarbonization, especially in hard-to-abate sectors. Areas like Carbon Capture, Utilization, and Storage (CCUS), green hydrogen, and Direct Air Capture (DAC) show promise. While these develop, focus on deploying available solutions now.

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Measure your emissions with Arbor

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Offsetting, removals, and Beyond Value Chain Mitigation (BVCM)

Credible net-zero strategies prioritize direct emission reductions. The SBTi states that carbon offsets cannot count towards a company's science-based reduction targets. Once deep decarbonization (over 90%) is achieved, high-quality carbon removals must neutralize any small, unavoidable residual emissions.

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Separately, companies can invest in Beyond Value Chain Mitigation (BVCM) – actions outside their value chain, like purchasing carbon credits, to contribute to broader global climate efforts. This is an additional step, not a substitute for internal reductions.

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Common challenges with net zero

The path to net zero has obstacles. Addressing these challenges proactively can improve success:

• Addressing Complex Scope 3 Emissions: Scope 3 emissions are often the largest and most difficult to control. Success here depends on strong collaboration with suppliers for data collection.
• Securing Investment for the Transition: The shift to net zero needs capital for new technologies and infrastructure. A strong business case, highlighting cost savings and new market opportunities, is key to securing funding.
• Navigating Policy and Regulatory Uncertainty: Climate policies vary and change. Staying informed and building flexibility into net-zero plans are important.
• Driving Internal Organizational Change: Embedding net zero into the corporate culture requires significant change management, including building capacity and aligning incentives.

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Why is net zero important?

Scientific consensus and strong business drivers fuel the global drive towards net zero. To limit global warming to 1.5°C above pre-industrial levels, the Intergovernmental Panel on Climate Change (IPCC) states that global GHG emissions must be reduced by 43% by 2030 (compared to 2019 levels) and reach net zero by mid-century.

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For companies, adopting net-zero strategies is an environmental responsibility and a strategic move with several advantages:

• Enhanced Risk Management: Climate change poses significant physical risks to operations and supply chains. A sound net-zero strategy mitigates these vulnerabilities and builds resilience.
• Increased Investor Confidence: Investors are increasingly scrutinizing Environmental, Social, and Governance (ESG) performance. Companies with credible net-zero commitments and transparent progress attract capital.
• Regulatory Preparedness: Governments globally have introduced over 5,008 climate regulations to date, Climate Change Laws of the World says. A proactive net-zero pathway ensures compliance and positions companies ahead.
• Strengthened Consumer Appeal: Consumers increasingly prefer brands committed to sustainability. Net-zero efforts can improve brand image and loyalty.
• Operational Cost Savings: Energy efficiency and renewable energy, part of net-zero plans, can reduce operational costs.
• Stimulus for Innovation: Pursuing net zero drives innovation in clean technologies and sustainable products, opening new market opportunities.
• Talent Attraction and Retention: A commitment to sustainability helps attract and keep talented employees who want to work for purpose-driven companies. IBM found that “67% of employees would be more willing to apply for or accept a job with an environmentally sustainable company.”

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Net zero’s ecosystem: Key frameworks and initiatives

Achieving a credible net-zero target involves aligning with established global standards and often participating in national or regional programs. These frameworks provide guidance, ensure consistency, and add credibility to efforts.

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Global Standards: The Science Based Targets initiative (SBTi)

The SBTi is a leading international body that enables businesses to set ambitious emissions reduction targets based on climate science.

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The SBTi's Corporate Net-Zero Standard is a benchmark for credible corporate net-zero claims and requires companies to:

1. Prioritize Deep Emission Cuts: Set near-term science-based targets (typically 5-10 years) to achieve rapid emissions reductions, aiming to halve emissions before 2030, in line with 1.5°C pathways.
2. Set Long-Term Science-Based Targets: Commit to reducing emissions by at least 90-95% across all scopes (1, 2, and 3) by no later than 2050.
3. Neutralize Residual Emissions: After achieving deep decarbonization targets, companies must use permanent carbon dioxide removals to neutralize any limited residual emissions (typically less than 5-10% of the original footprint) that are technically infeasible to eliminate.

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SBTi validation is widely seen as a mark of a credible climate commitment.

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National and regional efforts

Many countries have national initiatives to support businesses in their net-zero transitions. For instance, Canada's Net-Zero Challenge is a voluntary program encouraging businesses to develop and implement plans to transition to net-zero emissions by 2050.

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Participants commit to setting interim targets, developing net-zero plans, and reporting progress annually. Such national programs often provide tailored support and resources, helping align corporate efforts with domestic climate objectives and complementing global standards like SBTi.

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How to lead your company to net-zero

As a sustainability leader (e.g., CSO), you are central to your company’s net-zero transformation. This requires strategic thinking and fostering collaboration. Key strategic considerations include:

• Integrate, Don't Isolate: Weave net zero into core business strategy, financial planning, and risk management.
• Establish Strong Governance: Ensure board oversight and clear accountability for net-zero targets.
• Foster Cross-Functional Collaboration: Work with finance, operations, procurement, R&D, and marketing.
• Champion Data-Driven Decision Making: Invest in good systems for accurate GHG emissions data collection and analysis.
• Engage All Stakeholders: Communicate transparently with investors, customers, employees, and suppliers.
• Maintain a Long-Term Vision While Adapting: Keep a long-term view while adapting to new science, tech, and policies.

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How Arbor can help you get to net-zero

Making informed decisions on the path to net zero requires good data management and analytical tools.

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We’re Arbor, and see why we’re your partner to net zero:

• Thorough Carbon Accounting: Accurately calculate emissions across Scopes 1, 2, and 3, including Product Carbon Footprints (PCF) for lifecycle insights.
• Actionable Insights: Identify emission hotspots and model reduction scenarios to focus efforts effectively.
• Compliance Support: Align with frameworks like the GHG Protocol and ISO standards, ensuring data is verifiable for reporting and regulatory needs (e.g., CBAM).
• Scalability: Handle supplier engagement across thousands of SKU’s and hundreds of vendors efficiently.

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Measure accurately, pinpoint reduction opportunities, and manage climate compliance.

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Summary

The journey to net zero is a significant undertaking. It demands a clear vision, a sound strategy, good data management, leadership, and continuous improvement. While challenging, net zero also offers opportunities for innovation, efficiency, and building a resilient business. Interested in taking the challenge? Learn more about Canada’s Net-Zero Challenge.

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As sustainability leaders, your role is to champion this transformation. Remember these key actions:

• Prioritize deep, direct emission reductions across your value chain.
• Set science-based targets and pursue validation from bodies like SBTi.
• Measure comprehensively, paying close attention to Scope 3 emissions and product carbon footprints.
• Engage your value chain, especially suppliers, in collaborative reduction efforts.
• Be transparent in reporting and communications.

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The transition to a net-zero economy is complex but essential and offers a pathway to long-term business success.

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Lead your organization to turn net-zero ambition into action

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