- The Net-Zero Challenge is a voluntary Canadian federal program, open to all businesses, to achieve net-zero emissions by 2050
- Participants commit to clear targets, robust plans, and annual progress reporting; SMEs benefit from streamlined requirements
- Progress is recognized across participation tiers (Bronze to Diamond), higher ambition means more credibility
- Strong net-zero plans require accurate emissions baselines, SBTi-aligned targets, supplier engagement, and transparent governance
- Automation with platforms like Arbor eases data collection, reporting, and roadmapping, accelerating credible climate action
As climate change escalates, governments worldwide are pressing for meaningful action. For Canadian businesses, the Net-Zero Challenge stands out as a landmark initiative, a call from the federal government to commit to deep decarbonization and climate leadership.
But what is it, who can join, and how do organizations navigate its requirements?
This guide breaks down the essentials of Canada’s Net-Zero Challenge, offering you practical insights on your way to net zero.
What Is the Net-Zero Challenge?
Canada’s Net-Zero Challenge is a voluntary federal program that encourages businesses to develop and implement robust plans to reach net-zero greenhouse gas emissions by 2050.
Launched as part of Canada’s broader climate agenda, the challenge supports companies in making credible public commitments, setting interim targets, and tracking progress over time.
The aim? Meaningful corporate action and embed best practices in emissions measurement, reduction, and transparent reporting, for a competitive low-carbon future.
But what exactly does “net-zero” mean?
Net-zero is achieved when a company reduces its greenhouse gas emissions as much as possible across its entire operations and supply chain, and then balances any remaining emissions by removing an equivalent amount from the atmosphere for a given time period.
The result: the company’s total net emissions add up to zero. Net-zero targets signal real climate ambition and long-term resilience to regulators, customers, and investors alike.
Read our full guide to achieving net-zero emissions.
Why the Net-Zero Challenge Exists
With the Canadian Net-Zero Emissions Accountability Act, Canada commits by law to a net-zero target by 2050 and interim emissions cuts of 40-45% from 2005 levels by 2030. Achieving this requires coordinated action, innovation, and leadership from all sectors, especially private businesses.
Benefits for businesses include:
- Staying competitive in a low-carbon global economy
- Gaining investor and customer trust
- Mitigating regulatory and climate-related risks
- Accessing resources and best-practice networks
For further details on why net zero matters and its business value, check out our main net-zero guide.
Who can join the Net-Zero Challenge?
All organizations operating in Canada are eligible, from large corporations to SMEs (Small- and Medium-Sized Enterprises, i.e., <499 employees).
The challenge recognizes the unique needs of SMEs by streamlining certain requirements, yet the core commitment, credible planning and action towards net zero, remains.
To participate, businesses must:
- Sign a public Commitment Letter to net zero by 2050 or sooner
- Develop a preliminary net-zero plan within 12 months
- Complete and update annual progress reports
If your company grows from SME to 500+ employees, you notify the challenge and transition to full participation requirements.
Participation streams
- Stream 1: Large industrial emitters
- Stream 2: Financial institutions
- Stream 3: All other companies, including small- and medium-sized enterprises
Key requirements and participation tiers
Participation streams
Stream 1: Large industrial emitters
- Must report Scope 1 and Scope 2 emissions.
- Encouraged to include relevant Scope 3 emissions categories.
Stream 2: Financial institutions
- Must report Scope 1 and 2 emissions.
- Must include Scope 3, Category 15 (Investments), and lending portfolio emissions if applicable.
Stream 3: All other companies, including small- and medium-sized enterprises
- Must report Scope 1 and Scope 2 emissions.
- Must include the single most relevant Scope 3 emissions category.
- Small- and medium-sized enterprises are encouraged (but not required) to include additional relevant Scope 3 emissions categories.
Participation tiers
Participants are recognized with Bronze, Silver, Gold, Platinum, and Diamond tiers, each requiring progressively higher ambition (e.g., more comprehensive Scope 3 coverage, bolder interim targets, greater disclosure).
Higher tiers can enhance brand credibility and stakeholder confidence.
Here’s a table breaking down the different participation tiers of Canada’s Net-Zero Challenge:
How to start Canada’s Net-Zero Challenge:
1. Set Your Targets:
- Net-zero target no later than 2050 (earlier is better)
- Two interim targets (unless your target year is 2040 or earlier)
2. Develop Your Net-Zero Plan:
- A draft plan within 12 months
- A comprehensive plan within 24 months
3. Baseline Your Emissions:
- Provide 12 months of Scope 1 & 2 data (Scope 3 for larger companies, recommended for SMEs)
- Use international standards like the GHG Protocol
4. Action and Reporting:
- Annual progress checklists
- Plan updates every five years
5. Mitigation & Offsets:
- Prioritize avoidance/reduction; carbon offsets only for residual emissions
- Use high-quality, transparent carbon credits
6. Governance:
- Describe how climate goals integrate into business strategy, risk, and governance
What makes a strong net-zero plan?
A credible net-zero plan under the Net-Zero Challenge should:
- Accurately quantify baseline emissions (Arbor can help you do this)
- Set measurable, science-based targets aligned with SBTi guidance
- Include mitigation strategies for all relevant categories (e.g., electrification, clean energy, supplier engagement, operational efficiency)
- Perform scenario analysis to stress test your path to net-zero
- Be transparent about the use of offsets and disclose methodologies
- Incorporate robust governance, integrating climate action into business decisions
For practical guidance on setting up a net-zero roadmap, see our in-depth guide on net-zero.
Getting to net-zero: Tips & tools
- Baseline first. Know your Scope 1, 2, and 3 emissions.
- Set ambitious but achievable targets. SBTi-aligned goals bolster legitimacy.
- Engage your value chain. Suppliers and customers impact your Scope 3 and enable deeper reductions.
- Focus on action, not just offsets. Offsets are for hard-to-abate emissions only.
- Automate tracking and reporting. Saves time and improves accuracy.
- Access resources. Use government tools, SME guidance, and platforms like Arbor.
How Arbor can help with the Net-Zero Challenge
Navigating the Net-Zero Challenge is significantly easier with the right partners and technology.
Arbor’s cloud-based platform helps businesses:
- Automate emissions quantification (up to 80% time savings)
- Integrate procurement, travel, and waste data with ease
- Identify emissions hotspots and create actionable roadmaps
- Align reporting with GHG Protocol, ISO, and Canadian requirements
- Automate annual tracking, update plans, and generate customized reports
Ready to streamline your net-zero journey?
Summary
Canada’s Net-Zero Challenge is more than compliance, it’s a strategic opportunity. Whether you’re an SME or a multinational, now’s the time to get started:
- Review the full requirements
- Begin emissions baselining and target setting
- Leverage trusted data platforms and sustainability advisors
For more on the fundamentals and best practices of net zero, explore our definitive guide.
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