29 July 2020

Three key points to keep in mind for Net Zero

IOM3 Strategic Advisor Cynthia Adu looks at how we can help to reach Net Zero by 2050.

Nature climate change reported a 17% decrease in emissions due to the forced confinement we have experienced over the past few months. While this puts us on a pathway to carbon reduction, working from home won’t last forever. Slight reductions in emissions do not immediately reduce concentrations; they only slow the rate of increase. To reduce atmospheric CO2 build-up, we need to make more significant efforts. In response, you may have noticed organisations making ambitious pledges to achieve net-zero, carbon neutrality and even carbon negative. These announcements have been very comforting to see in the media. Especially when it comes from some of the highest emitting industries like construction, oil and gas and cement. Nonetheless, we must acknowledge the elephant in the room asking ‘HOW’.

A good place to start is probably the definitions of carbon neutral or net zero

Carbon neutral means that the sum of greenhouse gas emission produced from an organisation’s operations or product is offset by natural carbon sinks or through the purchase of carbon credits. Hence, the net GHG emissions associated with that entity, product or activity is zero for a defined period. The internationally recognised standard for carbon neutrality is the BSI standard PAS 2060 which succeeds the PAS 2050 standard for assessment of the GHG emissions. Unlike carbon neutrality, Net Zero doesn’t have a standard, and there is no commonly agreed definition.

However, there are four guiding principles from the Science Based Target initiative (SBTi), which essentially describe what Net Zero transition should look like for an organisation:

  • The business model of the should result in no net impact on the climate
  • Align with a mitigation pathway that limits global warming to 1.5℃
  • Mitigate any climate-related transition risk associated with the organisation
  • A long-term strategy and certainty on the viability  of the business in a low carbon economy

Finally, carbon-negative is the reduction of an organisation’s carbon footprint to less than neutral, meaning the activities of the organisation have a net effect of removing carbon dioxide from the atmosphere rather than adding it. There is no particular standard for this, probably the least common climate change pledge, with Bhutan being the only carbon negative country in the world due to its natural carbon sinks, and Microsoft recently pledging to be carbon negative by 2030. This also requires investment in greenhouse gas removal technologies (GGR). While there are differences in the standards, alignment and governing bodies, all terminologies are trying to achieve the same goal of mitigating climate change. Although you can make a product or your operations carbon neutral by procuring carbon offsets, Net Zero pledges are aligned with the 1.5℃ reduction target and require an organisation to change its business model to one that mitigates climate-related risk. For example, an airline setting a Net Zero target should have a future business model that is not reliant on fossil fuels. Hence, the effort required for a net zero organisation is a more strategic long-term plan, and some sectors would find it more difficult than others. Such a challenge brings back to the question 'HOW?'. From my recent experience of helping business navigate this topic, these few points must be considered.

You can’t manage what you can’t measure

You need to first understand your current impacts through regular sustainability and carbon foot printing. There is no limit to the size of business that should be measuring their carbon footprint from SMEs to a large multinational corporation. Measuring the organisation’s footprint is the first step to help prioritise high impact areas. Carbon emission measurement is done in 3 scopes – scope 1 emission caused by burning of fuels, company vehicle use and refrigerants. Scope 2 are indirect emissions generated outside your operations but used on site such as electricity, steam, heating and cooling. Finally, scope 3 is a big bucket from upstream emissions associated with purchased goods & service used to run your operations to downstream emissions associated with the use of your products; there are 15 different categories to account for emissions.

In most cases, these scope 3 emissions account for up to 90% of an organisations greenhouse gas emissions. Achieving Net Zero emissions will require an organisation to have a solid understanding of its impacts in these three scopes. Carrying out this exercise has helped many businesses to uncover areas that they didn’t expect to be a significant part of their emissions, such as business travel or air freighting of goods.

You also can’t measure what you can’t manage

Many organisations have diverse supply chains whereby once a product gets into the hands of a customer, they automatically loose visibility on how products are used and how consumer behaviour affects climate change. This is especially the case for manufacturers of consumer goods and intermediary products of final goods. This lack of visibility doesn’t only occur downstream at the consumer side but also at your suppliers where you source your raw materials. Most businesses will have no management or control of these areas of their supply chain; hence it becomes increasingly difficult to measure emission as the data collection methods are complex. Organisations will find it more challenging to set Net Zero targets associated with scope 3 emissions compared to scope 1 and 2 emissions where they have some visibility. Nonetheless, there are various ways of overcoming this through better relationships with suppliers, gathering consumer insights on how products are used and also adopting circular economy business models. Most circular business models have tighter supply chains with more feedback and interactions between stakeholder in the value chain.

You will need some allies to tackle these challenges

Achieving Net Zero is a global destination; the way each organisation gets there is going to be different, and for some, it may be a steep curve. Organisations who have made net zero pledges have taken different approaches such as renewable energy, improving energy efficiency in operations, investing in GGR technologies. Nonetheless, one company alone cannot address climate risk – it is important to share best practices and learnings. The SBTi has acknowledged the importance of players in the same sectors to come together. It has provided separate sectoral guidance for different industrial sectors as their challenges are different. You may have seen collaborations within sectors, for example, the UK concrete and cement sector have come together to put a Net Zero plan in place. To provide advice to the government and others, IOM3 has also joined the National Engineering Policy Centre (NEPC) together with other professional engineering institutions and led by the Royal Academy of Engineering.

As we continue to hear many pledges for Net Zero it is important to question how an organisation is trying to achieve this. Are they measuring and defining their carbon footprint? Have they considered areas of their operations such as scope 3, which cover emissions from suppliers and the actual use of their products?  Some key element of achieving net zero is measuring and accounting for the emissions, adopting new business models with less climate change risk, including other areas of operations and partnering with others to overcome challenges.

Cynthia Adu, IOM3 Strategic Advisor