How to define your company’s net zero journey?

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Key takeaways

  1. Comprehensive strategy formation: Developing a net zero strategy involves measuring current emissions, implementing reduction measures, setting achievable targets, creating a net zero pathway, incorporating carbon credits, and defining reporting mechanisms.
  2. Implementation and compensation: Effective net zero progress requires executing reduction strategies and compensating for hard-to-abate or unavoidable emissions using carbon credits.
  3. Continuous monitoring and reporting: Regular assessment and transparent reporting are crucial for tracking net zero journey progress and sharing successes with stakeholders.
  4. Employee and supply chain engagement: Engaging employees and collaborating with supply chain partners are essential steps for successful net zero implementation and fostering a culture of sustainability.
  5. Innovative approaches: Leveraging innovation, technology, and circular economy practices enhance the net zero journey by reducing emissions and maximising long-term cost savings.

In this part, we explore the following:

  • Defining the net zero journey
  • Looking at the specific steps within the net zero journey and how to create a net zero strategy
  • Considerations of the net zero journey
  • The benefits of going net zero

We will be covering the majority of the steps in the net zero Journey in depth in this module, but for now, let's get a high-level understanding of the concepts.

What is a net zero journey?

A net zero journey, or strategy, is the process of creating, implementing, and reporting on a net zero emissions strategy. The objective of the net zero strategy is to reduce a company's carbon emissions to zero while meeting other objectives such as reducing risk.

A net zero strategy will explicitly outline how a company will reduce its carbon footprint to zero. Now let’s look at an overview of the entire net zero Journey, before diving into each step further:

  1. Measure your company's current emissions.
  2. Assess the reduction measures available & establish the areas that need the most attention.
  3. Set clear, achievable net zero targets, outlining specific actions and timelines to achieve these targets.
  4. Create a net zero pathway, plotting the above net zero targets on your company's pathway to zero.
  5. Define how you will report on the company's actions.
  6. Implement reduction strategies
  7. Implement compensation with carbon credits
  8. Regularly monitor and report
  9. Share net zero successes

To ensure the strategy stands the test of time, it should be adaptable, considering future technologies, strategies and regulations that might directly or indirectly affect the company.

Let’s take a deeper look at these steps:

How to create and execute your net zero strategy?

1. Measure your company's current emissions

The first step is to conduct a thorough assessment of your company's current carbon emissions. You will have to collect data on the carbon emissions across Scope 1, 2, and 3 emissions which will include areas such as energy usage, supply chain practices, and overall operational activities. Thereafter, calculating your company's baseline emissions and its carbon footprint will be required. (More on this in the following chapter).

2. Decide on the emissions reduction measures and focus areas

Using tools such as the Marginal Abatement Cost Curve (MACC) helps in ranking strategies for reducing emissions based on cost-effectiveness. Other effective ways to establish which emitting areas in a company need to be looked at first, is to use the Life Cycle Assessment and conduct an Energy Audit.

3. Set net zero targets

Based on the successful plotting of your IPCC-aligned net zero pathway and the readiness of the emissions reduction strategy, the company needs to set realistic and measurable targets for emission reduction.

Setting a net zero target means committing to balance the amount of greenhouse gases emitted into the atmosphere with an equivalent amount of internally reduced emissions, and offsetting emissions that simply cannot be reduced.

It’s important to set net zero targets after establishing what the most prominent areas of GHG impacts are, as well as the available measures to abate these, as it will be more difficult to set accurate, ambitious, or achievable net zero targets without doing so first. These targets are meant to be short and long-term, which aids as milestones to achieve on the journey to the eventual net zero target.

A well-known and widely used standard for net zero target setting is the Science Based Targets Initiative (SBTi) framework.

4. Create a net zero pathway

Now you can go ahead and create your company's reduction pathway, in line with the IPCC 1.5° net zero Pathway for Companies. Your pathway will represent the decline in your company's emissions as it goes through the process of avoiding, replacing, and reducing its emissions over time.

Navigating the complexity of emissions reduction requires careful consideration of various options. Utilising tools like the Marginal Abatement Cost Curve (MACC) can clarify your company's emissions, pinpoint where the greatest reduction potential lies, and prioritise actions based on their cost-effectiveness. Strategies to reduce emissions could include switching to renewable energy sources, improving energy efficiency, adopting sustainable supply chain practices, and investing in green technologies.

Net zero pathway for companies

5. Define how you will report on the company's actions.

The purpose of this step would be to establish a structured and transparent approach to communicate the company's progress on its net zero journey, including actions taken, milestones reached, and challenges faced. Other considerations are

  • Select Reporting Frameworks: Choose frameworks like GRI, TCFD, or CDP to guide what and how to report, aligning with industry standards and stakeholder expectations.
  • Determine Reporting Intervals: Decide on reporting frequency (annually or bi-annually) to track progress and adapt strategies accordingly.
  • Identify KPIs: Define measurable KPIs for emissions reduction, energy efficiency, and renewable energy to gauge progress towards net zero targets.
  • Data Management Plan: Set up systems for data collection and verification to ensure consistent, accurate reporting across operations and supply chains.

6. Implement reduction strategies

This involves executing the plans laid out in your potential emissions reduction measures, focusing on the most impactful areas identified during the assessment phase. Initiatives may include transitioning to renewable energy sources, enhancing energy efficiency across operations, redesigning products to be more sustainable, and engaging with suppliers to reduce upstream emissions.

Effective implementation requires setting clear timelines, allocating resources, and assigning responsibilities to ensure that each strategy is executed efficiently. It's also essential to integrate these strategies into the net zero pathway, as well as the core business operations and decision-making processes, ensuring they are sustainable over the long term.

7. Implement compensation with carbon credits

Once the majority of the current emissions are either avoided or on the path towards reduction, a company might have a small percentage of currently hard-to-abate (or remove) and unavoidable emissions. This might lead to the company’s reduction pathway being above the IPCC pathway, resulting in the bright yellow gap on the extract above. A company can compensate for the hard-to-abate emissions that create this gap, by using carbon credits.

No matter how effective a company's reduction strategies and compensation strategies are, there will always remain emissions beyond those that are hard to abate, and these are known as unavoidable emissions. Here, a company can neutralise these emissions using carbon removal credits. This step can be actioned as soon as the company has clear data on the current or projected unavoidable emissions, and moving early here can hold great economic benefits to companies.

Example of a company's net zero pathway

8. Regular monitoring and reporting

Continuous monitoring and reporting of emissions is crucial. This ensures transparency and helps in adjusting strategies as needed to meet targets.

9. Share successes

Successfully embarking on the net zero journey holds many advantages for a company, and these would not be fully utilised if not communicated to stakeholders such as directors, customers, supply chains, investors, and employees.

Additional considerations for reaching net zero

In addition to the above points, there are several best practices to follow that will help the net zero journey be as smooth and successful as possible. Consider the following steps:

Employee engagement

It is recommended to involve employees in understanding and participating in the Net Zero journey. This can either be implemented as a standalone sustainability program or as a complement to an existing one. It is an effective way to promote a culture of environmental responsibility and can be communicated consistently with clear objectives to measure progress. Similar to a company's strategy, the net zero journey can serve as a guiding principle that everyone in the organisation understands and works towards. This helps with engagement and fosters a shared vision for the company.

More than 64% of respondents to a recent comprehensive study say a company's commitment to net zero would be a “major factor” in influencing their decision to work for that organisation.

Circular economy practices

It is crucial to adopt circular economy principles to address avoidable emissions since almost half of global emissions (45%) are caused by the creation and usage of products, materials, and food. By understanding and implementing circular economy principles, you can reduce emissions in your supply chain and cut costs. Usually, these principles are introduced through procurement, so it's essential to gain their approval and make them aware of the advantages.

Innovation and technology

Rapid advancements in technology offer both challenges and opportunities for businesses to mitigate their environmental impact. Identifying and implementing new technologies or collaborating with innovative suppliers can significantly lower emissions. This approach not only aids in emission reduction but also serves as a powerful narrative showcasing a company's dedication to technological progress and sustainability.

Supply chain collaboration

A significant portion of a company's emissions often originate from its supply chain, which is classified as scope 2 emissions. Establishing partnerships with suppliers to jointly reduce emissions is a key strategy. Looking at how to utilise supplier agreements that mandate emissions reduction plans enhances the collective move toward net zero. A good example of how this could be done is Unilever's Climate Promise, which exemplifies how companies can engage suppliers in their sustainability journey, encouraging them to adopt Science Based Targets and transparently report their emissions reduction progress.

Benefits of committing to net zero

Increased resilience

Becoming a net zero business can go a long way to protecting against economic, climate and regulatory shocks now and in the future.

Long-term cost reductions

Making changes to your way of doing business rarely comes without cost in the short term. However, you should seek to maximise the efficiencies that net zero businesses can find through reduced energy, waste, and water costs Businesses with minimal greenhouse gas emissions and environmental impacts may also find themselves able to avoid future carbon and waste taxes.

Early mover advantage

Becoming a net zero business can put you ahead of others in your industry and help you to establish a larger market share while others catch up, as well as maintain operational legitimacy within supply chains.

We will explore a myriad of other benefits in later chapters