April 4, 2022

Sustainability Glossary for Businesses Unpacked: Net Zero

As a business owner, the word “net” is part of your vocabulary. You make net profit, and you have net profit margins. Net is, as you know it so well, what is left after you take away the expenses and tax. Net in the “Net Zero” is therefore what is left after you reduce your carbon emissions to zero.  

Think of “Net Zero” as a shorthand for lowering carbon emissions from your entire operations to almost zero. However, the emissions that cannot be reduced any further, can be offset.  

According to Climate Change News, this concept has emerged out of discussions in 2013 as to how to convince the world to fully decarbonise, in other words, to achieve zero emissions so that global temperature does not rise above 1.5C and therefore limit the impacts of the changing climate on this planet.  

Knowing this may be difficult to embrace, as no economy or an individual can be emitting zero carbon, Net Zero was introduced instead. Since then, the concept has entered into everyday vocabulary; it has been translated into law in the UK and countless countries and companies have even pledged to be Net Zero by 2050.   

Unlike carbon neutrality, the concept of Net Zero focuses on reduction of emissions as far as it is possible. It is not about offsetting what is emitted into the atmosphere, but rather, it is about offsetting what cannot be reduced after emissions are almost at zero. So when others speak of Net Zero, they hopefully mean the same thing. However, despite its wide use, there was no common definition and so multiple interpretations followed. So, if you feel you got it wrong, do not worry as Net Zero has only recently been defined. In 2022, Science-based Targets Initiative published a Net Zero standard for businesses and in it said that it covers “a company’s entire value chain emissions, including those produced by their own processes (scope 1), purchased electricity and heat (scope 2), and generated by suppliers and end-users (scope 3). Most companies will require deep decarbonization of 90-95% to reach net-zero under the Standard”1

The key message here is that Net Zero means deep decarbonisation in phases in order to archive its target by 2050  while keeping your business profitable in the long term. 

Here is what you can do:

  1. Calculate your carbon footprint – because knowing how much you emit and what parts of the operations have high emissions, you can be practical about decarbonisation. 
  1. Integrate decarbonisation strategy into your business strategy –  because to keep your business going for years to come, you must redesign your operations so they are not impacted by the changing climate, legislation, distruption to supply chains and consumer backlash, 
  1. Set targets and a decarbonisation plan – because this cannot be done in one day and as a business owner you know that having a plan and targets keeps you on the right track. 
  1. Be honest about your efforts before you make the pledge – because staff and consumers stand behind businesses that back up words with actions and as you know it all too well, without them you cannot trade for years to come.  

Net Zero is an opportunity for businesses to thrive for years to come and to be rewarded by consumer and staff loyalty. A sustainable mindset, communication, education and actions are paramount to effective decarbonisation and therefore your future. 

Useful resources for businesses for Net Zero:

Ambitious corporate climate action – Science Based Targets

UK – SME Climate hub

How to Measure, Reduce, and Offset your Company’s Carbon Footprint – FutureLearn

Climate Clauses | The Chancery Lane Project

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The evidence is clear: the time for action is now. We can halve emissions by 2030

However, there is increasing evidence of climate action, said scientists in the latest Intergovernmental Panel on Climate Change (IPCC) report released today.

Since 2010, there have been sustained decreases of up to 85% in the costs of solar and wind energy, and batteries. An increasing range of policies and laws have enhanced energy efficiency, reduced rates of deforestation and accelerated the deployment of renewable energy.

“We are at a crossroads. The decisions we make now can secure a liveable future. We have the tools and know-how required to limit warming,” said IPCC Chair Hoesung Lee.  “I am encouraged by climate action being taken in many countries. There are policies, regulations and market instruments that are proving effective.  If these are scaled up and applied more widely and equitably, they can support deep emissions reductions and stimulate innovation.”

The Summary for Policymakers of the IPCC Working Group III report, Climate Change 2022: Mitigation of climate change was approved on April 4 2022by 195 member governments of the IPCC, through a virtual approval session that started on March 21. It is the third instalment of the IPCC’s Sixth Assessment Report (AR6), which will be completed this year.

We have options in all sectors to at least halve emissions by 2030

Limiting global warming will require major transitions in the energy sector. This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen).

“Having the right policies, infrastructure and technology in place to enable changes to our lifestyles and behaviour can result in a 40-70% reduction in greenhouse gas emissions by 2050. This offers significant untapped potential,” said IPCC Working Group III Co-Chair Priyadarshi Shukla. “The evidence also shows that these lifestyle changes can improve our health and wellbeing.”

Cities and other urban areas also offer significant opportunities for emissions reductions.  These can be achieved through lower energy consumption (such as by creating compact, walkable cities), electrification of transport in combination with low-emission energy sources, and enhanced carbon uptake and storage using nature. There are options for established, rapidly growing and new cities.

“We see examples of zero energy or zero-carbon buildings in almost all climates,” said IPCC Working Group III Co-Chair Jim Skea. “Action in this decade is critical to capture the mitigation potential of buildings.”

Reducing emissions in industry will involve using materials more efficiently, reusing and recycling products and minimising waste. For basic materials, including steel, building materials and chemicals, low- to zero-greenhouse gas production processes are at their pilot to near-commercial stage.

This sector accounts for about a quarter of global emissions. Achieving net zero will be challenging and will require new production processes, low and zero emissions electricity, hydrogen, and, where necessary, carbon capture and storage.

Agriculture, forestry, and other land use can provide large-scale emissions reductions and also remove and store carbon dioxide at scale. However, land cannot compensate for delayed emissions reductions in other sectors.  Response options can benefit biodiversity, help us adapt to climate change, and secure livelihoods, food and water, and wood supplies.

The next few years are critical

In the scenarios we assessed, limiting warming to around 1.5°C (2.7°F) requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by 43% by 2030; at the same time, methane would also need to be reduced by about a third. Even if we do this, it is almost inevitable that we will temporarily exceed this temperature threshold but could return to below it by the end of the century.

“It’s now or never, if we want to limit global warming to 1.5°C (2.7°F),” said Skea. “Without immediate and deep emissions reductions across all sectors, it will be impossible.”

The global temperature will stabilise when carbon dioxide emissions reach net zero. For 1.5°C (2.7°F), this means achieving net zero carbon dioxide emissions globally in the early 2050s; for 2°C (3.6°F), it is in the early 2070s.  

This assessment shows that limiting warming to around 2°C (3.6°F) still requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by a quarter by 2030.

Closing investment gaps

The report looks beyond technologies and demonstrates that while financial flows are a factor of three to six times lower than levels needed by 2030 to limit warming to below 2°C (3.6°F), there is sufficient global capital and liquidity to close investment gaps. However, it relies on clear signalling from governments and the international community, including a stronger alignment of public sector finance and policy.

“Without taking into account the economic benefits of reduced adaptation costs or avoided climate impacts, global Gross Domestic Product (GDP) would be just a few percentage points lower in 2050 if we take the actions necessary to limit warming to 2°C (3.6°F) or below, compared to maintaining current policies,” said Shukla.

Achieving the Sustainable Development Goals

Accelerated and equitable climate action in mitigating and adapting to climate change impacts is critical to sustainable development.  Some response options can absorb and store carbon and, at the same time, help communities limit the impacts associated with climate change. For example, in cities, networks of parks and open spaces, wetlands and urban agriculture can reduce flood risk and reduce heat-island effects.

Mitigation in industry can reduce environmental impacts and increase employment and business opportunities. Electrification with renewables and shifts in public transport can enhance health, employment, and equity.

“Climate change is the result of more than a century of unsustainable energy and land use, lifestyles and patterns of consumption and production,” said Skea. “This report shows how taking action now can move us towards a fairer, more sustainable world.”  

Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change

The Working Group III report provides an updated global assessment of climate change mitigation progress and pledges, and examines the sources of global emissions.  It explains developments in emission reduction and mitigation efforts, assessing the impact of national climate pledges in relation to long-term emissions goals.

Working Group III introduces several new components in its latest report: One is a new chapter on the social aspects of mitigation, which explores the ‘demand side’, i.e. what drives consumption and greenhouse gas emissions.  This chapter is a partner to the sectoral chapters in the report, which explore the ‘supply side’ of climate change – what produces emissions. There is also a cross-sector chapter on mitigation options that cut across sectors, including carbon dioxide removal techniques. And there is a new chapter on innovation, technology development and transfer, which describes how a well-established innovation system at a national level, guided by well-designed policies, can contribute to mitigation, adaptation and achieving the sustainable development goals, while avoiding undesired consequences.

The Summary for Policymakers of the Working Group III contribution to the Sixth Assessment Report (AR6) as well as additional materials and information are available at https://www.ipcc.ch/report/ar6/wg3/

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