What is net zero and why does it matter?

Simply put, net zero refers to the balancing out of the greenhouses gas (GHG) being produced with the amount removed from the atmosphere.

To avoid the dangerous consequences of climate change and keep global warming to no more than 1.5°C – as called for in the Paris Agreement – emissions need to be reduced by 45% by 2030 compared to 2010, and reach net zero by 2050. With most scenarios of the International Panel on Climate Change (IPCC) predicting a breach of this limit during the 2030s, there is an urgent need for rapid and sustained GHG emission reductions, a sentiment echoed by the outcomes of COP28.

Businesses play no small part in the push to reach these goals, and increased pressure from regulators, investors and society at large demands a new level of transparency in net-zero strategies and planning.

What does net zero mean for your business?

The goal of net zero emissions involves getting GHG emissions down or close to zero. The decarbonisation process generally covers the reduction or elimination of all such emissions, including carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, nitrogen trifluoride, perfluorocabons and hydrofluorocarbons.

Companies that commit to a net-zero target will want to start by mapping then reducing the Scope 1, 2 and 3 emissions occurring in their own operations and wider value chain. However, the focus and complexity of emissions mapping varies greatly depending on the sector. For example, companies in manufacturing with heavy industrial processes will have high-emitting own operations (Scope 1 and 2), while those in the service or logistics sector see most of their emissions in the value chain (Scope 3). 

Scope 3 emissions are difficult to understand, calculate and mitigate given their indirect character, and tackling Scope 3 will be critical in achieving net-zero ambitions.

5 steps to develop your net-zero transition plan

Developing a net-zero transition plan means outlining what your GHG emission reduction opportunities are and how these are compatible with the transition to a sustainable economy and the 1.5 degree limit on global warming.

1. Zero in on your key emission drivers

First things first. Map out your GHG emissions across Scopes 1, 2 and 3. This is the baseline from which you set your targets and a way to identify key emission sources and drivers. Accurate mapping exposes the hotspots where your biggest emissions lie. Keep in mind that clear and transparent carbon accounting, aligned with the GHG Protocol, is essential to satisfy the scrutiny of regulators, investors and other stakeholders.

2. Map target requirements against the timeline

What does your reduction curve look like? Standards such as SBTi provide general criteria for percentage emission reductions along a set timeline. However, the Sectoral Decarbonisation Approach (SDA) also takes into account the situation in certain specific sectors and adjusts the curve to factors that may impact your reduction pace, such as the upcoming introduction of electrofuels in shipping. Once you’ve determined the relevant trajectory for your business, you can start closing the gaps. 

3. Identify your reduction levers

Decarbonisation levers are the initiatives your company can pursue to reduce emissions and hit targets. While these naturally vary by sector, usual levers can include increased efficiency, different fuel sources and process enhancement. Each lever is served by various activities – e.g. fitting sensors can make machinery run more efficiently, a higher share of renewable fuel has an impact, and operational tweaks can shave off excess consumption. Gauge what you know as well as future opportunities and define your reduction potential.  

4. Compare the costs and benefits of measures

Dig down into the related risks and opportunities for identified levers. A high-level cost-benefit analysis is a sure path to sorting your reduction priorities and necessary actions. Weigh up investments against reductions, including the short- and long-term perspective for both. It makes sense to consider the ‘abatement cost’ here – the cost of an action to reduce GHG emissions by 1 ton. With this done, you are now armed with all you need to set your targets.

5. Finalise your action plan

It’s time to operationalise. With credible targets front and centre, set out your prioritised actions in the short and long term along with the estimated cost and avenues for funding. Securing investment can be a complex challenge, particularly for industries where the lion’s share of emissions are Scope 3. This can require, for example, collaborations and agreements with suppliers, customer buy-in and a willingness to pay for ‘green services’. It’s here that active engagement plays a key part in executing your plan.

Carbon accounting done right

Position Green’s carbon accounting software helps you track your targets and understand your global impact, adapting to your company’s ambitions over time. Easily measure and report GHG emissions across all scopes and build strategies based on data you can trust. Our seasoned advisors are on hand to support you in developing a truly impactful net-zero plan.

Use ready-to-go solutions to consolidate and report your GHG data in line with key standards and frameworks straight out of the box – from CSRD and GHG Protocol to CDP and SBTi.