Corporate Net-Zero pledges are becoming weekly news. This is a positive trend as decarbonisation is popularised as a legitimate way to mitigate climate and regulatory risk, increase one’s competitiveness and unlock supply chain optimisation. However, as the number of net-zero press releases and news articles grows, the language around the net-zero emissions topic develops, distorts, and fades around the edges. What’s more, some intentionally muddy the waters in their interest to greenwash their performance. This greenwashing is achieved through vague sustainability promises with credible-sounding, but ultimately undefined terminology to hide the unsubstantiated claims.
To fight the confusing language (i.e. “jargon”) and growing greenwashing; the Science Based Targets Initiative (SBTi) has published a “Net-Zero Jargon Buster” alongside their “Net-Zero Standard”. As Plan A aligns with SBTi’s terminology, we want to shed light on the topic by explaining the common terms, relating them to each other and the Net-Zero Journey that Plan A customers (and other companies) embark on.
The Net-Zero journey terminology buster
To start, let's deep dive in the core of net-zero definitions and terminology:
- Net-zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere by oceans and forests, for instance. Net-zero is reached when a business has eliminated all the carbon emissions it could and then compensated the remaining emissions with beyond value chain mitigation. The net-zero process starts with calculating emissions across Scope 1, 2, and 3, setting science-based targets, developing decarbonisation pathways until 2030, and gradually moving towards long-term carbon capture, storage, and sequestration for those emissions which cannot be reduced.
- Carbon neutral is a theoretical state achieved via the “offsetting” or “compensating” of residual emissions with projects beyond the company’s own value chain. However, this may hide and distract from real decarbonisation, where emissions are cut within the company’s operations. The Science Based Targets initiative’s Net-Zero Standard clearly states: “SBTi does not validate carbon neutrality claims.”
- Neutralisation corresponds to the removal of carbon from the atmosphere and its permanent storage. It can also be referred to as Carbon Dioxide Removal (CDR). Projects include inter alia Direct Air Capture (DAC) and Bioenergy with carbon capture and storage (BECCS).
- Beyond value chain mitigation (BVCM) are measures taken to avoid (prevent), reduce or eliminate greenhouse gas emissions outside of their value chain. Both compensation and neutralisation can be considered BVCM, and should always come as an addition to decarbonisation, rather than its substitute.
- Near-term science-based targets are defined by targets for the next five to ten years, halving emissions as compared to a baseline year. A first reality check on a company’s journey to Net Zero 2050.
- Long-term science-based targets are achieved when decarbonisation reaches over 90% as compared to baseline emissions, to achieve Net Zero by 2050, with residual targets addressed with neutralisation.
- Mitigation Hierarchy means that decarbonisation should always come before Beyond value chain mitigation (BVCM): compensation and neutralisation. Net Zero can only be achieved by deep emission cuts of at least 90% by 2050, after which residual emissions are addressed with neutralisation.
Learn more with our Corporate Sustainability Glossary.
The Net-Zero journey for corporates and beyond
A company can only become net-zero by first setting a target consistent with emission cuts (abatement) required to meet the 1.5-degree warming carbon budget. Secondly, the company needs to start dramatically reducing its emissions through decarbonisation to stay on this target. Finally, and only then, residual emissions should be neutralised via removal projects, permanently removing carbon dioxide from the atmosphere. Traditional offsetting is not recognised as climate action by the SBTi or Plan A and is not counted towards a company’s Net-Zero target. While the Net-Zero Journey is a significant multi-decade commitment, it is important to remember that alongside climate protection it brings a multitude of business co-benefits.
How to become Net-Zero?
Let’s examine the Net-Zero Journey of a hypothetical company, called “Dunder Mifflin”, via the Net-Zero graph above.
Dunder Mifflin claims to be “Carbon Neutral” today by having “compensated” or “offset” their emissions via carbon avoidance projects or other carbon credits. Although voluntary carbon markets have generated capital for some promising projects, many studies have shown problems with i.a. permanence, overestimation and additionality, even when the credits are ‘verified’. More importantly, offsetting is likely to hide and distract from the real need for genuine deep decarbonisation. The SBTi clearly states: “--SBTi does not validate carbon neutrality claims.”. Therefore, offsetting does not contribute towards Science Based Targets (SBTs), decarbonisation, or the Net-Zero goal.
Let's assume that the company "Dunder Mifflin's" Business-As-Usual (BAU) emissions, shown in orange in the graph above, denote their increasing emissions if no decarbonisation action is taken. The “decarbonisation within value chain” arrow shows the number of emissions that can be, and should be, addressed via i.a. changes in energy supply (electrification), materials substitution, process optimisation, and employee engagement. This year-on-year abatement results in lowered “residual emissions”, i.e. the emissions post-decarbonisation that remain between status quo and Net-Zero. The gap towards Net-Zero can be further closed by “neutralisation” however. X GmbH’s “Net emissions” (the dashed line) are their residual emissions minus purchased neutralisation credits via carbon removal projects.
Note: neutralisation does not count towards the “SBTi target” in 2030 (e.g. -42%; a decarbonisation goal).
However, Net-Zero itself can be achieved by neutralisation. Achieving Net-Zero without carbon dioxide removal is extremely difficult as some GHG emissions from human activity will always exist. Both compensation and neutralisation are considered “mitigation beyond the value chain” as these actions take place outside of the company’s value chain (in some cases also within; e.g. with forestry companies).
The 2030 “near-term science-based target” for decarbonisation should be the first reality check on a company’s journey to Net-Zero in 2050. Emissions should be approximately halved at this stage (e.g. -42%) to remain on track to achieve >90% cuts in emissions and the “long-term science-based target”: Net-Zero emissions and contribute to the effort to achieve global <1.5-degrees warming.
The corporate Net-Zero journey: Making sure your net-zero pledges are credible
True global climate action and preventing warming greater than 1.5 degrees requires a shared understanding of the problem, the terminology defining it, and a strict approach against greenwashing. The Net-Zero Journey is a multi-decade commitment, shedding light into the entire operations of a company, bringing several co-benefits alongside climate protection: optimised supply chains, and control over regulatory and direct climate risk. Net-Zero can be best achieved by following a clear pathway, e.g. SBTi Net-Zero Standard’s “Mitigation Hierarchy”.
- Decarbonisation should always precede neutralisation or compensation, or in other words: “within value chain mitigation” should precede “beyond value chain mitigation”.
- Neutralisation should come before compensation. Net-Zero can only be achieved by deep emission cuts of at least 90% by 2050, after which residual emissions are to be addressed with neutralisation.
Backed with these rules and best practices, the combined efforts of Corporate Net-Zero Journeys can lead the charge for global climate action and the 1.5-degree target.