Since the Paris Agreement, nearly 200 countries have committed to reaching net-zero emissions by 2050 to limit global warming to 1.5°C. Yet, many businesses still struggle to define what "doing their part" looks like to avoid the worst scenarios outlined by IPCC (+4.5°C-5°C). As climate risks intensify, proactive companies that embed net-zero strategies early will gain a competitive edge through enhanced brand reputation, regulatory compliance, and operational efficiencies.
This guide provides a structured approach to setting net-zero targets in line with the latest climate science.
Was ist Netto-Null?
Net-zero means cutting greenhouse gas (GHG) emissions to as close to zero as possible, with any remaining emissions reabsorbed from the atmosphere by carbon sinks (e.g. oceans and forests). 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.
Now, let’s dive into what net-zero targets mean for your organisation.
What are net-zero targets?
From a global perspective, net-zero is a state where the amount of greenhouse gases emitted into the Earth’s atmosphere equals the amount removed. For a business, having net-zero targets means committing to cutting GHG emissions down to a small residual amount that can be absorbed and stored by nature or carbon removal technologies.
Net-zero targets for countries
A national net-zero target refers to a country-wide commitment to achieving a balance between GHG emissions and removals by a specified date, typically by 2050. These targets align with the Paris Agreement’s goal of limiting global warming to 1.5°C.
Key elements of national net-zero targets include:
- The deadline for achieving net zero is often set for 2050, though some countries have committed to earlier dates.
- An effective target should cover all sectors, including energy, transport, industry, agriculture, waste, and emissions from international aviation and shipping.
- Prioritising direct emissions reductions over-reliance on carbon removal technologies (e.g., carbon capture and storage, afforestation).
- Some countries use carbon credits or international offsets, but a robust target minimises reliance on these mechanisms.
- Countries must establish binding laws, conduct regular progress reviews, and develop sectoral roadmaps to ensure implementation.
Net-zero targets for businesses
Corporate net-zero targets are company-level commitments to eliminate or neutralise all GHG emissions within their operations and value chains. These targets must be science-based and aligned with the Science-Based Targets Initiative (SBTi) and the Greenhouse Gas (GHG) Protocol.
Key elements of corporate net-zero targets include:
- Companies must address Scope 1 (direct emissions), Scope 2 (indirect emissions from energy use), and Scope 3 (value chain emissions).
- The SBTi requires companies to set near-term targets (5-10 years) to reduce emissions by at least 95% for Scope 1 and 2 and at least 90% for Scope 3 by 2050.
- Unlike carbon neutrality, net-zero requires businesses to prioritise deep emissions cuts before using carbon removal strategies (e.g., Direct Air Capture (DAC), afforestation).
- Companies must transition to 100% renewable electricity by 2030 and aim to decarbonise operations completely.
- Companies should work with suppliers and partners to reduce emissions beyond their direct control, improving transparency and accountability.
- Companies should publicly report progress using recognised frameworks like CDP, TCFD, or GRI and undergo third-party verification.
By setting and adhering to robust net-zero targets, nations and businesses can meaningfully contribute to mitigating climate change while unlocking operational efficiencies and future-proofing against regulatory and market shifts.
How is net-zero different from carbon neutrality?
The difference between carbon neutrality and net-zero lies in the focus and scale of actions required. Achieving net-zero involves deploying abatement strategies to eliminate GHG emissions. In contrast, carbon neutrality allows some emissions to be offset by purchasing carbon credits rather than reducing them at the source.
Understanding net-zero targets' structure and boundaries
Science-Based Targets (SBTs)
The Science-Based Targets initiative (SBTi) ‘Corporate Net-Zero Standard’ provides a structured framework for companies to set near-term and long-term decarbonisation targets aligned with a 1.5°C pathway. The SBTi requires:
- A minimum 95% reduction in Scope 1 and 2 emissions by 2050.
- A 90% reduction in Scope 3 emissions for long-term alignment.
According to the standard, a GHG Protocol-aligned target boundary-setting exercise is crucial to identify and account for all relevant emission sources. This involves categorising all relevant emission sources within the company’s operational and value chain activities, aligned with the GHG Protocol's principles.
Scopes of emissions: Breaking it down
Understanding and measuring emissions is crucial for credible net-zero target-setting. The Greenhouse gas (GHG) Protocol categorises emissions into three scopes:
- Scope 1: Direct GHG emissions from sources owned or controlled by the company, such as on-site energy generation and fuel combustion in broilers and vehicles.
- Scope 2: Indirect GHG emissions linked to generating electricity, heating, cooling, and steam purchased by the reporting company.
- Scope 3: All indirect emissions outside Scope 1 and Scope 2 boundaries, such as those from upstream and downstream activities across a company’s value chain.
Compared to Scopes 1 and 2, Scope 3 emissions are challenging to measure as they involve engaging suppliers and consumers to collect data needed for accounting and tracking progress.
Additionally, variability in reporting standards and methodologies can lead to inconsistencies in emissions data, making it challenging for companies to track progress accurately. Nonetheless, Scope 3 often represents the most significant portion of a company’s total emissions, making it essential for net-zero strategies.
How to set net-zero targets: A step-by-step process
The importance of a structured, science-based approach while setting net-zero targets cannot be overemphasised. These targets should be guided by the SBTi standards, which provide a clear framework for aligning corporate actions with the global climate targets.
Companies must take a methodical approach, following these key steps:
1. Establish your baseline: Knowing the baseline should be the starting point of every net-zero journey. Companies can do this by preparing a comprehensive GHG emissions inventory to understand their current environmental impact and identify major emitters.
2. Locate high-impact reduction opportunities: A complete GHG emissions inventory is essential for identifying emission hotspots and evaluating potential reduction initiatives, such as implementing energy-efficient practices.
3. Set science-based targets: According to the SBTi, near-term targets should ideally cover a timeframe of 5-10 years. Meanwhile, long-term targets must aim to reduce emissions to residual levels by 2050. Both targets must be aligned with 1.5°C pathways
4. Build a reduction roadmap: Once the baseline and targets are established, companies must develop a reduction roadmap. This plan should be comprehensive and time-bound, detailing specific actions and responsibilities for achieving net-zero emissions.
5. Engaging stakeholders: Clear and regular communications in the target-setting process will ensure transparency about the targets and progress.
Regular reviews of net-zero targets are essential to ensure alignment with the latest scientific findings and business developments. The SBTi advises companies to reassess their targets at least every five years or sooner if substantial changes occur in their operations or emissions profile. This periodic evaluation ensures companies maintain their commitment to climate action, remain accountable, and adapt to evolving market conditions.
Ambition and scope-wise requirements for net-zero targets
The global goal of limiting global warming to 1.5°C requires organisations to make deep and rapid cuts in emissions across all scopes. Near-term targets should span 5-10 years, focusing on reducing at least 90% of Scope 1 and 2 emissions. Long-term targets must achieve net-zero emissions across all scopes by 2050 or earlier. Ambition for Scope 3 emissions is equally important, with near-term goals aligned to well-below 2°C pathways and long-term goals set to meet 1.5°C pathways.
Scope 1 and 2 targets
Both near-term and long-term SBTs should cover a minimum of 95% of organisation-wide Scope 1 and 2 emissions and align with the level of decarbonisation required to limit global warming to 1.5°C.
Additionally, companies must ensure that any absolute reduction targets are at least as ambitious as the minimum of the approved emission range with the 1.5°C climate goal.
Scope 3 target
Also known as value chain emissions, a company’s Scope 3 emissions typically account for over 90% of its total emissions. Cutting these emissions requires engaging with suppliers and consumers to increase the adoption of science-based emission targets.
In the near term, Scope 3 targets must be aligned with the level of decarbonisation required to keep global warming well below 2°C. However, in the long term, companies must align targets with the 1.5°C pathway.
Combined target approach
The SBTi allows companies to combine scopes (Scope 1+2 or Scope 1+2+3) while setting targets, provided each target component meets relevant ambition criteria.
Companies adopting combined targets benefit from a cohesive, holistic approach to emissions reduction, where decarbonising efforts can be maximised. However, they must communicate the ambition levels for each scope within their combined targets to ensure transparency and accountability.
Renewable electricity integration
Companies should commit to procuring at least 80% renewable electricity by 2025 and 100% by 2030 to achieve long-term targets and reduce Scope 2 emissions. To accelerate renewable electricity procurement, organisations can explore virtual power purchase agreements (PPAs) and renewable energy certificates (RECs).
How to implement and monitor net-zero targets
Once the targets are set, organisations should develop a detailed action plan with timelines to pivot business processes toward net-zero ambitions. Clear milestones and performance metrics are key to tracking progress and maintaining transparency in the implementation phase.
Über die Minderung der Wertschöpfungskette hinaus
To impact the global net-zero transition meaningfully, companies should undertake actions and investments to reduce emissions outside their value chain. The SBTi calls this ‘engaging in beyond value chain mitigation’ (BVCM) and involves supporting projects that reduce emissions, such as reforestation, renewable energy initiatives, or community-based climate action projects. These efforts can significantly enhance a company’s overall impact on emissions reduction.
Neutralisation strategies
Despite best efforts, an organisation may be unable to reduce its carbon emissions to zero. Neutralisation strategies are essential for counterbalancing residual emissions after a company has implemented its long-term science-based targets.
Some common strategies include:
- Carbon capture and storage (CCS): technologies that remove carbon dioxide emissions directly from air or industrial sources and store them deep underground
- Reforestation and afforestation: large-scale planting of trees that enhance carbon sequestration and restore ecosystems
- Soil carbon sequestration: regenerative agriculture practices such as no-till farming and cover cropping that increase the amount of carbon stored in soil
Target review and update
A regular target review exercise ensures that net-zero targets reflect the latest climate science and any business operations or emissions profile changes. Companies with SBTi-approved targets must review them at least every five years to ensure they align with the latest criteria.
In case of significant changes, businesses should recalculate their net-zero targets and submit them to SBTi for revalidation. This process maintains the targets' integrity and ensures that they continue to drive meaningful emissions reductions.
Best practices to communicate and report on your progress towards net-zero
Net-zero is not a branding or marketing exercise. It is a substantial undertaking that often requires fundamental changes to an organisation’s operations, for which stakeholder support is critical. By communicating science-based targets and sharing progress through comparable and verifiable data, leaders can demonstrate the authenticity of efforts to all stakeholders.
Reporting requirements
With climate risk skyrocketing, regulatory bodies demand comprehensive annual reporting on GHG emission reduction. Companies should include separate disclosures for emissions reductions and removals, ensuring completeness and transparency in the GHG inventory.
The SBTi recommends using standardised platforms like CDP’s climate change annual questionnaire to provide comparable and credible reporting.
Communicating progress
Communicating progress effectively and regularly is key to building momentum among stakeholders toward a net-zero transition. Business leaders must share targets using clear and concise language and communicate progress, including challenges and target recalculations.
Net-zero communications should include the following for maximum effectiveness:
- Clearly articulating overarching ambition to reach net-zero state by a specific date
- Stating near-term SBTs in the form of interim targets in line with the ultimate goal
- Sharing long-term SBTs by outlining the ultimate degree of emission reduction for all scopes.
The stakes of climate change are rising. Businesses that are slow to start their net-zero journey face financial risks, increasing supply chain disruptions and revenue loss. On the other hand, those who adopt a science-based approach to decarbonising their operations and value chains will reduce climate risks, improve operational efficiencies, and foster innovation essential for a net-zero future.
Begin your net-zero journey with Plan A. Contact our experts to understand how our sustainability software can measure, monitor, and reduce your company’s emissions.
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