Net-zero has recently evolved from a buzzword to an essential strategic framework. What's the precise meaning of net-zero? How can it be achieved? What are the best practices for businesses?
This comprehensive guide explores everything you need to navigate the net-zero landscape in 2025.
What is net-zero?
Unlike simpler approaches to emissions management, achieving net-zero requires a comprehensive strategy that includes:
- Near-term science-based targets: These 5-10 year emission reduction targets set companies on a path to deep decarbonisation.
- Long-term science-based targets: These targets aim to reduce emissions to a residual level by 2050 at the latest (or earlier for some sectors).
- Neutralisation of residual emissions: Companies must remove carbon from the atmosphere and permanently store it to counterbalance any unabated emissions that remain after achieving their long-term science-based target.
- Beyond value chain mitigation: Companies are strongly encouraged to take action outside their own value chains to mitigate GHG emissions and their science-based targets.
The difference between net-zero and carbon neutral
While often used interchangeably, net-zero and carbon neutral represent fundamentally different approaches to addressing greenhouse gas emissions. Understanding this distinction is crucial for companies setting meaningful climate targets.
Net-zero is significantly more comprehensive and stringent. It requires deep emissions reduction across all scopes (approximately 90-95%, subject to sectoral variations) before any neutralisation of residual emissions. It demands permanent carbon removal rather than just offsetting and represents a continuous commitment rather than a one-time achievement.
For more detailed information on these differences, you can explore the difference between carbon neutral, net-zero, and climate positive.
How to achieve net-zero?
Achieving net-zero requires a comprehensive, science-based approach that transforms how organisations operate across their entire value chain. The net-zero journey involves several critical steps that companies must navigate effectively.
Establish a robust baseline
The foundation of any net-zero strategy is a comprehensive baseline of your current emissions. This involves:
- Calculate your complete emissions inventory across all scopes following the GHG Protocol standards
- Structure your data according to scopes (1, 2, and 3) and emission categories
- Ensure proper accounting methods that will stand up to auditing and verification
Dr. Dzhordzhio Naldzhiev, Head of Research and Policy at Plan A, explains:
Carbon accounting without scientific evaluation or underpinning is like a 3D printed house designed with AI that has no foundations. It might withstand a winter or two, but are you willing to live with your family there not knowing when cracks might appear or how it was built?!
Plan A's carbon accounting platform enables companies to establish a robust baseline with certified calculation methodologies compliant with GHG Protocol standards, ensuring the quality and reliability of emissions data.
Set science-based targets
With a baseline established, companies must set appropriate targets aligned with climate science:
- Define appropriate targets that specify emissions reduction by a specific amount
- Align with limiting warming to 1.5°C following the Science Based Targets initiative (SBTi) frameworks
- Include both near-term and long-term science-based targets to guide your journey
Johannes Weber, Director of Sustainability Solutions at Plan A, emphasises the importance of using specialised solutions:
As a carbon accounting expert, I strongly advocate using sustainability software over internal solutions. Unlike cumbersome internal solutions reliant on spreadsheets, advanced software offers efficient data collection, accurate emissions calculations, streamlined data integration across departments, and enhanced stakeholder transparency.
Plan A's target setting module helps companies define science-based targets aligned with the latest methodologies, providing the framework needed to structure an effective decarbonisation journey.
Develop and implement a climate transition plan
A comprehensive climate transition plan maps out the journey from current emissions to net-zero:
- Governance structure to oversee implementation
- Financial indicators and planning (CAPEX, OPEX, R&D expenditure)
- Specific actions across all parts of the value chain
- Skills and human resource development related to climate change
Nathan Bonnisseau, co-founder at Plan A, highlights the importance of track-and-trace in decarbonisation efforts:
The very important bit about decarbonisation is to really try and make sure that the activities you select can be tracked in the platform you are using. There should be a circle between the data collection, the reporting analytics to understand what the data shows, selecting actions for the best possible opportunities in your business, and then feeding back this data the following months to see if you're transforming your organisation.
Implement immediate reduction strategies
Effective emissions reduction requires targeted strategies across all scopes:
Scope 1 & 2 emissions:
- Convert fleet vehicles to electric alternatives
- Increase facility energy efficiency
- Commit to renewable electricity procurement
Scope 3 emissions:
- Engage suppliers to set science-based targets
- Reduce materials used per product
- Implement supplier engagement programmes with incentives
Plan A's decarbonisation module helps companies identify and implement the most impactful reduction strategies based on their emissions profile, with actionable insights tailored to their specific circumstances.
Track progress and report transparently
Monitoring and reporting progress is essential for maintaining momentum and accountability:
- Monitor and report progress against all targets
- Disclose GHG emissions data for all years between base year and reporting year
- Clearly separate carbon offset credits from reported GHG inventory
Nathan Bonnisseau notes,
What I find really interesting in this reporting world, whether it's voluntary or compliance-based, is that there is a certain continuity between one and the other. The voluntary reporting we do, for example, through the B Corporation, prepared us to meet the relevant compliance-based reporting that we either will have in the future as our organisation grows.
Plan A's reporting capabilities enable companies to generate comprehensive carbon footprint reports and visualisations that can be easily shared with stakeholders, making communication of progress and achievements straightforward and impactful.
How to leverage carbon management platforms
Carbon management platforms play a crucial role in supporting the net-zero journey by providing comprehensive tools for measuring, reporting, tracking, and reducing greenhouse gas emissions.
Key capabilities that make carbon management platforms essential include:
- Standardised data collection using centralised approaches that reduce calculation errors
- Support for science-based target setting aligned with the Paris Agreement
- Progress tracking with regular reporting capabilities
- Identification of reduction opportunities to enable cost-effective emissions reduction
According to a BCG study, 86% of companies still record and report their emissions manually using spreadsheets. This approach is not only time-consuming but also prone to errors and inconsistencies.
Benefits of leveraging a carbon management platform like Plan A include:
- Facilitated data collection through templates, API connections, and automatic data processing
- Automatic mapping to emission categories according to GHG Protocol
- Certified calculation methodologies ensuring compliance and reliability
- Advanced reporting and dashboards providing actionable insights
- Target setting and emission forecasting capabilities to support strategic planning
- Actionable insights for emission reduction based on company-specific data
Key benefits of achieving net-zero emissions
Achieving net-zero creates substantial benefits for businesses that extend far beyond environmental impact, delivering tangible advantages across multiple dimensions.
Strategic and financial benefits
Businesses implementing net-zero strategies experience significant strategic and financial advantages:
Enhanced brand reputation and stakeholder trust
Companies with credible net-zero commitments enjoy enhanced brand image with investors, customers, employees, and the public. This trust translates into stronger stakeholder relationships and reduced reputational risks.
Competitive advantage and market differentiation
Net-zero strategies enable product differentiation based on environmental performance, helping companies capture growing consumer preference for sustainable products. Companies can distinguish their offerings with measurable sustainability credentials that appeal to environmentally conscious buyers.
Improved financial performance
According to McKinsey's analysis of over 2,200 companies, organisations integrating ESG priorities into their strategies consistently outperform their peers in Total Shareholder Returns (TSR). Specifically, companies excelling in growth, profitability, and ESG generated an annual TSR premium of 2 percentage points over their purely financial counterparts and 7 percentage points over average performers.
Innovation driver and value chain collaboration
Setting net-zero targets drives product innovation and increases sales of low-carbon technologies. It also enhances value chain collaboration as companies work with partners to improve the overall sustainability of product systems.
The case of Payhawk, Bulgaria's first unicorn offering an all-in-one financial management platform, illustrates these benefits. By partnering with Plan A to measure and reduce their carbon footprint, they've aligned their rapid growth with sustainability principles. As CEO Hristo Borisov explains,
Plan A has given us immense support in streamlining our carbon accounting processes and reporting. They provided us with the tools to measure our company's emissions, assess our decarbonisation potential, and prepare for the regulatory shifts impacting our ever-increasing international footprint.
Consequences of not aiming for net-zero
Companies that fail to embrace net-zero targets face escalating risks across multiple dimensions that could significantly impact their long-term viability and competitiveness.
Regulatory and compliance risks
The regulatory landscape around climate action is rapidly evolving, with frameworks like the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and expanding carbon pricing mechanisms. Companies without net-zero strategies face:
- Increased regulatory scrutiny as governments implement stricter climate policies
- Non-compliance penalties under emerging regulations
- Difficulties meeting mandatory reporting requirements that demand detailed climate transition plans
Financial and investment challenges
Financial institutions are increasingly incorporating climate considerations into lending and investment decisions:
- Reduced access to capital as investors prioritise companies with credible climate strategies
- Higher cost of capital and borrowing rates for companies without decarbonisation plans
- Stranded asset risks as carbon-intensive assets become obsolete in a low-carbon economy
Market and competitive disadvantages
As markets shift toward sustainability, companies without net-zero strategies will face significant competitive challenges:
- Loss of market share to competitors offering lower-carbon alternatives
- Exclusion from supply chains as more companies set supplier engagement targets
- Missed revenue opportunities from sustainable product portfolios
Reputation and talent acquisition issues
In an increasingly climate-conscious business environment, companies without net-zero commitments face:
- Brand damage and erosion of consumer trust
- Difficulties attracting and retaining top talent as employees prefer employers with strong sustainability commitments
- Stakeholder pressure from customers, communities, and investors
Communicating net-zero goals effectively
For CEOs and finance leaders, effectively communicating net-zero goals and commitment is crucial for building support and driving implementation across the organisation and with external stakeholders.
Internal communication strategies
Successful implementation requires strong internal alignment and engagement:
- Secure senior management commitment as a prerequisite for a successful GHG reduction programme
- Cascade targets throughout the organisation, breaking down high-level commitments into actionable components for different departments and teams
- Create a multi-stakeholder team including senior leadership, sustainability teams, procurement, finance, and other key functions
- Track and report progress internally with regular performance checks and transparent information sharing
Nathan Bonnisseau emphasises the importance of effective tools for sustainability teams:
One of the key essential measures for Plan A is the time to action, time to report, time to data upload. And these are very operational metrics of the efficiency of a sustainability team. If that team is able to divide by 80 the time to get a complete report, then they have that much more time available to strategise around this data.
External communication best practices
Effective external communication builds stakeholder trust and demonstrates leadership:
- Prepare comprehensive stakeholder reports containing clear information on GHG emissions and reduction progress
- Clearly define target parameters, including type (absolute or intensity), boundary, base year, and completion date
- Highlight business benefits to strengthen the case for net-zero initiatives
- Participate in voluntary programmes to demonstrate commitment and strengthen relationships with stakeholders
- Use real-world examples that demonstrate successful implementation and results
By following these communication strategies, leaders can build support for net-zero initiatives and drive meaningful action across their organisations and value chains.
The journey to net zero requires commitment, resources, and expertise, but the rewards extend far beyond environmental impact to include enhanced competitiveness, improved financial performance, and stronger stakeholder relationships. Conversely, companies that fail to embrace net zero face escalating risks that could significantly impact their viability.
