April 21, 2021

Doing carbon neutrality right

Have you heard a lot of companies saying they are going to reduce their carbon footprint to net-zero? Have you also noticed the carbon-neutral’ designation on websites or clothing labels a lot recently and wondered what this actually means? Then youre not alone. The terms carbon neutral’ or net-zero emissions’ have exploded in use over the last few years – often with very different uses and meanings. 

And why does this even matter? It matters because if were using the wrong definitions of net-zero then we wont achieve the target of reducing global warming to 1.5 degrees. According to the IPCC (Inter-Governmental Panel on Climate Change), who advises the UN on climate change, we will only limit global warming to 1.5 degrees if we achieve net-zero emissions globally, no later than 2050. 

It also matters because definitions affect consumer choices – most people will be more likely to buy a product that is carbon neutral than one that has been produced using 50 % less CO2 (I know I would), but a flawed definition of carbon-neutral can actually make the latter option better. 

In this article, I will describe some of the minimum requirements for what should be included in a commitment of carbon neutrality or net-zero emissions and what the Science Based Target initiatives new Net-Zero standard will likely mean for the term in the future. Happy reading!  

Getting the details right: A few definitions 

Net-zero/carbon-neutral – the basicsIts important to understand that companies, people, and products will always emit greenhouse gas (GHG) emissions throughout their lifetime. Therefore, a company claiming carbon neutrality or net-zero carbon emissions will still emit GHGs, but they will remove as much GHG from the atmosphere as theyre emitting in the first place.  

Carbon-neutral/net-zero – the differenceIn this article, I will use net-zero and carbon neutrality interchangeably. Though there is a difference, and generally speaking net-zero emissions is considered more ambitious as it for example includes more greenhouse gases than the carbon-based ones, the points in this article are relevant for both claims of carbon-neutrality and net-zero.  

The situation today: The three pitfalls of carbon neutrality 

Right now, there is a lot of flexibility in how to achieve a net-zero GHG emission target. This is because there is not a single globally agreed-upon standard with such a definition. This has resulted in companies claiming carbon neutrality in many different ways and at least three common pitfalls exist: 

1 – Off-setting can be overused and reductions in own emissions deprioritised 

Some companies claim carbon neutrality by continuing to do business-as-usual while just offsetting all their emissions through planting trees or improving cooking stoves around the world. Others significantly reduce their own emissions before starting to offset the rest. 

2 – Not all companies are accounting for all their GHG emissions 

Some companies claim carbon neutrality without taking emissions from flights, products, and supply chain into consideration. Others include their entire value chain in their commitment. 

3 – Due diligence of offsetting is often forgotten 

Some companies base their CO2 reductions on offsetting projects where the benefits have already been claimed by other companies, where the reductions would have happened without them, or where the projects end up not having the expected effect. Others track the developments of the project, ensure that no double counting happens and adjust their portfolios of offsetting projects accordingly. 

All of the above companies make the same commitment of carbon neutrality/net-zero emissions but, evidently, some of these commitments are not adequate to stop global warming at 1.5 degrees. Therefore, we need increased literacy on what the terms actually mean, and we need standardization. Fortunately, this is within reach. 

A new standard is coming: Science Based Targets Net-Zero commitment 

Its very timely that the Science Based Targets initiative (SBTi – a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF)) is currently developing a net-zero commitment with rules and guidelines on how to achieve this commitment in line with what is required by science. 

The standard for Net-zero target-setting is not finalised and there are still several things in the standard that are up for debate. In their recent public hearing, SBTi asked for feedback on areas such as which off-setting mechanisms should be acceptable, how to deal with the issue of permanently removing emissions from the atmosphere (what happens if the forest catches fire), what minimum proportion of emissions should be included in the target, and much more (Nordic Sustainability sent their take on these questions last month).

But some requirements and recommendations are not up for debate and this has consequences for companies who have already made or are making announcements of carbon neutrality today. 

First, companies need to reduce their own value chain emissions significantly before theyre at a stage where the offset of the last residual emissions will result in carbon neutrality. Continuing with business-as-usual with an added layer of offsetting is therefore not an option. 

Second, value chain emissions from suppliers, products, waste, transport, investments, etc. need to be dealt with. Only focusing on operational emissions is not enough. 

Third, the offsets that are being used to counteract the last residual emissions need to be carbon removals, not avoided emissions. CO2 actually needs to be taken out of the atmosphere through technological, biological, or hybrid solutions – investing in renewable energy projects and improved cooking stoves is not enough. 

What that means for companies already claiming or wanting to claim carbon neutrality 

Over the next few years, we will undoubtedly see increased requirements for corporate action on climate change. As Science Based Targets (the original commitment developed by SBTi in which companies commit to develop short to medium-term science based climate targets) becomes the new norm and the EU Taxonomy gets implemented, corporate climate action and companies’ claims of carbon neutrality will come under increased scrutiny. The flexibility of how to achieve the carbon neutrality targets and what can be excluded from them will be limited. Therefore, companies who think that they’re carbon neutral because they’ve offset emissions through a website or who exclude value chain emissions and consider it job done when they’ve handled their immediate production-related GHG emissions should understand that this is a short-term solution that is not enough and can and likely will backfire over the next decade.

Doing it right takes time, but it is the only way. Companies who start reducing their own emissions now, instead of just offsetting, those who engage with suppliers to reduce their emissions, and those who improve their knowledge of credible offsetting mechanisms will be the winners of the future. 

The Science Based Targets Net-Zero standard is expected to be published by the end of this year.