Net zero explained: what is it and how to achieve it?
We are in the midst of a climate emergency. The recent hurricanes in Florida, exacerbated by warmer oceans, are a stark reminder of how the world is rapidly changing due to climate change. Greta Thunberg’s famous words resonate now more than ever: “I want you to act as you would in a crisis. I want you to act as if our house is on fire – because it is”. The urgent need for climate action is undeniable.
Businesses play a crucial role in tackling the climate crisis. Measuring carbon emissions, setting net zero targets and demonstrating real progress on targets are now fundamental parts of any robust sustainability strategy. With rising pressure from regulators and stakeholders, businesses taking climate action by setting and achieving net zero targets is no longer optional.
In this guide, we demystify net zero by explaining what it means, why it’s important and the types of net zero targets businesses can set. We also explain how to create and achieve net zero targets, where to begin and how automated LCA tools like Root can accelerate your company’s net zero journey.
PUBLISHED: 6 November 2024
WRITTEN BY: Charlie Walter
Table of contents
- What is net zero?
- Why is net zero so important?
- Net zero terminology explained
- Net zero key concept: carbon footprints
- Net zero versus carbon neutrality: what’s the difference?
- Net zero targets for businesses
- What is carbon offsetting and when should you consider it in your net zero journey?
- Benefits of setting and achieving a net zero target
- Challenges of setting and achieving a net zero target
- How to achieve net zero
- Tips to accelerate your net zero journey
- Measure, reduce and report your carbon emissions with Root
- How we can help
What is net zero?
Net zero means balancing the greenhouse gases we emit with the amount removed from the atmosphere. Achieving net zero is essential to avoid the most severe impacts of climate change. To stay on track with the Paris Agreement’s goal of limiting global temperature rise to 1.5°C, we must reduce global emissions by 45% by 2030 and reach net zero by 2050. Cutting carbon emissions is vital to achieving net zero since carbon dioxide accounts for approximately 80% of all greenhouse gases.
Image source: World Resources Institute graphic, basec on the findings in the IPCC Special Report SP1.5 (2018)
Why is net zero so important?
Pressure is mounting for businesses to set and make progress on net zero targets. Regulators, investors and customers are increasingly demanding transparent carbon footprints and real climate action.
Why the urgency?
Climate change is transforming our world. Over the past two decades, there has been a significant increase in the number of extreme weather events and global sea levels have risen by 24 centimetres since 1880. If we do not reduce emissions, it could cost the global economy an estimated $178 trillion by 2070 and up to 70% of the world’s population could be exposed to extreme weather by 2040. This could have a significant impact on your business, with potential impacts including increased operational costs and supply chain disruptions.
With just 100 companies accounting for 71% of global emissions, businesses are pivotal in reaching net zero. From operations to supply chains, reducing the scope 1 and 2 emissions in your operations and the scope 3 emissions in your supply chain is essential. Setting a net zero goal is no longer seen as an ambitious initiative – instead it is fast becoming a fundamental part of any credible sustainability strategy, as seen by 37% of the world’s largest listed companies having public-facing net zero targets in 2023. Businesses that do not have a net zero target risk being seen as behind compared to their competitors.
Regulations are making climate action mandatory. Europe is leading the charge in accelerating climate action, most notably with the introduction of the CSRD, which requires companies to measure and report comprehensive carbon footprints, including the elusive scope 3 emissions. Companies that are not compliant risk fines, reputational damage and loss of stakeholder trust.
The reality is that measuring and reducing emissions is no longer optional – it’s essential. This isn’t only about protecting the planet; it’s about future-proofing your business in a rapidly changing world, staying compliant with regulations and remaining competitive with your peers.
Net zero terminology explained
Let’s face it – net zero jargon can be overwhelming! Understanding these basic terms will help you navigate the world of carbon and net zero:
| Net zero Term | Definition |
|---|---|
| Carbon budget | The limit of cumulative emissions to keep global warming within a specific threshold. |
| Carbon footprint | The total greenhouse gas emissions are caused directly or indirectly by an organisation, product or individual. |
| Carbon insetting | Investment in carbon reduction projects within a company’s supply chain, aimed at reducing emissions associated with its own operations and supply chain. |
| Carbon neutrality | Offsetting the total carbon footprint, often without requiring significant emissions reductions. |
| Carbon offsetting | Compensating for emissions by investing in projects that reduce or capture an equivalent amount of greenhouse gases elsewhere, such as reforestation or renewable energy projects. |
| Decarbonisation | The process of reducing carbon emissions in operations and products. |
| Emission source | Points in the production or operational processes where greenhouse gases are released. |
| Net zero action plan | A detailed strategy outlining how a company will reduce its emissions and reach net zero. |
| Paris agreement | An international accord with the goal of limiting global warming to below 2°C, ideally to 1.5°C. |
| Residual emissions | Emissions that remain after all feasible reduction measures have been taken. |
| Science Based Targets Initiative (SBTi) | A widely respected organisation that supports companies in setting carbon reduction targets and net-zero pathways, which align with the Paris Agreement’s goal of limiting global warming to below 1.5 degrees. SBTi ensures that climate action is based on scientific evidence. |
Net zero key concept: carbon footprints
You’ve probably heard the term carbon footprint, but what does this actually mean?
A carbon footprint is the total greenhouse gases your company produces, both directly and indirectly. The Greenhouse Gas Protocol breaks this down into three scopes:
- Scope 1: Direct emissions from your company-owned facilities and vehicles.
- Scope 2: Indirect emissions from the energy you buy, e.g. electricity and heating.
- Scope 3: Indirect emissions across your supply chain – from raw materials to product disposal.
A complete, accurate carbon footprint covering scope 1-3 emissions is the foundation of any robust net zero strategy. Without accurate carbon data, net zero strategies rely on gut feelings and estimates, leading to unpredictable outcomes and wasted investments.
Scope 3 is often called the ‘holy grail’ of emissions as it is the hardest to measure but can account for up to 90% of your footprint – making it the most significant opportunity to drive meaningful change. If your business is serious about achieving net zero, tackling scope 3 is crucial.
Net zero versus carbon neutrality: what’s the difference?
You’ve likely heard the terms net zero and carbon neutral used interchangeably. However, while similar, they are not the same and understanding the distinction is important to avoid greenwashing.
Simply put, the key difference is that net zero means reducing emissions as much as possible and then using high-quality carbon offsets for any remaining, unavoidable emissions, which are typically called residual emissions. On the other hand, carbon neutrality is simply offsetting your carbon footprint without necessarily reducing emissions first. Companies can be carbon neutral by simply offsetting their carbon footprint.
The term carbon neutral is often associated with greenwashing and the EU plans to ban ‘climate neutral’ claims by 2026 under the Green Claims Directive. For a robust, credible climate strategy, focus on emission reductions through a verified science-based net zero action plan rather than only focusing on carbon offsetting (we dive into this topic in more detail later in the blog).
Net zero targets for businesses
A crucial step in your net zero journey is setting a net zero target. This establishes the deadline and determines the trajectory of your net zero action plan.
Net zero is often associated with the Science-Based Targets initiative (SBTi), which is the gold standard for setting net zero targets. SBTi helps companies set rigorous, science-backed targets that align with the Paris Agreement’s goal of limiting warming to 1.5°C, so these targets are robust and credible.
There are three types of SBTi-approved net zero targets, with varying levels of ambition:
Near-term SME science-based target
- Measure your carbon footprint annually.
- Set a science-based emission reduction target for 2030 and commit to around 50% scope 1 and 2 reduction and no absolute scope 3 emission growth.
- Reduce carbon emissions and report annually.
- Neutralise residual emissions with carbon offsets once the yearly reduction target has been achieved.
- Applies to companies with less than 500 employees.
Near-term science-based target
- Measure your carbon footprint annually.
- Set a science-based emission reduction target for 2030 and commit to around 50% reduction in scope 1-3 emissions.
- Reduce carbon emissions and report annually.
- Neutralise residual emissions with carbon offsets once the yearly reduction target has been achieved.
- Applies to companies with more than 500 employees.
Long-term science-based target
- Measure your carbon footprint annually.
- Set a near-term science-based target for 2030
- Set a long-term science-based target for 2050, which is typically around a 90% reduction in scope 1-3 emissions.
- Reduce carbon emissions and report annually.
- Neutralise residual emissions with carbon offsets once the yearly reduction target has been achieved.
- Applies to all companies.
What is carbon offsetting and when should you consider it in your net zero journey?
Carbon offsetting allows your company to compensate for emissions by investing in projects that reduce or capture greenhouse gases elsewhere, such as reforestation or renewable energy initiatives. While carbon offsetting is part of net zero strategies, it’s important to understand when and how to use it effectively.
When should you consider offsetting?
Here’s the golden rule: you can’t offset your way to net zero. Offsetting should only occur after you’ve taken all possible measures to reduce your emissions internally. This means focusing on reducing all possible emissions first, then using offsets to neutralise any remaining residual emissions that are hard to eliminate. If you offset all your emissions, as mentioned earlier, you are not becoming net zero, but instead, you are carbon neutral, which is commonly associated with greenwashing.
The carbon offset market is not regulated so choosing high-quality, reputable offsets is vital. Poor-quality offsets may cost less but can harm your reputation and expose you to accusations of greenwashing, so choose your carbon offsets wisely. The main takeaway is that offsetting should be the last stage of your net zero strategy; it’s not a shortcut to achieving net zero.
Benefits of setting and achieving a net zero target
Setting and achieving a net zero target offers your company numerous benefits, including:
Future-proofs your business
With increasing demand for climate action from stakeholders and regulations like CSRD mandating complete (scope 1-3) footprints, setting and making progress on your net zero targets is essential. This future proofs your business against a rapidly evolving regulatory landscape and enables you to meet stakeholder expectations for transparency on climate action.
Cost savings
Reducing your emissions lowers operational costs, especially by improving energy efficiency and minimising waste, resulting in cost savings over time.
Drives product innovation
Having detailed carbon footprints of your company and your products, especially the crucial scope 3, reveals opportunities for product innovation and ecodesign. You can identify high-impact products, see where the most emissions occur in your products’ life cycles and use these insights to develop more sustainable, lower-carbon products.
Builds trust with stakeholders
Transparent and measurable climate action strengthens trust with key stakeholders like investors and employees who increasingly want to see climate action from companies.
Improves brand loyalty with customers
Setting a verified, science-based net zero target and, more importantly, making progress on your goal demonstrates to your customers that you care about sustainability and prioritise climate action, helping build loyalty with environmentally conscious consumers.
Challenges of setting and achieving a net zero target
Setting and achieving a net zero target presents numerous challenges for companies. Below are the key obstacles companies typically face:
Access to accurate data
While it’s relatively easy to measure Scope 1 and 2 emissions, Scope 3 is more complicated as these emissions mainly occur from processes outside your control, like your suppliers or how your product is used and disposed of. Many small suppliers lack the internal capacity, carbon knowledge or tools to accurately measure their emissions, leading to gaps or estimates in your scope 3 data, which can limit the effectiveness of your net zero strategy.
Complex global supply chains
Global supply chains add complexity to tracking carbon impacts across product life cycles. Sectors like fashion, with limited visibility beyond tier 1 suppliers, often struggle to fully understand their carbon impact due to their typically untransparent supply chains. This is why supply chain transparency and carbon measurement go hand in hand – the more transparent your supply chain is, the easier it is to gather accurate data to calculate your carbon footprint, which is the foundation of your net zero strategy.
Voluntary nature of carbon reporting
Outside of Europe, measuring and reporting carbon footprints is still mostly voluntary, which limits companies’ motivation to set and achieve net zero targets. However, with new regulations like the CSRD introducing mandatory carbon measurement and reduction requirements, pressure is rising for companies to set net zero targets.
Resource-intensive processes
Setting and achieving net zero targets requires significant time, dedicated team members, investment in carbon measurement tools and often companies partnering with consultancies for technical support. For smaller businesses, these investments present a substantial challenge.
How to achieve net zero
A clear roadmap will make your journey to net zero bulletproof. Here’s a five-step guide to setting and achieving net zero targets within your organisation:
1.Measure your carbon footprint
- Measure your scope 1, 2 and 3 emissions to capture all direct and indirect emissions.
- Having an accurate footprint is vital as it provides the foundation for your net zero journey.
2. Create an action plan
- Set short-term and long-term science-based net zero targets that align with your company’s sustainability goals (typically these are 2030 and 2050 targets).
- Build a detailed net zero action plan to achieve these targets, prioritising high-impact areas in your operations and supply chain.
- Make sure the plan is clear and accessible so everyone in your company can contribute.
3. Verify your targets
- Align your net zero targets with established frameworks like SBTi so they are credible and rooted in climate science.
- Having a verified target (e.g. SBTi approved) demonstrates to key stakeholders your commitment to climate action.
4. Execute the action plan
- Implement emissions-reduction strategies in high-impact areas, focusing mainly on scope 3 emissions in your supply chain, as this is where most emissions typically occur.
- Make achieving net zero a team effort by engaging your team. One way to do this is by creating sustainability champions who are responsible for their department’s emission reduction initiatives. This also helps foster a company culture that celebrates sustainability.
5. Measure and communicate your progress
- Measure your carbon footprint annually and report progress towards targets.
- Provide transparent updates to stakeholders on milestones on your website or annual reports.
- Embrace transparency by openly sharing any challenges and lessons learned.
Tips to accelerate your net zero journey
Setting and achieving a net zero target may seem daunting. If you are a product company, here are some key strategies to significantly reduce your scope 1, 2 and 3 emissions and accelerate your net zero journey:
- Switch to 100% renewable energy: Transitioning to 100% renewable energy is essential in your net zero journey as it significantly reduces scope 2 emissions.
- Deeply understand your supply chain: As the saying goes, you can’t manage what you can’t measure. Conduct an in-depth supply chain analysis to pinpoint high-emission activities so you can target and effectively reduce scope 3 emissions.
- Collaborate with supply chain partners: Building and maintaining strong supplier relationships is crucial to scope 3 reductions. Work together to help them measure and reduce their carbon footprints and emissions across your supply chain.
- Embrace circularity: The circular economy is a powerful tool for reducing scope 3 emissions. Use supply chain data to build and implement circular business models and redesign products with recyclability, reuse and reduced materials in mind, lowering your product’s emissions across its life cycle.
- Prioritise hotspots: Focus on the 10% of products or processes responsible for 90% of your emissions. Initially targeting these high-impact areas of your business efficiently reduces your carbon emissions.
- Focus on electrification: Electrify your fleet and transition to electric vehicles in your supply chain to reduce missions. This supports the global shift to electric vehicles while accelerating your net zero journey.
Measure, reduce and report your carbon emissions with Root
There is only one way to become net zero – a data-driven approach. Having accurate product carbon footprints and understanding the carbon emissions of your company and your product portfolio is vital in any robust net zero strategy.
Root’s platform simplifies the process of measuring and reducing your company and product-level footprints. You can see a product demo of Root’s carbon measurement and reduction approach in the video below:
Here’s how we do it in four easy steps:
Step 1: Upload data
Upload your company and product data using Root’s user-friendly onboarding modules. Root guides you through the process, mapping your supply chain and identifying incomplete information. Our system helps fill gaps with informed assumptions if data is missing. This first step creates a solid foundation for building accurate carbon footprints.
Step 2: Measure impact
Root generates thousands of product life cycles at once from the data upload. The platform’s dashboards offer clear insights into your company and product level carbon footprint, which products and processes contribute most to your carbon footprint and a detailed breakdown of scope 1, 2 and 3 emissions.
Step 3: Analyse insights
Root’s scenario builder helps you explore and model different carbon reduction strategies, making it easy to find the most impactful strategies and build a robust net zero action plan. Use Root’s scenario builder to make data-driven decisions that lower your carbon footprint and bring you closer to net zero emissions.
Step 4: Optimise impact
Set and track net zero goals over time, measuring progress towards achieving net zero. Use Root’s reporting features to communicate transparently to stakeholders like customers and comply with regulations like CSRD.
We can help
At Root, we aim to redefine the norm by making company and product footprints universal. Our platform conducts automated LCAs for entire product portfolios – helping businesses report effectively on regulations, avoid greenwashing and become industry leaders in sustainability.
Root accurately measures and reduces company-wide and product-level carbon footprints, forming the foundation of impactful, data-driven climate strategies and making companies’ journey towards net zero emissions bulletproof.
Interested to learn more? Get in touch with our team to discover how Root can help you achieve compliance and drive sustainable growth.