What is Net Zero?
Countries, cities and companies are increasingly committing to reach net zero by 2050 – removing as much CO2 as they produce to limit global warming. Short- and medium-term emission reduction goals, consistent with the Paris Agreement, are set all over the globe to eliminate the worst impacts of climate change this decade.
The importance of corporate Net Zero targets
Reaching net zero emissions means balancing the greenhouse gases we emit into the atmosphere with what we extract. Under the Paris Agreement in 2015, 197 countries pledged to keep temperature rises “well below” 1.5°C to avoid severe consequences of climate change. The Intergovernmental Panel on Climate Change (IPCC) found in its report of 2018 that “global net human-caused emissions of carbon dioxide would need to fall by about 45% from 2010 levels by 2030, reaching net zero around 2050. This means that any remaining emissions caused by human activity that cannot be abated, will need to be balanced by removing CO2 from the atmosphere.
EU is the first to put Net Zero target into law
An increasing number of countries, cities and organization have pledged to reach net zero within 2050, turning the net zero promise into a mainstream act. The EU is aiming to be the world’s first net zero continent, and is hence tightening its energy politics and regulations, being the first region to put the net zero target into law. The initiative “Net Zero Tracker” has mapped out the number of net zero pledges of countries, cities, regions, and organizations, to get an impression of how large an impact these entities may have on reaching the global net zero target. According to the Net Zero Tracker, 90% of the global economy is committed to reaching net zero. The country level commitments cover 88% of global emissions and includes 85% of the population (as of January 2022). Out of 2000 of the largest publicly traded companies worldwide, the Net Zero Tracker has identified 683 with a net zero target.
Country-level coverage only. Sub-national net zero targets in countries without a target are not included. Source: Net Zero Tracker
Corporates' Net Zero targets
On an organizational level, the quality of the net zero targets varies. While some companies have set ambitious targets that requires deep emission cuts, others have set modest emissions reduction targets, lacking the detailed abatement planning. The variation in quality and structure of targets makes it harder for stakeholders to compare companies’ net zero targets and their implications.
The Net Zero Standard
The net zero pledges need to be turned into measurable plans and targets for which companies can be held accountable. By aligning net zero targets with standards, targets become more transparent, comparable and more likely to be of quality and eventually to succeed. The Science Based Targets Initiative’s (SBTi) Net Zero Standard is one such standard that gives substance and guidance to net zero targets. The SBTi Net Zero Standard provides a common, robust, and science-based understanding of net zero. The standard is the world’s first of its kind to provide a method for companies to take their part in enabling the global economy to reach net zero.
Corporate net zero targets differ across three dimensions: the boundary of the target, the mitigation strategies chosen, and the time frame to achieve the target. Companies who want to align with the Net Zero Standard need to set long- and short-term goals, aiming for deep emission cuts in its scopes 1, 2 and 3 of at least 90% before 2050, and halving their emissions by 2030.
Based on guiding principles in the Net Zero Guidance, reaching net zero aligned with limiting warming to 1.5°C involves two conditions:
1. To achieve a scale of value-chain emission reductions consistent with the depth of abatement achieved in pathways that limit warming to 1.5°C with no or limited overshoot.
2. To neutralize the impact of any source of residual emissions that remains unfeasible to be eliminated by permanently removing an equivalent amount of atmospheric carbon dioxide.
Corporate net zero targets represent an important tool for companies that signal that the private sector has the power to drive progress in the race against climate change. Pledge to reach net zero is part of a growing trend but committing to a science-based net zero target shows responsibility.