In August 2021, The International Panel on Climate Change (IPCC) published its Sixth Assessment Report on the Physical Science Basis of Climate Change. It clearly laid out the scale of the climate catastrophe and urged decisive action to reduce greenhouse gas (GHG) emissions.

According to the report, temperature rise since pre-industrial times could pass 1.5°C by 2030. The IPCC has previously made clear that when this threshold is passed it will lead to an increasing frequency of extreme weather-related events and devastating damage to ecosystems and biodiversity.  

Thankfully, this is not the end game. Although the latest report provides perhaps the most concerning analysis yet on the future of our planet, it does map out how temperature rise can be abated.

Achieving net zero emissions is a key part of the solution. Businesses have a big role to play therefore organisations over the world must not waste a second in taking the first, and most crucial step, in achieving net zero: reducing their own GHG emissions. There is simply no time to waste.

What does a good net zero strategy look like?

Net zero is achieved when GHG emissions produced by human activity are negated through a combination of first reducing emissions and subsequently neutralising any residual emissions, for example through carbon dioxide absorption from the atmosphere.

Since 2020, one in three of the largest listed companies in G20 nations “has (set) net zero targets”, which is up from one in five in the previous year. This is no surprise as companies are coming under increasing pressure from investors, regulators, employees and customers to not only monitor and reduce their GHG emissions, but to incorporate a net zero goal into a wider sustainability strategy, which also accounts for ESG factors which go beyond just GHG emissions.

That said, it is grimly appropriate that much of what passes for a net zero strategy amounts to little more than hot air. This will have to change with increasing scrutiny from investors and customers, and new regulations and rules increasingly coming to the fore. Net Zero Tracker reported that since 2020 there has been a doubling of G20 countries (from three to six) enshrining net zero in law, with the UK setting a legally binding deadline for organisations to be net zero by 2050.

The truth is transitioning to net zero is extremely difficult. Here at Avieco, when we speak to businesses about it, common worries include not knowing how to get started, the fear it will cost too much or cause significant disruptions, and a hesitancy to commit without knowing exactly how to get there.

While these are all valid concerns to raise, none of them are insurmountable. Far from it. Whether you have already set out your plan or want to get one going, this is what should be considered when building a successful strategy for achieving net zero…

Establish working groups

As the old adage goes, you can’t manage what you don’t measure. Start by identifying the areas of your business that make the biggest contribution to your GHG emissions and then establish what drives these emissions and who has the ability to influence them. The route to decarbonisation for different emission sources is likely to look very different, with a potentially entirely separate set of stakeholders involved. For example, decarbonising building energy use may require engagement with energy suppliers, contract managers and landlords, to ensure a gradual transition to on site renewable and renewable energy tariffs, whilst in order to decarbonise products you will need to work with product designers, procurement specialists and value chain partners.

Once these parts of your business, and the individuals with the ability to influence them, have been identified, try to create working groups to tackle them. These working groups should explore the drivers behind emissions, determine what can be done to address them, set appropriate timelines, establish the resources required to drive change and set a range of targets and KPIs to track progress over time.

In partnership with ITN’s CEO and senior leadership team, Avieco developed a strategic framework that prioritized sustainability in its internal culture, implemented sustainability measures in its buildings, operations, and its programme production process, and baked it into the content and stories it creates.

Read the success story here.

It is crucial to avoid siloed thinking. The groups must be in regular communication, sharing ideas, findings and solutions, as well as reporting on progress. This will help ensure everybody in the organisation with the ability to influence GHG emissions is working to achieve net zero in a coherent and efficient manner.

Secure sufficient funding and management support

Every working group will have its own unique challenges to deal with, such as time constraints, a lack of human resources and a need for training, and it is absolutely vital that management recognise these impediments and authorise investment to overcome them.

Financial support from your organisation’s leadership will help remedy these challenges as well as demonstrating to your internal stakeholders that net zero is being taken seriously. Make sure this kind of strong leadership is also outward-facing, so that your message is conveyed to external stakeholders in a way that will inspire change, give confidence to consumers and investors, and drive new partnerships.

Work with your value chain

Obtaining high-quality data on emissions from your value chain is crucial, so work with your suppliers to refine the quality of the emissions data you are getting from them. Whilst year one scope 3 reporting will often rely on estimated emissions (usually based on modelling from procurement spend), data quality can be improved from year two by engaging directly with value chain suppliers and partners. Start with your most material partners and suppliers (i.e. those who contribute the most to your GHG emissions). Explore what data they already have and whether that’s sufficient. For products, see whether LCA data is available. For service based companies, try apporting organisational level emissions based on the proportion of revenue you account for within that supplier/partner.

 

Croda International is a global speciality chemicals manufacturer. Avieco work with Croda to understand and manage their carbon emissions impact up and down their value chain.

Read how we went about doing it.

We’re increasingly seeing this type of action amongst our clients and in the wider industry, where giants like Microsoft are now beginning to request that their suppliers 1) report in line with the WRI GHG Protocol and 2) set decarbonisation targets that align with their own.

Once you have the have precise information you need, you will have a clearer idea of how to re-design your value chain and its inputs,  allowing you to assess how decarbonisation can be driven. Research sustainable alternatives that partners or competitors are already using to see if they could be incorporated into your operations, and set reduction targets for suppliers. The moves being made by the likes of Microsoft could inspire major change in the technology sector and beyond.

Encouraging suppliers to work to targets will not only help reduce emissions in your value chain, but it will also allow you to identify the suppliers that are most committed to decarbonising their operations and that you should therefore be building long-term partnerships with.

Identify ‘innovation gaps’

There will very likely be emissions in your value chain that will be hard to reduce. These are known as residual emissions and they must not be ignored. Rather, you must know the total amount of these emissions and how they will change over time.

Getting to grips with the level of residual emissions you have to deal with, both now and in the future, will mean you can make choices about how to close what is known as the ‘the residual emissions innovation gap’.  There are three ways to do this…

  1. Neutralise the residual emissions
  2. Design them out of your value chain or significantly reduce them (eg. use more sustainable alternatives, stop business travel)
  3. Fund innovation and research to facilitate change

Be aware that each of these options come with their own implications in terms of complexity and cost, so consider carefully which route you want to commit to cut your residual emissions.

Establish a neutralisation strategy that fits with your broader purpose

In recent years, carbon offsets have become a popular option for businesses transitioning to net zero. While they may seem like an easy and accessible option, they’re unlikely to constitute best practice in the long term and a reliance on offsetting will expose businesses to financial risk, with price increases likely. It is a better idea to find carbon neutralisation alternatives that you can design yourself to retain a greater sense of ownership and to ensure that the principles underpinning the project are aligned with best practices.

This is an area expected to develop significantly over the coming years. The SBTi have remained relatively noncommittal on what best practice neutralisation will entail and have instead chosen to align with and signpost to the forthcoming WRI GHG Protocol on Carbon Removals, which will complement the WRI GHG Protocol, and outline how organisations should account for carbon removals. Nonetheless, market leaders are beginning to take action already – for example, BrewDog purchased 9,000 acres of land in Scotland with the aim of reforesting it from 2023.
Long term, this could be more cost-effective and could bring extra benefits that align with the UN’s Sustainable Development Goals around social justice, biodiversity, community infrastructure and more, and will better demonstrate your commitment to dealing with the climate crisis.

Drive change within your wider industry

Ultimately, stopping the climate crisis relies on collective action, so every organisation has a responsibility to bring about transformative change within their sector and beyond.

You won’t be able to do this as a sole voice, so work with competitors and regulators to address the challenges your industry is facing. Many of the ESG issues you are dealing with in your organisation will be replicated across the sector, so don’t be afraid to share findings and work out a collective action plan.

The UN Asset Owners Alliance is an excellent example of this kind of collaboration, with 29 large institutional investors, Allianz, CDPQ and Swiss Repledging to reduce portfolio emissions by a quarter in five years across listed equity, corporate bonds and real estate combined targets.

Be transparent: report progress and share best practices

The importance of honesty and transparency in communicating the enormity of the challenge you are facing on net zero cannot be overstated. Neither can the need for disclosure that goes above and beyond the minimum requirements set down by regulators and legislators. It is not enough just to announce targets and list initiatives, you need to go deeper.

Firstly, introduce the concept of a carbon budget. Annual progress is essential if you are to hit net zero. Your emissions need to fall year-on-year. Follow this up by reporting on the progress you are making and keep in mind that net zero isn’t an end goal, but a transitional state that you need to maintain.

Go beyond simply reporting on GHG emissions too. Disclose on the opportunities and risks that you’ve identified, how you identified them and how you plan to address them. Talk about the governance structures that you’ve established to ensure sustainability is the right level of attention internally. You must also ensure your reporting complies with relevant regulatory frameworks such as SECR and TCFD, and there are a number of voluntary disclosure platforms and initiatives, such as Climate Disclosure Project, RE100 and SBTi, that you may benefit from working with.

Finally, if you miss targets, don’t shy away from that fact or try to hide it. Be honest about how you failed and communicate clearly to stakeholders how you will go about rectifying things in the future. Achieving net zero is the challenge of a generation – progress is not going to be smooth sailing and stakeholders will understand that so long as disclosure is clear, consistent, transparent, reliance and objective.

Conclusion

The need for businesses to start working towards net zero is urgent. The climate crisis is extremely likely to get worse before it gets better, and it will only get better if organisations throughout the world change course and get their carbon emissions under control.

Setting a headline-grabbing net zero target, but only tinkering at the margins of your operations is no longer acceptable. A science-based strategy with short and long term, tangible goals for reducing emissions is the only way to go. Engaging with suppliers must be part of the plan too, as must demonstrating the strongest possible leadership that invests financially in the transformation of your business.

With governments, investors and customers demanding change and the warnings from scientists about the consequences of not acting so stark, there is no choice to be made.

Creating a workable, dynamic net zero strategy will transform your business for the better, creating new opportunities for growth. It is a challenge that must be embraced right now.

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