A Deep Dive on Net Zero Target Setting
In this article, I introduce the notion of target-setting as a crucial process in developing corporate net zero strategies and cross-examine some of the existing schemes for doing so, to help companies determine the best approach for them.
Net-zero target setting for corporations is the dual process by which companies reduce emissions across their value chains or neutralise those that cannot be prevented through atmospheric extraction, in pathways that limit warming to 1.5°C. To many, simple target setting might seem one of the easier aspects of developing a net zero strategy. However, this could not be further from the truth.
The industry is awash with carbon-reduction schemes, methodologies, and frameworks, each of which appear to have similar intentions but use individual terminologies or slightly different goals.
With these many options available, how do you know what will work best for your company?
This article aims to demystify some of the ins and outs of net zero target setting so you can decide what is best for both your business and the planet.
Defining ‘Net Zero’
First of all, let’s start by addressing what is actually meant by the term ‘net zero’.
The definition may differ slightly depending on where you look and even varies from sector to sector. A discussion paper published jointly by the Science-Based Targets Initiative (SBTi) and CDP grappled with the need for more clearly defined terms, and concluded that:
“Net zero emissions are achieved when anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period.”
But why is it necessary for companies to aim for net zero in the first place? It may appear on the surface that small- and medium-sized companies have less of a need to reduce their emissions, given their own carbon footprints are almost negligible in comparison to larger companies. That said, smaller companies are estimated to account for around 50% of all business-driven emissions in the UK in aggregate.
Whilst important that all organisations reduce their in-house emissions, as described above, what takes greater precedence, particularly within an industry such as property development where total emissions put us at one of the most highly polluting sectors, is reducing emissions in client-facing work. Sure, a team of 10 architects could transform their organisation into one that is paper free, has a cycle-to-work scheme, and operates out of a solar-powered building, yet their decision to utilise concrete structures in their designs over timber would result in emissions that greatly outstrip those saved in house. If that firm works on 100 buildings in a year, the cumulative emissions resulting from those design choices could vastly exceed its own day-to-day footprint, demonstrating that a company’s true impact extends far beyond its direct emissions to the long-term carbon consequences of its work.
Moreover, the UK government has itself committed to achieving nationwide net zero by 2050, with an intermediate greenhouse gas (GHG) reduction target of 68% by 2030, meaning UK businesses must adapt their practices in order to meet the demands of these new regulations. This intermediate (or ‘near-term’) target is important as it ensures that steady progress is made towards net zero (see Figure 1). This is preferable to a strategy that only considers long-term goals, since this could create a reality whereby organisations feel no immediate pressure to adapt their ways of working and optimise their value chains, as it allows for a gradual and consistent effort towards net zero. If only long-term goals were considered, we could easily conceive that most net-zero strategies would fail in the sudden rush to meet targets as the time period elapses (see Figure 1).
But setting targets should be more precise than a simple finger-in-the-air exercise. It should be tailored to the company in question, meaning it should be a) informed by the company’s operations and value chain, b) ambitious but at the same time realistic, and c) specific about what is and is not included.
Figure 1: Example graph showing two net zero scenarios for a single company. Under scenario 1, the company makes only minor changes to its operations, barely reducing annual emissions, then makes drastic changes as it progresses towards its net zero target. Under scenario 2, the company makes steady progress towards its target. The area contained beneath each line represents total emissions between beginning of the net zero journey and the net zero target year for each scenario.
Let me break this down further.
Well-Informed
Before being able to even set a net-zero target, every company needs to conduct some form of an audit to understand their annual emissions, i.e. they need to know the extent of the challenge and the key sources of pollution.
This audit can be achieved either in-house or externally, but must essentially define a baseline from which the company can develop strategies to work back from and reduced emissions.
Ambitious
Setting ambitious reduction targets demonstrates a commitment to sustainability and can help to create a positive brand image. One study found that 36% of UK adults are willing to pay more for goods and services provided by companies who demonstrate sustainable practices [source]. However, the target should also be achievable and not bootstrap the company.
Testing different future scenarios under varying pathways is an important part of the target-setting process, which involves an assessment of the likely reduction impacts that a certain action will make. For example, it might be worth testing whether switching to 100% renewable energy will have more of an impact than simply reducing the company’s energy requirements.
Specific
Companies should base their targets around what approach works best for them. They should define their intention to become either carbon neutral or net zero. It is also important that they are transparent around which emissions sources are included across Scopes 1, 2, and 3 within their calculation, and are able to justify why it is not relevant to include some emissions categories. You can read more about what is meant by the different scopes here, but in brief:
Scope 1 emissions are a company’s direct emissions from sources owned or controlled by the company, e.g. emissions from fossil fuel-powered vehicles, fuel use.
Scope 2 emissions are indirect emissions from purchased energy, e.g. electricity, heating & cooling, and steam.
Scope 3 emissions constitute other indirect emissions across the value chain not included in Scope 2, such as purchased goods, transport, or commuting.
Based on what they decide as the most appropriate target, a company may decide to join a scheme which ensures accountability and provides accreditation for companies that are actively measuring and reducing carbon emissions. There are several options. The most established scheme for setting net-zero targets is the Science Based Targets Initiative (SBTi) which bases its methodology on current climate science, asserting that companies must align with reduction pathways aimed at limiting global average temperature increases to 1.5°C by 2100. The process has several steps:
Commit to setting a net-zero target (only a mandatory action for larger companies).
Develop a net-zero target.
Submit targets for validation.
Communicate your targets to your stakeholders.
Disclose annual progress towards your targets.
One of the key selling points that sets SBTi apart is that their target-setting process is considered to be much more robust than alternative methodologies because of its close links to current climate research. Furthermore, it provides all the guidance, criteria, and recommendations companies need to reach net-zero targets in line with limiting warming to 1.5°C.
However, they have received some criticism due to their blanket approach to target-setting, which does not differentiate between those countries (and companies) that have excessive emissions and those that emit far less. The problem with this is that, while there is some value in setting everyone on a path to reach ‘net zero greenhouse gases by 2050’, not everyone has equal access to the financial or technological resources required to decarbonise. Interestingly, around 90% of companies that have set net-zero targets via the SBTi are based within developed economies, according to one article [source].
ISO 14068-1, the replacement of PAS 2060, is a separate certification standard which offers an alternative framework (see Figure 2) for decarbonisation, aiming for carbon neutrality rather than net zero. The difference here is that to achieve net zero, as defined by the SBTi, companies are only permitted to offset a maximum of 10% of their total emissions after reducing them by 90% against their baseline. Comparatively for ISO 14068-1, there is no limit to the amount of offsetting that can be carried out to gain carbon neutral certification, though it is recommended that reductions and greenhouse gas removals are prioritized beforehand.
Figure 2: Summary of the ISO 14068-1 carbon neutrality framework, adpated from Figure 2 of the guidance document. Highlighted in pink are the steps which are relevant for target-setting.
Some argue that carbon offsetting does not have the same effect as preventing carbon emissions; for instance, some reports have noted a lack of regulation around the quality of some projects which can be financed in exchange for carbon offset credits [source], and others claim that offsets made in regions that are geographically distinct from the location of the company may not be equivalent in terms of impact. However, this is not to say that carbon offsets are intrinsically worthless. On the contrary, there are examples of carbon offset projects which have had very positive impacts. If in doubt, think local, think accredited, and think long-lasting.
Whilst we do recognise that offsetting can often be an exercise in kicking the can down the road, it can often form an essential part of a carbon-reduction programme. In particular, we at Love Design Studio often have interest in offsetting emissions locally; if a development is insufficiently large to provide enough solar panels on the roof and decarbonise energy production on site, there is often the potential to install these same panels on a nearby school or community building.
Although there are other available certification schemes for net zero and carbon neutral alike, they largely share similarities with those already mentioned. The third main option is that companies organise target-setting themselves or in partnership with a consultancy. Although this does not come with the accreditation or external accountability that is associated with other net-zero schemes, it grants companies complete control over dictating their emissions reductions as they see fit.
The underlying message beneath the intricacies of the net-zero target-setting process is that the most important thing is for companies to act decisively. Whether they choose to join a scheme or not, they should aim to set the wheels in motion towards net zero as soon as possible, before deciding on targets that challenge them to change in a way that works for them.
If you or your company have any doubts about how you can set net-zero targets, or if you are considering starting your own net-zero journey, get in contact here!