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Devon Lake Director, Sustainability Solutions, Head of Food & Beverage
Nik Bollons Senior Manager, Sustainability Solutions UK & Ireland, ENGIE Impact
Marisa Donelly Senior Manager, Sustainability Solutions, ENGIE Impact
Net Zero Strategy
Decarbonization
Carbon Offsets

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What does Net Zero mean?

The Four Essential Questions

1. Why Net Zero?

As with any strategic endeavor, begin by asking “Why?” The answer will likely revolve around opportunities, risks and stakeholder perspectives. Consumers want to know that brands are environmentally and socially responsible before making their purchasing decisions. Governments need to demonstrate their progress toward Paris Agreement goals. Investors want to see business models built around seizing new opportunities in a low-carbon economy while managing long-term risk. Employees are motivated to work for companies whose day-to-day operations reflect their long-term climate pledges.

Knowing and articulating the “why” will help you drive alignment around a set of Net Zero principles to guide your program. Here’s how we worked with a bank recently:

  • Conducted a Net Zero gap analysis helping to identify and address gaps in its inventory of Greenhouse Gas (GHG) emissions
  • Outlined materiality issues and risks in order to quantify the value at stake
  • Sequenced opportunities based on stakeholder priorities and materiality

Takeaway

This is an opportunity to develop your company’s view on industry Net Zero best practices and a way to demonstrate climate leadership. Beyond that, setting Net Zero targets can help inform strategic transformation of your business, including driving product and service innovations, opening up new markets and unlocking operational efficiencies. It can be a catalyst in positioning your company for success in the low-carbon economy.

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2. When should you reach Net Zero?

The trajectory of your Net Zero initiative should align to a well below 2°C (preferably 1.5°C) science-based trajectory. The timing should demonstrate tangible near-term ambitions and interim goals by 2030. Net Zero should be achieved by no later than 2050, but some companies are moving faster than others and setting the pace of change in their industries. Unilever, for example, has laid out its plan for becoming Net Zero, covering emissions from its entire value chain, by 2039. It also plans to reduce emissions from its own operations, including factories, by 70% and 100% by 2025 and 2030, respectively.

Takeaway

By accelerating your Net Zero timeline for both reducing and neutralizing your emissions and celebrating that ambition, you can inspire and move others in your industry to take action. Be transparent about your strategy and how you are making decisions knowing their power to raise the bar for the industry and send clear demand signals for decarbonization technology and high-quality removal and offsets projects.

3. Where are your emissions boundaries?

A credible Net Zero target must include a company’s full carbon footprint. That means developing a full corporate GHG emissions inventory – incorporating Scope 1, Scope 2, and Scope 3 emissions. Scope 1 includes direct on-site emissions while Scope 2 covers indirect on-site emissions (e.g. purchased electricity). The largest sources of emissions for many companies are often the Scope 3 emissions, which include upstream and downstream emissions in a company’s value chain. Stakeholder expectations around measuring and managing Scope 3 emissions are increasing. Expect scrutiny around where you set your boundaries. Look to emerging Net Zero guidance and materiality assessments of what matters most to your stakeholders to inform this decision.

Netflix has laid out a detailed plan to achieve Net Zero GHG emissions by end of 2022. In setting its boundary, it included all Scope 1 and Scope 2 emissions, as well as all relevant Scope 3 categories, even though in many categories the company has limited operational control. This boundary covers all Netflix-branded content, whether produced directly or through a third-party production company, as well as all licensed branded content. Netflix acknowledges the challenge of measuring and reducing emissions from the productions the company does not manage directly, but by taking responsibility for the emissions from all Netflix-branded content it is hoping to create a ripple effect across the industry.

Takeaway

In setting your boundary for Scope 3 categories, consider how they contribute to the size of total emissions and the company’s risk exposure. Understand how your stakeholders view these emissions and how much influence can you have in reducing them. Take into account any sector-specific guidance about the category of emissions.

Get a behind-the-scenes look at the making of Netflix’s Net Zero strategy. Register for webinar→

4. What’s your strategy to get to Net Zero?

A credible Net Zero strategy follows a well-defined GHG mitigation hierarchy while maintaining a science-aligned reductions trajectory.

Start by eliminating, reducing and substituting emissions sources, first internally and then across the value chain. Bring emissions down through activities like purchasing more renewable energy and switching to electric vehicles within your organization. Then, work with supply chain partners to help reduce the emissions in products and services, e.g., by including more recycled packaging and shifting from air freight to ocean freight. Consider opportunities to redesign products and services to address use phase emissions. Once you have committed to the most ambitious reductions trajectory, consider which types of offset credits to use and when. Interim guidance suggests that offsets from carbon removal projects -- nature based or technology projects that remove carbon from the atmosphere -- are likely to be required in the target year.

Netflix, for example, has announced it will achieve Net Zero emissions by the end of 2022 putting its internal emissions reductions on a 1.5-degree C pathway and bringing the remainder to zero through projects that remove carbon from the atmosphere. It plans to reduce its Scope 1 and Scope 2 internal emissions by 45% by 2030. By the end of 2021, it will neutralize emissions it can’t reduce internally, including Scope 3, by conserving natural areas like tropical forests. And by end of next year, it will incorporate investments in carbon removal projects such as the regeneration of ecosystems like mangroves.

OR Microsoft

Microsoft, for example, has announced that by 2050 it will remove from atmosphere all the carbon dioxide it has ever emitted, either directly or through electricity use, since the company was founded in 1975. The company is creating a vast carbon removal portfolio and has purchased 1.3 million metric tons of carbon removal from various suppliers in 2021 alone. Microsoft is aiming to not only transform its own operations but build a new market for carbon removal technologies.

Start by eliminating, reducing and substituting emissions sources, first internally and then across the value chain. Bring emissions down through activities like purchasing more renewable energy and switching to electric vehicles within your organization. Then, work with supply chain partners to help reduce the emissions in products and services, e.g., by including more recycled packaging and shifting from air freight to ocean freight. Consider opportunities to redesign products and services to address use phase emissions. Once you have committed to the most ambitious reductions trajectory, consider which types of offset credits to use and when. Interim guidance suggests that offsets from carbon removal projects -- nature based or technology projects that remove carbon from the atmosphere -- are likely to be required in the target year.

Microsoft, for example, has announced that by 2030, it will be carbon negative, going beyond Net Zero to start removing more carbon from the atmosphere than it emits. By 2050, the company expects to remove from atmosphere all the carbon dioxide it has ever emitted, either directly or through electricity use, since its founding in 1975. Microsoft is creating a vast carbon removal portfolio and has purchased 1.3 million metric tons of carbon removal from various suppliers in 2021 alone. Microsoft is aiming to not only transform its own operations but create marketplace demand for carbon removal technologies. for carbon removal technologies. for carbon removal technologies.

Takeaway

Your Net Zero strategy must put reductions first, following the mitigation hierarchy and including science-aligned goals. Use offsets and removals to neutralize residual emissions that have not yet been reduced by other means. When it comes to offsets, the quality of the credits you buy is essential.

How to become Net Zero

Once you have addressed the Why, When, Where and What of Net Zero, you need to map out ‘How’ you will execute at the scale and pace required. In the next installment of this series, we will explore the essential components of the operating system that will support your transition to Net Zero, including funding, data and governance.


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