Your top questions about net-zero, answered

Why is this report so important?

Published at a time when many nations across the globe are suffering from intense heatwaves, devastating forest fires and droughts, the AR6 report urges climate action to address the hardships we already face and those that are yet to come.

Net-zero transformation will be critical in addressing the action we need to take. As the report highlights, every ton of carbon has an impact. Nations, businesses, and individuals must all now focus effort on decarbonization and net-zero transformation.

Net-zero may seem like a daunting concept. It does not (yet!) have an internationally agreed definition, and that raises a lot of questions. In this blog, we aim to answer some of the most frequently asked questions for organizations on their journeys toward net-zero.

What does net-zero even mean?

Net-zero is essentially an accounting term applied to carbon emissions. However, the challenge so far has been the lack of an internationally recognized definition, and the absence of any universal guidelines on how to achieve it.

With no time to lose to limit global warming, there is a growing consensus between climate experts in the sustainability sector who have been working with terms like “carbon neutrality” and “net-zero emissions” for some time. We define net-zero as a state where we add no incremental greenhouse gases to the atmosphere. This means emissions output is balanced with removal of carbon from the atmosphere via carbon sinks (forests, mangroves, carbon capture, etc.). Essentially, what goes in must be removed to equal net-zero.

What role does digital play?

The digital sector already accounts for 1.4% of global emissions and 3.6% of global electricity use. Along with consumerization, increased digitization can present challenges for net-zero. The mobile phone industry is a good example because new models are replaced every year and 75% of this sector’s emissions are in manufacturing. In parallel with digitization is the continued growth of data, forecast at 26% compound annual growth rate (CAGR). This can also present a climate risk because data requires storage, which requires power that results in further emissions.

To counteract these negative impacts, digitization must be intelligent and combined with sustainable practices such as lifecycle assessments, reducing waste, improving efficiency and use of renewable energy sources. The hyperscaler public cloud providers are all moving beyond carbon neutral to net-zero. In particular, Microsoft has committed to be carbon negative by 2030, and by 2050 will have removed all the carbon it has emitted either directly or by electrical consumption since its founding.

Digitization and decarbonization will need to move forward together to ensure that digitization acts as a driver for change in the next decade and beyond. Placing digital at the center of your organization’s decarbonization journey, and decarbonization at the heart of your digitization will ensure that your company reaps the benefits of both transitions. The next installment of this series will discuss the business case for net-zero in greater detail.

How do we set science-based net-zero targets?

Science-based targets (SBTs) are an integral part of any net-zero strategy. Simply put, they quantify how much and how quickly a company needs to reduce its greenhouse gas emissions to prevent the worst effects of climate change. They help change the mindset from “do something” to “do this.”

Having SBTs in place is a way to demonstrate your company’s credible commitment to reducing emissions as part of its net-zero strategy. Setting science-based targets ensures that your business is on a path aligned with limiting global warming to 1.5° Celsius.

The SBTi (Science Based Targets initiative) recently raised the minimum ambition of corporate targets for emissions reduction to 1.5 degrees which will impact many businesses, but that’s a topic we will discuss later in this series.

Which company activities are responsible for greenhouse gas (GHG) emissions?

The most widely-used corporate accounting and reporting standard — the Greenhouse Gas (GHG) Protocol — categorizes a company’s greenhouse gas emissions into three groups (also known as scopes):

Scope 1 or direct GHG emissions includes GHG emissions from fuel combustion, vehicles and so-called fugitive emissions (such as refrigerants or nitrogen fertilisation) that are within the organization’s direct control.

Scope 2 or electricity indirect emissions includes GHG emissions related to the production of electricity, heat and steam purchased by the organization.

Scope 3 or other indirect GHG emissions includes all other indirect GHG emissions, not included in Scope 2, related to the organization’s wider activities, but that come from GHG sources owned and/or controlled by others. This includes emissions indirectly related to the use of consumer goods and associated transport, waste treatment and the travel of employees and visitors.

Scope 3 is usually the largest component of the carbon footprint and the hardest to reduce, because these emissions are largely beyond the company’s direct control.

We will explore some strategies for tackling Scope 3 emissions in a later installment, but it you are interested in learning more right away, you can access our factsheet and six-step methodology to taking action on your Scope 3 emissions.

What is offsetting and why is it important?

As we outlined earlier, science-based emission reduction targets are a critical part of any company’s net-zero strategy.

Unfortunately, eliminating all emissions will be difficult — particularly in the short term — but there are immediate steps we can take. Supporting sustainable development projects that protect and restore precious carbon sinks are a form of offsetting. So are helping build renewable infrastructure and supporting communities in developing sustainably.

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