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Net-Zero Explained


At the core of the global battle against climate change lies the commitment to achieve net-zero emissions by 2050. But what does it mean to be net-zero, and how can the private sector accomplish this?



Understanding Net-Zero

Net-zero entails balancing the amount of carbon emissions released into the atmosphere with an equivalent amount removed. In 2021, global carbon emissions totaled 36 billion tonnes, highlighting the urgency of removing the same amount to achieve equilibrium. Oceans absorb 25% of carbon dioxide emissions [1], aided by vital carbon sequestration processes in seagrasses and mangroves. On land, carbon is stored in the biomass of the world’s forests, emphasizing the need for their protection. The industrial revolution disrupted the Earth’s natural balance, necessitating human intervention to mitigate climate change’s effects.


Nations have united to limit global temperature rise to 1.5 degrees, requiring a 45% reduction in emissions by 2030, and achieving net-zero by 2050. Companies can cut GHG emissions through waste reduction, optimizing manufacturing, renewable energy, and purchasing carbon offset projects, which balance out remaining emissions. This means the company continues to produce emissions, but it can now achieve net-zero to balance out any remaining emissions. Carbon offset projects can include investing in environmental initiatives such as tree and mangrove plantations. Innovative technologies like Direct Air Capture and Storage (DACS) can remove carbon directly from the atmosphere. However, while promising, DACS requires further scalability and affordability.


The Importance of Net-Zero Strategy

A net-zero strategy acts as a roadmap, integrating emissions reductions, and carbon offsets to achieve carbon neutrality. Crucial to its effectiveness are science-based targets, aligning reduction goals with climate change mitigation requirements. Companies claiming net-zero status without realistic plans risk greenwashing, damaging their reputation. Therefore, businesses must transparently communicate their progress, and employ credible strategies, fostering genuine trust among consumers, investors and stakeholders. Microsoft stands out as a company committed to science-based sustainability targets, showcasing how authentic climate action can be implemented and verified, serving as a model for others. Their dedication to transparency and accountability is reflected in their comprehensive carbon negative initiative, aiming not just for net-zero, but to remove all the carbon the company has emitted since its founding in 1975.


Benefits of Net Zero Strategy

  1. Reduces costs: Implementing a Net Zero Strategy significantly cuts operational costs. For example, Keilhauer reduced energy bills by transitioning to energy-efficient technologies [2]. Additionally, in Canada, reduced carbon tax liabilities result from active greenhouse gas emissions reduction, leading to savings in both taxes and energy expenses.

  2. Enhances Reputation and Trust: Embracing carbon-neutral practices benefits the environment and bolsters a company's reputation. Take the example of Patagonia, an outdoor clothing company known for its eco-friendly initiatives. By consistently prioritizing sustainability, they have built a strong reputation for environmental responsibility, which resonates with their customer base [3].

  3. Attracts investors: ESG focused investors, recognizing sustainability as a sign of responsible management, invest in companies like Unilever, dedicated to sustainable sourcing. Canadian firms like Sun Life, which has over a trillion dollars of assets under management, is planning to invest 20 billion dollars in sustainable investments by 2025 [4].

  4. Improves Financial Security: Implementing a net-zero strategy reduces reliance on fossil fuels, safeguarding against financial risks from rising energy costs.

  5. Promotes Habitat and Species Restoration: By investing in conservation projects and reducing emissions, companies contribute to preserving ecosystems, protecting endangered species, fostering biodiversity, and ensuring a sustainable future.

Starting Your Net-Zero Journey

Companies initiate their net-zero journey by measuring GHG emissions (Scope 1, 2, and 3) to establish a baseline. Scope 1 involves direct emissions, Scope 2 indirect emissions, and Scope 3 emissions from the entire value chain, being the largest and most challenging to calculate.


We assist companies with assessing their emissions and setting realistic, science-based reduction targets, enabling them to become net-zero leaders, promoting environmental responsibility and a sustainable future.


References:

1. SBTI Dashboard https://sciencebasedtargets.org/companies-taking-action#dashboard

2. 2023 Corporate Sustainability report - https://keilhauer.com/planet-keilhauer/

3. Patagonia Trust Analysis: Values Driven or Money Driven https://www.clearestate.com/blog/patagonia-trust-analysis-values-driven-or-money-driven

4. Sun Life Sustainability Report – 2022 https://www.sunlife.ca/en/about-us/sustainability/




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