Former Bank of England governor Mark Carney warned last year that: “companies and industries that are not moving towards zero carbon emissions will be punished by investors and go bankrupt.”
I would add customers and employees to that statement: a Net Zero commitment is becoming an expectation for companies they will buy from or work for. And, if that isn’t enough, there is little doubt that regulation is coming soon to compel everyone to start the journey.
In 2019, the UK became the first major economy to commit to net zero greenhouse emissions by 2050 – with Boris Johnson this year committing £350m stimulus funding to cut emissions as part of the effort to #buildbackbetter. This is a clear sign that the path to net zero represents an opportunity for businesses that move swiftly and smartly.
But what does “net zero” really mean? And how can a company trying to shore up its business in a post-Covid future start to tackle it? From our work with companies navigating this challenge, there are some simple lessons to draw out.
Simply put, net zero is a state where we add no incremental greenhouse gases to the atmosphere; any emissions are balanced with the removal of carbon from the atmosphere. But there is no common definition of “net zero” in the corporate context, leading to confusion and inconsistent claims.
A net zero strategy in essence consists of three steps.
First, identify emissions from your company’s own activities, from suppliers providing input to your business, and from your customers’ use of your product or service during its lifetime, as well as its disposal. This isn’t an easy task, but can be a hugely valuable map, and there are many fairly simple tools available to both small and larger companies.
Second, create a plan to reduce emissions, and commit to a science-based target.
This will require a combination of short- and long-term changes. Often, reducing emissions results in reducing costs — but beyond savings, the process of identifying and working out how to reduce emissions can act as a springboard for innovation, and provides a new opportunity to deepen engagement with suppliers, customers and employees. Setting a target is a great way of galvanising employees and attracting new customers.
Third, the emissions you cannot immediately reduce need to be offset by removing carbon from the atmosphere to balance out the carbon you emit. One way to do this is to buy so-called carbon credits.
A carbon credit represents a reduction or removal of greenhouse gases. It is issued by a carbon crediting programme: be aware that not all carbon credits are created equal.
Before investing in an off-the-shelf carbon credit, it is worth considering how your business can uniquely address this issue in a way that is less about cost, more about opportunity. Where in your business might you use a material which uses carbon sequestered from the atmosphere rather than a standard material? For instance, carbon-negative concrete, natural fibre, polymers and more are already available, and more technologies are rapidly maturing for use thanks to initiatives like the Global CO2 initiative.
“Nature-based solutions” that remove carbon from the atmosphere and store it in natural carbon sinks, such as peatlands and healthy soils are also an important part of the equation. Many of these solutions offer considerable additional benefits in terms of health, wellbeing, productivity and more.
As advisors to large global businesses, we see that the demands of the market are shifting exponentially. In order to stay competitive, net zero must be on your board agenda.
Main image credit: Getty