All talk, no action on net zero?

More and more businesses are setting net-zero targets – but how many of them are credible? David Burrows reports

Businesses are making net-zero commitments at a furious pace. A recent study by Data-Driven EnviroLab and the NewClimate Institute showed that there was a threefold increase in the number of businesses setting net-zero goals between the end of 2019 and September 2020, rising from 500 to 1,541. Similarly, the number of regional governments with net-zero goals climbed from 11 to 101 in 2020, and city-wide net-zero commitments have risen eightfold, from 100 to 823.

“Net zero is now the frame of reference for ambition on climate change,” says Steve Smith, greenhouse gas removal lead at the University of Oxford. This is encouraging. “It’s not long ago that large companies were proud to be publishing ‘10% reduction in CO2 in 10 years’ targets, which clearly wasn’t enough,” adds Nicola Stopps, CEO at consultancy Simply Sustainable.

A range of industries, from finance and insurance to retail and big oil, are shifting through the gears. Investors are predicting a ‘tectonic shift’ as capital is reallocated to sustainable assets. COP26 later this year is whipping up interest too, as is the concept of a ‘green recovery’ from the pandemic.

We are in an innovation cycle that’s touching multiple systems – planet, economy, regulation. But do we need to take a step back? Is this profusion of net-zero targets outpacing guidance on best practice?

“We should be sorting the genuine from the greenwash,” Smith and his colleague Tim Kruger wrote for The Conversation. “What the world needs now is pace runners to show how net zero should be done, and referees to call out the cheaters and laggards.”

Zero or hero?

There is currently no defined standard for setting a net-zero emissions target. The Science Based Target initiative (SBTi) is currently undertaking a public consultation exercise on its draft ‘net zero standard criteria’, so a standard may be on the horizon. In the meantime, large corporations are setting targets while the international standards movement runs to catch up, says Jamie Pitcairn, technical director (sustainability and circular economy) at consultancy Ricardo Energy & Environment.

A smorgasbord of plans, commitments and targets have been released under the ‘net zero’ banner. Some are excellent, says Alex Massie, principal consultant and climate emergency specialist at consultancy Eunomia. Others “so wilfully obscure the facts that they are arguably fraudulent”.

Some firms boast a certain level of net-zero maturity, with a well-structured plan and narrative. Their initiatives span scope 1, 2 and 3 emissions, data is becoming richer, and the impacts on their business are better defined and prepared for. Some are even applying internal carbon pricing to their business and developing innovation funds to catalyse ideas.

That isn’t the case everywhere. SBTi’s corporate sector report 2020 acknowledges that businesses are approaching the setting of net-zero targets “inconsistently, making it difficult to assess these targets’ contribution to the global net-zero goal”. According to Pitcairn, some plans give the “illusion of progress” when little is being done in the short-term.

There is a pressure, as the Financial Times’ US editor-at-large Gillian Tett noted recently, to divide companies neatly into ‘green’ and ‘brown’ buckets – but at the moment, we are turning everyone to a ‘lighter green’ in a way that can be measured credibly. “Targets announced by companies like WSP, Cemex, Siemens, Scottish Power and Legal and General Investment Management (and others) are particularly important and credible because they come with a range of actions broken down over short-term, medium-term and long-term horizons,” says Nick Molho, executive director at Aldersgate Group.

Many of those with ‘genuine’ plans are also clear about the actions they will take in the near term, and honest about some of the answers they don’t yet have. The advance of technology will play a huge role in achieving net zero – from battery storage to hydrogen power to lab-grown meat and carbon capture and storage – but it isn’t yet clear which technologies will work, or how effective they will be.

“Net zero is now the frame of reference for ambition on climate change”

Climate confusion

Some plans are, of course, easier to draw up than others. Data limitations can create challenges, so detailed carbon mapping and forecasting is essential. Some businesses also lack the expertise required for this. Research by IEMA and the British Standards Institute this year found that seven out of 10 senior decision makers and sustainability professionals have made, or are considering making, a solid commitment to achieve the net-zero goal.

However, 64% were not confident that they fully understood the impact such a goal could have on their firm, while 82% said they required more guidance to achieve the target. Those with a keen understanding of the target are in the minority: just one in 10 are fully confident in their understanding of net zero and how it impacts their own organisation.

Terminology is also being thrown around: ‘carbon positive’, ‘carbon negative’, even ‘pre-zero’. Pitcairn suspects this rebadging of the same targets is part of the “race to be best in class”. SBTi’s recent work to define terms such as ‘net zero’ and ‘climate positive’ is helpful. Just how many of the current wave of net zero commitments meet such a definition is moot.

Some companies have already begun picking at holes in their competitors’ plans, which admittedly sometimes run to little more than a press release. Smith’s research across several hundred net-zero targets made by business, cities and governments, showed that a “significant fraction” are yet to publish a plan for achieving their target, or set out interim goals to demonstrate they are getting on with it.

The reliance on offsetting is also receiving a lot of attention. Even in the most optimistic scenarios, some carbon will need to be sucked from the air, and there has been an explosion of standards for nature-based solutions that will lead to carbon credits. However, a balance needs to be struck, and plans need to show this. Net-zero responses involve both cutting emissions and removing CO2, but the problems lie in the interaction between these two elements, noted professor Duncan McLaren, a research fellow at Lancaster University’s Lancaster Environment Centre, in a blog for Carbon Brief in 2019. “If we pay more attention to removals, how might that affect releases?” he asked. The trick is to separate the two, rather than combine them in one net-zero goal. Pitcairn adds that it is important companies don’t “jump” to offsetting without making great strides in reducing their emissions.

Another weakness is a failure to include scope 3 emissions – all indirect upstream and downstream emissions that occur in the reporting company’s value chain. Tobias Parker, director at Anthesis, suggests there are difficult but exciting challenges to face as conversations also move from decarbonisation to de-consumption. Stuff, he says, is “the elephant in the room”.

“Some companies are taking net zero very seriously and communicating transparently, but most are not”

Credibility, clarity and CEOs

Reducing consumption is not normally good business practice, so it’s critical that there is boardroom buy-in for net-zero plans. Increasing emissions and hoping they can be offset won’t wash.

Board-level buy-in is one thing; ‘climate competent’ senior executives are another. Experts at New York University’s Stern Center for Sustainable Business dug into the environment, social and governance credentials of 1,188 Fortune 100 board directors. Just 69 (6%) had relevant environment experience, and only three (0.2%) had specific climate expertise.

Poor net-zero plans are unlikely to be challenged by ignorant directors – but they have to learn fast. Most chief executives will have received a wake-up call from investors during the past few months. BlackRock, the world’s largest asset manager, said in January that it will demand all companies demonstrate plans to reach net zero by 2050. How it will assess the plans, and against what metric, is unclear.

More clarity is needed if genuine plans are to be sifted from the greenwash. Reporting organisations that can make themselves look better through “sleight of hand” will do so, says Massie at Eunomia. “Some companies are taking net zero very seriously and communicating transparently, but most are not.”

So, it’s all a bit messy at the moment. In some ways there are similarities to the ‘dotcom’ era of 25 years ago; carnage at first, but then calm – and the world changed. Net zero is proving equally destructive and creative. “It holds huge promise, but threats, too,” says Parker at Anthesis. “We have to embrace it all and keep our feet on the ground.”

That’s easier said than done. Commitments will snowball as November’s climate talks in Glasgow approach. Firms will be lining up to make bigger, bolder statements, but will they be better?

David Burrows is a freelance writer and researcher.

Image credit: iStock