Net zero refers to a scenario in which greenhouse gases released in the atmosphere are neutralized through the removal of an equivalent amount of greenhouse gases from the atmosphere. The COP 15 Paris Agreement and COP 26 Glasgow summit saw many countries pledging to achieve net-zero emissions over the next few decades. Commitments made by governments have compelled companies to adopt sustainable practices to neutralize their carbon footprint steadily in the years to come. As regulatory scrutiny increases, with heavy penalties imposed on organizations failing to adhere to the environmental guidelines, many companies have started drafting sustainable strategies and implementing steps to reduce carbon emissions from their value chain. This article highlights whether companies are able to incorporate net-zero goals through strategy, measures and action steps.
Data from Net Zero tracker show that 849 companies from 136 nations have made various climate pledges including net zero, carbon neutrality, emission reduction and zero emissions. 390 companies have vowed to become net zero firms, while 172 companies have committed to carbon neutrality. 155 firms have set an emissions reduction target to minimize their carbon footprint.
14% of the companies that have pledged to become net zero are from the financial services sector, followed by the energy and utilities sector (13%) and the retail sector (8%). The oil & gas sector form a meagre 2%.
The end status of net zero commitments made by the companies diverges widely. 57.2% have included net zero in their corporate strategy, while 36.6% are in the declaration/pledge stage. 3.4% of companies have achieved (self-declared) their net-zero goal, while the remaining 3.4% have yet to finalize their net-zero goal.
In terms of interim target year for net zero, 61.7% of companies have set their transitional progress report year as 2030 while 23.4% of companies have set 2025 as their provisional progress measurement timeline. 3.7% of companies have set their interim target year as 2035.
Analysis of the process and methodologies adopted by companies to achieve net zero throws light on key aspects of business value chain — the most material focus area for emission reduction. While 81.5% of companies have agreed to remove Scope 1, 2 and 3 emissions to pare their carbon footprint, 16.6% are undecided on developing a plan/road map to mitigate Scope 1, 2 and 3 emissions. Another 1.82% have yet to develop a plan to eliminate emissions from their business value chain.
80.7% companies that have pledged net zero have developed/included a reporting mechanism for GHG emissions and tracking carbon footprint in the business supply chain. 81.30% companies are procuring carbon credits to offset emissions to attain their net zero goal. The results of the analysis of the incorporation of a reporting mechanism for GHG emissions and the use of carbon credits are provided in the graph below.
Overall analysis of the net zero target unearths sustainable transformation of organizations by incorporating multiple measures to increase accountability and shareholder confidence. Organizations trailing in this context need to prepare a detailed plan, publishing reports annually on sustainability and emissions, procure carbon offset credits to meet their net zero target and have in-depth understanding to reduce Scope 1, 2 and 3 emission, among others.
The material progress on net zero goals made by organisations underlines compliance with increased transparency and accountability towards reaching net zero targets they had pledged. The various data points on targets emphasizes swelling integrity and companies’ nimbleness, highlighting their zeal in setting net zero target and meaningfully cutting their net emissions to zero.