How to make your business net zero

A step-by-step guide

You’ve probably heard of the concept of setting a net zero target, or achieving global net zero by 2050, but if you’re unsure about what this means for your business, you’re not alone! 

This guide will help outline the steps any business (but particularly SMEs) need to take in order to reach net zero in line with the timeframe climate scientists believe is necessary to avoid dangerous climate change.

What does it mean for a business to reach net zero?

Achieving ‘net zero’, or net zero emissions, means reaching the point at which an organisation is producing less emissions than it removes from the atmosphere, or is releasing no additional emissions into the atmosphere overall.

A net zero target is the metric a business sets for itself to determine when it will achieve net zero emissions. 

A net zero target should include:

  • Scope - a definition of which emissions sources are included in the company’s measurements (usually Scopes 1 and 2 at a minimum), and
  • Time frame - the year the company intends to reach net zero

Underpinning most reputable net zero targets is the concept of “science-based targets” (or SBTs for short). Targets are considered “science-based” if they are in line with the level of decarbonisation required to keep global temperature increase below 2°C compared to preindustrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC).

SBTs particularly help define the shorter-term targets a company must hit to ensure it is on track to meet its net zero commitments and that it is decarbonising at the speed required to meet the IPCC’s goal.

With this in mind, science-based targets include additional details around:

  • Ambition - a specific commitment to how fast a company intends to decarbonise (i.e. the slope of the emissions reduction curve), and
  • Type - whether the company is intending to reduce its absolute emissions, its emissions intensity (volume of emissions relative to operational metrics), or both (more on this later..!).

The Science Based Targets Initiative is a non-for-profit organisation set up by reputable organisations such as the WWF and the United Nations Global Compact to help organisations set science-based emissions reductions targets. They have developed a consistent standard for all companies to meet in order to make net zero claims and provide public validation for companies that successfully meet these standards. Check out the SBTi website to learn more about how your company can get involved.

How quickly do we need to decarbonise & reach net zero?

Net zero is not something that can happen overnight, but it is a goal we need to progress towards globally with urgency. 

Why? This comes down to the concept of a ‘carbon budget’ - that is, the amount of GHG emissions (or the carbon dioxide equivalent) that scientists believe we can emit, within a certain timeframe, in order to limit global warming to below 2 degrees celsius (and ideally 1.5 degrees) by 2050. 

The IPCC’s Sixth Assessment Report (released in 2021) estimates that for a 50% chance to limit warming to 1.5C, our remaining global carbon budget is approximately 460bn tonnes of CO2 (GtCO2) – or just 11.5 years at 2020 emissions levels. 

With this in mind, it’s everyone’s job - from governments to businesses and even households - to ensure we remain within this budget as a global community. Naturally, the largest emitters have the largest responsibility to do their bit, but it’s also up to smaller contributors (including SMEs!) to reduce their emissions in line with their size and scale – collectively, we can all make a difference!

What are the steps to reach net zero?

There are six key steps to achieving net zero emissions as a business.

Step 1: Measure your baseline

Before you can set any targets or put strategies in place, you need to know where you’re starting from. This is referred to establishing your ‘baseline’ and involves measuring your emissions from the previous year (or several years to increase the accuracy of your data).

This will require gathering data about any business activity that produces emissions, including things like energy usage, travel, waste production and your supply chain expenditure. It’s best practice to measure Scopes 1, 2 and 3 during this process so you have the maximum available data to help set your net zero strategy.

To accompany the emissions data for your base year, you should also gather the following information:

  • Base year activity data - e.g. # of employees, $ revenue
  • Forecast changes - i.e. how much do you anticipate your business will grow over the next 5 - 10 years?
  • Sector classification - identify which sector your business falls under according to the GRI Sector Classification. This will help set benchmarks for target setting that are relevant to your industry.

Trace can help you measure your business’ emissions in less than 1 week, providing you with a breakdown of your emissions profile across all scopes and key categories - all of which will be essential information for step 2…!

Step 2: Set science-based targets (short & long-term)

Once you have your baseline, the next question is, how quickly can (and should!) you reduce your emissions? 

You should define at least two key targets:

  1. When you aim to  reach net zero, and 
  2. When you aim to at least halve your emissions.

There are also different types of targets, depending on how the target will be measured and/or benchmarked over time. The two most common approaches include: ‘Absolute’ and ‘Intensity’ targets. However, if you’re just starting out, we’d recommend using ‘Absolute’ targets as a starting point.

Here’s an example Absolute net zero target:

Company X  commits to reduce absolute scope 1 and 2 GHG emissions 47% by 2030 from a 2019 base year. Company X also commits to reduce absolute scope 3 GHG emissions from purchased goods and services 47% by 2030 from a 2019 base year.

Step 3: Commit & share your ambition

Now you’ve got your targets set, it’s time to share them. Just like any other business target, it’s important you share your target with your team (including your Board and investors where relevant) as they will be responsible for putting your target to work. Sharing your target with your team can also be incredibly motivating and promote employee engagement (and in turn, retention!), especially for those who are passionate about taking climate action.

💡Did you know... 78% of Australian employees agree with the statement “businesses need to take full responsibility for their environmental impact“?*

*Atlassian Return On Action Report, 2021

Whether you decide to share your net zero targets publicly is up to the leadership team of your business, however we recommend announcing your targets in the spirit of transparency with your customers and to help keep your team accountable.

If you choose to align your targets to the Science Based Targets Initiative criteria, it is a requirement to announce your targets publicly within 24 months (ideally 16 months) of your stated baseline year. 

There are three components to your public reporting/ announcements with SBTi:

  1. Announcing your commitment to set science-based targets - your company logo is placed on the SBTi website
  2. Announcing your targets.
  3. Annual reporting of your emissions and progress towards your targets.

Step 4: Plan out your decarbonisation strategy

Now you’ve got your targets and you’ve rallied your team around a unified set of goals, it’s time to plan out how you will achieve your targets.

Identifying the best ways to start decarbonising your business will depend on:

  1. Which areas of emissions currently contribute the most to your overall footprint (i.e. where is the greatest opportunity for impact?), and
  2. Your capability and willingness to invest resources (financial & expertise) to implement emissions reduction initiatives

There may be some reduction strategies that result in almost immediate reductions (e.g. switching to a renewable energy retailer), while others may require investment now for longer-term payoff (e.g. switching to more energy efficient offices or manufacturing facilities).

Some of the easiest ways most businesses can begin to reduce their emissions include:

  • Significantly reducing air and car travel for business purposes
  • Switching to a carbon neutral or renewable energy retailer for all offices/ facilities
  • Choosing carbon neutral suppliers
  • Reducing waste produced in your offices/ facilities by avoiding single-use products and recycling where at all possible.

We’ve written a list of over 70 ways you can reduce your office carbon footprint if you’re ready to get started.

Step 5: Review, report & adjust targets (if necessary)

Reporting on your progress is an essential part of your net zero strategy. The main way to do this is to conduct an annual carbon emissions assessment so you can track your YOY progress. 

In the interim, you can also track your progress on key emissions reduction initiatives. For example, if one of your initiatives is to switch to renewable energy across all your office locations by a certain date, you may wish to report monthly or quarterly on how you’re progressing towards that goal (e.g. 50% complete, or on track/ off track).

There are select cases where you may find you need to adjust your original targets, including:

  1. The nature of your business changes significantly, rendering your original targets as irrelevant to your industry or operations. E.g. if your main product line or service offering changes.
  2. You find you’re significantly outperforming your interim targets and therefore realise your initial targets were not ambitious enough.
  3. Intensity targets used (e.g. level of production/ output) no longer accurately reflect the way your business is operating, meaning the relationship of these targets to emissions reductions are largely meaningless. E.g.  Your original targets tracked revenue produced from a certain product/ service but you later significantly changed your prices.

While changing your targets will make tracking progress overtime more difficult, inappropriate targets aren’t useful for achieving the ultimate goal of reducing your business’ impact on the planet, so don’t be afraid to change them if any of the above scenarios apply to you. (Just be sure to clearly communicate your changes to all stakeholders to maintain transparency and credibility!).

Step 6: Offset your remaining emissions

Once you have reduced your business emissions as much as possible (by 90 - 95%), you can use carbon offsets to compensate for the remaining emissions in order to officially achieve net zero emissions.

Is it possible to achieve net zero without offsets?

At this stage, it is highly unlikely most businesses will be able to achieve net zero emissions without the use of some carbon offsets. This is because the process of decarbonising the entire global economy to eliminate the production of GHG emissions from waste production will take time. In fact, it is most likely that there will continue to be a low level of emissions produced from human activities indefinitely, but the goal is that the volume of these emissions is within the range that allows the earth’s natural carbon cycle to maintain global temperatures to a safe level.

With the technologies available to us today, it is possible for most businesses to reduce their emissions by at least 90% within the decade, however in order to reach true net zero, certified carbon offsets can be used to make up the difference.

Even before you have reached net zero (which may take several years), offsets are a fantastic mechanism for taking responsibility for your business’ emissions, having an immediate positive impact, and reflecting the cost of the emissions your company produces on your company balance sheet. 

By offsetting all of your unavoidable emissions even before you reach net zero, your business can be considered ‘carbon neutral’. Chat to the Trace team about how to make your business carbon neutral in less than one week and start your journey to net zero.

What’s an example of a ‘bad’ net zero target?

A good net zero target will have the following qualities:

  • A clear timeframe for achievement - with short and long term milestones
  • Easy to comprehend how and why the target will lead to the reductions expected
  • Any assumptions around measurement (scopes & emissions boundaries) are clearly stated

Common downfalls of net zero targets include:

  • Targets to reduce emissions by a specified mass of GHGs. e.g. “to reduce emissions by 5 million tonnes by 2030”), because this doesn’t provide transparency about the company’s actual, overall emissions performance.
  • Targets that benchmark performance against sector average values. Sector-benchmarked targets may change over time with changes in sector performance, reducing the ability to track long-term changes in performance.
  • Targets that rely heavily on carbon offsets (i.e. more than 5 - 10% of emissions reductions). 

Learn more

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