By: Stephan Wehr, Vice President, Matt Beck, Director, and Kristine O’Rielly, Cleantech and Innovation Consultant, The Delphi Group. This blog is a repost from the Delphi Group.
Before the global pandemic hit, the call for demonstrable climate action from businesses, often in the form of carbon targets, was growing steadily. Even as countries, businesses and individuals are grappling with the consequences of COVID-19, that momentum continues, as evidenced by the recent shareholder-driven climate action at ExxonMobil and Chevron.
When it comes to climate leadership, carbon neutrality is the current standard for many in the corporate sector. A 2019 study by Natural Capital Partners determined that 50 of the Fortune Global 500 companies, including Amazon, Google, and Apple, have already established carbon-neutral commitments. Roughly a third of those have committed to achieving carbon neutrality by 2050, another third by 2030, and the rest are already carbon neutral. If growth in corporate carbon-neutral targets continues at the same rate it has since the 2015 Paris Agreement, the study authors estimate that 80% of Fortune Global 500 companies could have carbon-neutral targets by 2030.
On the home front, the Government of Canada announced late last year that it is developing a plan to achieve net-zero emissions by 2050. The government also said it will set legally binding, five-year emissions reduction milestones to accompany the plan. While the unprecedented impacts of COVID-19 will likely slow its development, a Canadian Net Zero by 2050 Strategy is coming.
Moreover, the Canadian federal government has signaled that its COVID-19 recovery plan will also support a transition to a cleaner, greener economy. Notably, the federal Large Employer Emergency Financing Facility (LEEFF) program will require all borrowers to publish an annual climate‑related financial disclosure report, highlighting how they are managing climate-related risks and opportunities.
Given these trends, it may seem like a logical next step for your climate-aware organization to establish its own carbon-neutral target. Setting a target that reflects sound science, is measurable, and fits an organization’s sustainability reporting capabilities takes planning and work. We want to support you by sharing some guidance around which terms to use, how to assess your organization’s readiness and how to design a carbon-neutral strategy.
- A Carbon Neutrality Lexicon
- The Carbon Neutrality Readiness Checklist
- Six Steps to Setting a Carbon-Neutral Target
- Connect With Us
A Carbon Neutrality Lexicon
Typically, when we talk about carbon-neutral targets, we are referring to a high-level goal within an organization to balance (1) the emissions it produces with (2) activities that reduce or offset its emissions, so the net result is zero. Much like the first of the 3 Rs of waste management, the focus should first and foremost be on reducing generated carbon emissions. Organizations achieve these reductions through a range of energy efficiency initiatives and emission-reducing technologies and processes. Any emissions which cannot be eliminated can then be mitigated with carbon offsets or the purchase of carbon credits.
In addition to carbon-neutral goals, we often see a range of terms used to reference climate targets. The lack of consistency can be confusing and make it challenging for organizations that are starting down the target-setting path. Here’s a cheat sheet for some of the most common terms:
- Carbon Neutral: A carbon-neutral company removes the same amount of carbon emissions that it is releasing into the atmosphere from its operations. Carbon neutrality can be more simply thought of as ‘balancing the scales’ in terms of emissions.
- Net-Zero Carbon: Net-zero carbon is an alternative term for the concept of carbon neutrality. It similarly refers to balancing man-made carbon emissions through the removal of emissions from the atmosphere (e.g., sequestration and storage) or the elimination of emission sources entirely. The Paris Agreement references the term ‘net zero’, stating that “global carbon emissions should reach net zero by mid-century.”
- Zero Carbon: Zero carbon is a term that is typically used to refer to a product or service that generates no carbon emissions—unlike carbon neutrality, which means that emissions are generated but later reduced and offset. For example, zero-carbon electricity is 100% generated from renewable energy sources. Zero carbon is a term that is often associated with green buildings and assets (e.g., Canadian Green Building Council’s Zero Carbon Building Standard). Depending on the details of the zero-carbon claim, it may or may not imply a full life-cycle view of carbon emissions balance.
- Carbon Negative: A carbon-negative company is one that removes more carbon from the atmosphere than it releases. Interface launched its first carbon-negative carpet tiles this year. Microsoft has also recently set a carbon-negative target, committing to carbon negativity by 2030 and pledging to remove all the carbon it’s ever emitted from the atmosphere by 2050.
- Carbon Positive: While some companies opt for the ‘carbon negative’ term and others opt for ‘carbon positive,’ the two terms describe the same commitment—a company removes more carbon from the atmosphere than it releases. Notably, IKEA has pledged to become carbon positive by 2030 and Patagonia also has a carbon positive goal.
Note: Depending on your organization’s GHG footprint, carbon neutrality can include specific efforts to balance Scopes 1, 2, and/or 3 emissions, as defined in the GHG Protocol. As a quick refresher, Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain.
We know the range of terms and the different ways they’re applied by different companies can be confusing. If you’re just starting to increase your organization’s ambition by stepping into the carbon-neutral world, opting for the most common term—carbon neutral—is likely your best bet.