The race is on: With almost daily announcements of carbon reduction initiatives from the EU, from other world powers and most importantly from more than 1,000 companies across the globe, including 25% of the Fortune 500, there is a strong movement of organizations stepping up on climate commitments to meet the 1.5°C call-to-action.
While many companies have made these commitments, there are still many discussions on what exactly constitutes net zero (and, maybe more importantly, what it is not). Net zero, carbon neutral, climate positive and carbon negative claims lack clear, widely accepted definitions. Initiatives differ based on what a company sells, owns or influences—and what it’s ultimately working to reduce. The emissions reduction rate associated with neutrality claims is not always clear and neither are the ways that the remaining emissions may be reduced. Additionally, companies like Ikea now enter the climate positive (or is it carbon negative?) space, by committing to remove more carbon dioxide from the atmosphere than it emits. So where is the common ground?
Unfortunately, the definitive answer to this question isn’t clear. Experts are in ongoing discussions to establish a global standard that may be available as soon as summer 2020. However, below are some questions companies can use as a checklist when understanding competitors’ claims and in designing your own:
1. What does ‘net zero’ mean for our planet?
According to the Intergovernmental Panel on Climate Change (IPCC), limiting global temperature increase to 1.5°C above pre-industrial levels requires global net anthropogenic greenhouse gas (GHG) emissions to reach net zero around 2050, meaning that no additional emissions are added to the atmosphere. Most scenarios used for this pathway include carbon dioxide removal (CDR), referring to activities that remove emissions from the atmosphere, through means such as sequestration or afforestation. The net zero trajectory is the result of a balance between reduced emissions through decarbonization (-), carbon removal (-) and remaining carbon emissions (+) that most likely will occur even after 2050 for some geographies and processes.
2. What divides carbon and climate neutrality?
Carbon neutrality, net zero emissions and climate neutrality are often used synonymously, meaning the neutralization of the impact of human activity on the climate system. However, in science, the scope of neutralizing climate forces differs as there are other greenhouse gases besides CO2 that contribute to climate change. Definitions from IPCC SR15 can help to distinguish between carbon neutral, climate neutral and net zero: Per UNFCCC/Kyoto Protocol, relevant GHGs are currently: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).
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3. What about the emissions scope?
A crucial consideration in any carbon/climate neutral or net zero claim is which emissions scopes a company’s activities fully address. Emissions are divided into Scope 1, Scope 2, and Scope 3. Scope 1 emissions are those under direct control of the corporate entity, such as in onsite fuel consumption or fleet emissions. Scope 2 are those generated indirectly from purchased electricity. And Scope 3 are all other indirect emissions including those generated from business travel, waste management and upstream and downstream emissions in the business value chain.
Each emission scope must be addressed differently. For example, as an emissions-reducing tool, renewable electricity can typically only be used to address Scope 2 emissions, in a 1:1 ratio. Scope 1 and Scope 3 emissions can be addressed through a variety of means, including energy efficiency practices, consumption reductions, carbon offsets, circularity, fuel switching/biofuels, electric vehicle purchasing, innovative technologies, value chain engagement and more.
There are examples of how these boundaries can be applied in practice: BT group, Bosch, Novartis and LG are some of the many organizations claiming carbon neutrality for their own operations, mainly tackling Scope 1 and 2 emissions given the difficulty with addressing Scope 3 emissions. Even more targeted goals, like ‘carbon free shipping’, ‘carbon neutral growth’ or geographic boundaries, add further complexity to the discussion.
Many experts are aligned that the litmus test of carbon credibility is science-based targets (SBTs), and therefore any initiative claiming neutrality needs to include Scope 3 emissions, even if it might be in a hybrid action plan.
Discover the scope of Schneider Electric’s own carbon targets on our
4. What is the right time horizon?
The IPCC pathways that limit warming to 1.5 °C require reaching global net-zero emissions by no later than 2050. However, this is neither described as a linear decline nor will this mean the same pace for all organizations in all geographies. In fact, many organizations have set their net zero target for 2030 or even sooner, acting as pioneering leaders and spurring action in their competitors. Microsoft has gone a step further with its recent carbon negative announcement by committing that it will remove all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975 by 2050. In theory, what we have added to the global carbon budget can also be removed – but no removal technology has yet been deployed at scale. These long-term dreams should not prevent the needed short-term goal-setting and decarbonization activities.
5. What about offsets?
Carbon offsets can be a valuable component to a company’s carbon neutral strategy, particularly when there are few (if any) other solutions currently available. A carbon offset (also referred to as a Verified Emissions Reduction or VER) is the reduction of a specific amount of greenhouse gas emissions resulting from a counterbalancing action to destroy, remove or prevent carbon from entering the atmosphere. Commonly, these projects include sequestration or afforestation, and frequently offer other co-benefits such as economic stimulus or improvements to human health. Carbon offsets can be obtained from extremely high-quality sources, generally convey additionality and are registered and retired by leading entities around the world.
Yet, the use of carbon offsets remains controversial. Balancing emissions with atmospheric removal is part of the most relevant IPCC pathways, as an addition to deep decarbonization. But the impacts of carbon removal options depend on the type of projects selected and the scale of deployment. For example, pathways that rely on the deployment of large-scale land-related measures, like afforestation and bioenergy supply, can compete with food production and hence raise food security concerns. There are also concerns that companies will grow to rely on offsets and avoid taking actions to reduce Scope 1 and Scope 3 emissions in other ways. For these reasons, offsets are not currently recognized by the Science-Based Targets Initiative as an appropriate carbon-reducing technology under their framework.
There is precedent for environmental commodities to both be challenged and to provide an important market demand signal. Historically, energy attribute certificates (EACs) were denigrated for similar reasons, yet they have built the foundation for corporate renewable electricity purchasing to skyrocket. Today, EACs are a recognized mechanism for the tracking-and-trading of renewable energy worldwide. High-quality offsets can serve the same purpose, particularly considering a dearth of effective carbon-reducing technologies in segments like air travel and shipping.
Today, most companies setting neutrality targets use a hybrid approach that includes both a degree of decarbonization and other mitigation approaches, such as offsets. However not all carbon credits are effective to neutralize climate impacts. The role of offsets in a company’s strategy must be considered and not chosen in favor of deep decarbonization of business activities.
6. Is the next goal climate positive or carbon negative?
Fun fact for the last question: what’s the difference between Unilever’s carbon positive and Microsoft’s carbon negative goal? This is probably a question more about wording, as both mean to do more than becoming carbon neutral. From a logical standpoint, it would appear that climate positive means that an activity goes beyond achieving net zero carbon emissions to actually create an environmental benefit by removing additional carbon dioxide from the atmosphere. But carbon positive is also broadly used from organizations describe the previous two definitions. Understandably confusing, but ultimately is an important question to answer to preserve the validity of these claims.
As companies consider their carbon neutral commitments and claims, it is critical that they avoid greenwashing. It can be easy to want to jump into carbon neutrality with both feet, but companies should understand which emission scopes they are addressing and how before applying one of these often-misunderstood labels.