Brightest's Guide to Designing and Setting Net Zero GHG Emissions Targets

Net Zero GHG Emissions Reduction Targets

Net zero and other emissions reduction targets are one the best ways to focus and communicate your organization's attention on climate change, sustainability, and ESG performance. Emissions targets are clear, quantifiable goals and market signals that help align your company's purpose and sustainability strategy with a carbon accounting process and operational steps to reduce its environmental footprint. When it comes to emissions targets, net zero targets are the most comprehensive and ambitious, indicating your company, government, or organization has a plan to reduce its carbon and greenhouse gas emissions (GHG) to as close to zero as possible, while offsetting any remaining emissions

A net zero emissions target starts with a baseline year, then sets an emissions reduction path over time to reach zero net GHG emissions in your target year. This means all of an organization or entity's carbon emissions have either been eliminated or offset by carbon credits

Emissions reduction targets should follow established carbon accounting and sustainability measurement standards in terms of how you track and calculate carbon equivalents (CO₂e), then account for reductions.

The right net zero target for your organization should balance ambition with feasibility. Too conservative, you're not really decarbonizing or driving positive change, which may look less favorable compared to your peers and competitors. Too ambitious? You may not be able to achieve it and will need to revise or restate your target (or rely too heavily on carbon offsets, which can carry their own problems in terms of quality, reputation, and climate effectiveness).

Net zero emissions mean that the entire amount of greenhouse gas (GHG) emissions released into the atmosphere is balanced by an equal amount of emissions being reduced, captured, or removed

The right balance to a thoughtful, effective net zero target lies somewhere in the middle.

Since the global economy (and most companies) are not net zero today (they are net polluters), net zero needs to be achieved through various decarbonization strategies and steps.

Types of Net Zero Targets

There are a few different types of net zero emissions target:

1. Absolute net zero - An absolute net zero emissions target focuses on reducing the entire inventory of greenhouse gas emissions (GHG) emitted by a company or entity down to zero. As a simple example, if our company emits 1,000 metric tons (MT) of CO₂-e in 2020 and our goal is to be net zero by 2030, we need to reduce annual emissions by an average of 100 MT year-over-year (each year) from 1,000 all the way down to 0 mtCO₂-e
2. Scope-specific net zero - Scope-specific net zero targets are focused on achieving net zero within a specific carbon accounting scope. For example, it's common for many companies to set one target for their Scope 1-2 direct emissions, and a separate target for their indirect value chain Scope 3 emissions. It might be possible to achieve operation net zero across Scope 1 and Scope 2, but not Scope 3

There are different ways and feasibility paths to achieve net zero emissions, and different organizations should use an approach aligned with their size, sector, current emissions intensity, and specific circumstances and goals.

Is it Possible to Achieve Net Zero Emissions?

In short, yes, net zero emissions are possible. In fact, net zero's already being demonstrated by certain organizations. Google, for example, now operates as a net zero company, as does online retailer Etsy. However, achieving net zero emissions is more difficult for a company with a physical supply chain, compared to an organization whose primary products and services are delivered through cloud technology and software.

Some governments and countries are also making strong progress toward net zero emissions. Costa Rica generates 98%+ of the country's power from renewable electricity, and could realistically achieve a net zero energy mix. The government of Iceland has also set a target to become carbon neutral by 2040, and has a realistic path to a net zero economy.

Common steps companies and countries can take to achieve net zero emissions include:

Today, most companies and governments pursuing net zero emissions use most if not all of these tactics to decarbonize.

The Business Case for Net Zero Targets

Net zero targets can serve as top-level corporate sustainability goals within your organization's overall roadmap. For modern brands looking to improve corporate reputation, reduce regulatory and climate risk, and unlock business innovation, developing and adhering to net targets offer a number of benefits:

1. Net zero targets provide strategic and operational clarity on top-level sustainability and ESG objectives
2. Net zero target adherence reduces regulatory risk in countries and states with current and/or future sustainability laws and environmental reporting requirements
3. Net zero targets strengthen investor confidence, credibility, and ESG transparency
4. Net zero targets publicly signal your business is a sustainability and environmental leader

Successful net zero target execution can also drive second-order benefits as well, including operational cost savings, supply chain improvements, employee engagement and retention benefits, and more.

How Widely Used are Net Zero Targets?

While we don't have data on the exact number of companies who've set net zero targets, there has been a growing trend among organizations to set and announce net zero emissions targets in recent years, particularly as concerns about climate change have increased and investors have become more interested in companies' environmental performance.

According to the Science Based Targets Initiative (SBTi), as of March 2022, 2,643 companies around the world have made science-based emissions target commitments, and 1,226 companies have set and are working toward defined SBTs. Not all SBTs are net zero targets, but an increasing percentage are.

Source: Procter & Gamble

For example, global CPG brand Procter & Gamble (P&G) has set a series of 2030 science-based targets en route to its overall target of achieving net zero by 2040 across its operations and supply chain - from raw materials to retail.

Net Zero Target Design: Unilever

While SBTi offers guidance on setting science-based targets, there are no formal rules or laws to follow today on how your organization should plan or design a net zero target.

For example, global consumer goods brand Unilever has a 2039 net zero target, divided into three target phases:

1. A Short-term Emissions Reduction Target - Reduce in absolute terms our operational (Scope 1 & 2) emissions by 70% by 2025 against a 2015 baseline
2. A Medium-term Emissions Reduction Target - Reduce in absolute terms our operational emissions (Scope 1 & 2) by 100% by 2030 against a 2015 baseline
3. A Long-term Net Zero Value Chain Target - Achieve net zero emissions covering Scope 1, 2 and 3 emissions by 2039

Source: Unilever

How to Set Net Zero Emissions Targets At Your Organization

If your company's considering setting a net zero target, we recommend following these steps:

Step #1 - Measure Your Emissions Baseline

First, you'll need to measure your emissions baseline. Your baseline is your starting point. For example, if your carbon accounting shows your company generated 1,000 tons of CO₂-e in 2022, you might set that as your baseline amount and year. You can use a carbon accounting tool like Brightest to measure your baseline, or collect and calculate all your emissions manually. Depending on your organization's size, industry, operational complexity, and resource availability to complete your baselines analysis, the time it will take to complete this process will vary.

Step #2 - Evaluate the Feasibility of Your Net Zero Target Among Key Internal Stakeholders

Next, work with executive leadership, your operations and supply chain teams, and other relevant stakeholders to determine what a realistic net zero target or scenario is for your company. By definition, net zero targets are based on clear science and a feasability estimate of what your organization can achieve by your target date. For example, after internal discussion and analysis, you might determine it's realistic to achieve net zero emissions by 2035, and use that as your target year.

While carbon offsets do not count as progress for a science-based target, they can be included in a net zero strategy. For a formal science-based target your company needs to achieve measurable operational and value chain emissions reductions. For informal, internal, or public net zero targets, carbon offsets are acceptable to use for a portion of your GHG reduction that can't be achieved operationally.

Step #3 - Make and Announce a Net Zero Commitment

Once you've validated your baseline, ambition, and the operational feasibility of your net zero pathway, you should announce your target to all your stakeholders - internal teams, departments, and employees, investors, suppliers, customers, and the general public. Your net zero target should be the north star for your ongoing sustainability strategic roadmap, KPIs, and progress tracking.

Your net zero should include at least five components:

1. Boundary - Your net zero target should include at least company-wide Scope 1 and Scope 2 GHG emissions
2. Timeline - Your snet zero target goal period should ideally be between 5-15 years from your baseline
3. Level of Ambition - At a minimum, your target should be consistent with the economic pathway to 2°C mean global warming by 2050
4. Scope 3 Screening - If Scope 3 emissions cover a significant portion of your organization's emissions (i.e., greater than 40% of total aggregate Scope 1-2-3), your company should include Scope 3 emissions in your net zero target
5. Reporting - Your company should report annually on its net zero roadmap and progress

How you choose to announce your net zero target(s) within the context of your corporate communications strategy is up to you, but be sure to communicate it to all material stakeholders.

Step #4 - Complete Your Decarbonization Work and Track Progress

Once you've finalized and announced your net zero target, you're ready to continue the decarbonization work to reach your target. It's equally important to track your carbon accounting and emissions reduction progress along the way to make sure your organization's on track to meet its commitment.

Net zero targets require ongoing tracking and reporting on your target(s) over time, as well as ESG disclosures through annual reports, sustainability reports, your website, and other communication channels.

Net Zero Next Steps and Concluding Thoughts

One thing to keep in mind is your business doesn't have to publicly disclose to SBTi or undergo SBTi review in order to set an emissions reduction target or work on decarbonization projects, even a net zero target. Emissions targets are an open standard, method, and approach any company can use. If your company doesn't have high confidence in a net zero target, or is early in its sustainability journey, it might make more sense to work toward a private, short-term 'informal target' or scenario planning exercise until you have higher confidence in the progress your organization can make year-over-year to go public and achieve your emissions reduction goals. If you need expert guidance at any point in your emissions, science-based target, or net zero target-setting process, feel free to contact us for help.