Opportunity knocks: keeping the glass half full on net zero

30th March 2023


David Burrows keeps his glass half full as he looks at some key themes to watch regarding net zero

Desperate for a definition

Despite companies and governments across the world committing to ‘net zero’ there is still no unified definition of it. Marketers have fed off the ambiguity. The UN says, “simply put, net zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions reabsorbed from the atmosphere, by oceans and forests for instance”. How close is close enough?

Net zero can also be conflated with ‘carbon neutral’; terms like ‘carbon positive’ and ‘carbon negative’ simply confuse further. Well-meaning pledges are palmed off as below par while many others are “little more than empty slogans and hype”, according to the UN’s expert group on the topic. The pioneers of net-zero planning have been panned: red tape is needed to avoid the risk of greenwash. Clear guardrails are needed to ensure the robustness of net zero as a framework for climate action, noted experts in a paper for Nature Climate Change in 2022 (‘The meaning of net zero and how to get it right’). They produced a framework on how to get net zero right, with seven attributes that would ensure commitments have urgency, integrity and are consistent with sustainable development objectives. Snappy slogans must give way to detailed definitions.

Scope 3 in the spotlight

Emissions come in three scopes, and while it’s important to get to grips with 1 and 2, it’s 3 where the battle will be won or lost. For companies whose scope 3 emissions cover more than 40% of their combined scope emissions, science-based targets must cover scope 3. For some sectors, such as food, scope 3 can amount to over 90% of the total footprint. Indeed, many companies – even behemoths and those with complex supply chains (think retail) – are still grappling with scope 3. Others continue to ignore them, at least publicly. A full picture of scope 3 illustrates the scale of change required.

“The arithmetic on supply chain emissions is pretty solid, but the answers are incompatible with current business models,” said Duncan Oswald, head of climate science at carbon accounting firm Spherics, recently. Gathering the data has become easier (use of primary rather than secondary data is increasing). Some companies, understanding their full emissions better than ever, publish detailed breakdowns of sources. Consultants are excited about this move into scope 3 data. It’s a “huge trend and essential for achieving net-zero reductions”, says one. “We’re already seeing lots happening here but it’s only just beginning.”

Carbon insetting

Using carbon offsets to achieve net zero is controversial. In an article in January, The Guardian claimed that 90% of rainforest offsets offered by the largest certifier are “worthless”. Providers have offered reassurance, but companies are wary of the possibility of legal and reputational liability from offsetting. Carbon insetting, pitched as the better alternative to offsetting, is waiting in the wings. The International Platform for Insetting, a community of businesses implementing insetting projects, suggests insetting is “offsetting brought home”, or offsetting within the value chain. It’s about creating carbon removals and emissions reductions in supply chains, mostly through nature-based solutions such as agroforestry, reforestation and regenerative agriculture. Think planting shade trees for coffee plants.

“With offsetting you can do good carbon things anywhere, [but to achieve] net zero it has to be insetting,” Nestlé head of green coffee development Marcelo Burity told Just Drinks recently.

Those with links to land use and agriculture are showing interest, but the idea has been given short shrift by some experts. The NewClimate Institute called insetting “a business-driven concept with no universally accepted definition”, or to put it another way, “unregulated offsetting of emissions”. The Science Based Target initiative (SBTi) allows insetting as part of emission reduction targets (which is contentious) but warns that it’s not a substitute for reductions. Work to standardise the definition of insetting/supply chain interventions and clear accounting methodologies is “ongoing”.

“[Insetting is] about creating carbon removals in supply chains, mostly through nature-based solutions"

Economic opportunities

Former energy minister Chris Skidmore’s review described net zero as the “economic opportunity of the 21st century”. Citing an analysis by global consultancy firm McKinsey, the report said the supply of goods and services to enable the global net-zero transition could be worth £1trn to UK businesses by 2030. Not to be sniffed at. Indeed, UK firms can use decarbonisation as a spur to reduce their costs, increase revenues and optimise their capital structure – or all three. Forward-thinking businesses will know all this, but the message is one ministers needed to hear again. The fact the review also warned the UK could “lose out” as other countries pressed ahead with ambitious policies, driving investment and change, will have focused minds.

An updated net-zero strategy is due soon, delivered by the new Department for Energy Security & Net Zero. Green Alliance policy director Dustin Benton tweeted recently that there is “more to do but no heroics” with regard to electricity; industry, heating, transport and land/agriculture are “where the biggest challenges are now”. Punchy policies are needed, and on what and how companies are required to report may be crucial. “What companies are obliged to measure, they will more naturally manage,” says Chris Hilson, professor of environmental law, University of Reading.

Collaboration on carbon

Collaboration will be key in government policymaking, as it will be for businesses. Worth watching closely are the UK competition regulator’s plans to ease restrictions on how closely businesses can cooperate on sustainability plans. The Competition and Markets Authority chief executive, Sarah Cardell, revealed plans to ease the anti-trust rules on climate change initiatives to tackle business concerns that collaboration on climate action could expose them to claims of collusion. New guidance is forthcoming, so expect to see more businesses working out how to come together to reduce their emissions.

Companies also need to start influencing the far ends of their supply chains to cut carbon, so expect to see a mixture of carrots (financing initiatives) and sticks (contractual obligations). Tesco, Santander and Anthesis have been working on a new sustainability-linked supply chain finance product that gives the supermarket’s suppliers preferential financing rates based on their disclosure of emissions, setting of reduction targets and delivering on them. SMEs will have a huge role, but need more guidance and support.

“UK firms can use decarbonisation as a spur to reduce their costs, increase revenues and optimise their capital structure"

Carbon tunnel vision

In November 2021, Jan Konietzko from consultancy Cognizant posted a graphic on LinkedIn that reflects a frequent debate around environmental sustainability: that companies seem overly and narrowly focused on carbon emissions. If we make it to net zero, great, but what if we overlook air pollution, resource use or human rights along the way? “It turns out I’m not the only one concerned about carbon tunnel vision,” Konietzko wrote recently, and while climate change is among the most “pressing” challenges, companies that ignore the wider spectrum of environmental and social impacts can “miss out” on opportunities.

Data will be crucial to understand both the wider impacts and how they interplay, as well as how companies report and communicate on all this. Governments have failed too. The end of 2022 brought a new set of targets, agreed at the COP15 talks in Montreal, Canada. Warm words are fine but investment and immediate action are needed.

Inspiration

Looking at the state of the planet, it’s easy to be pessimistic, yet there are many positives. So my final theme is inspiration. Let’s keep our glasses half full and better communicate the stories that show what’s possible, the proof that we can move from pledges to positive change.

David Burrows is a freelance writer and researcher

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