A lot has been written about Net Zero and Carbon Accounting over the last years. This article aims to provide you, the reader, with a simple overview and context of these concepts. (We understand that there are many nuances to this systemic-change topic but have simply tried to summarise the key touchpoints).
The Science Based Targets Initiative (SBTi) offers the most rigorous corporate net zero guide for companies. Their Science Based Targets are company adopted targets to lower GHG emissions in line with the recommended decarbonisation described in the AR5 of the IPCC. Once emissions are reduced, permanent removal of the carbon emitting process informs the last activity stage (versus offsets). The SBTi additionally provides sector by sector advice for achieving the reduction levels necessary for carbon mitigation with amounts of emissions reduction and timelines dependent on each sector’s current and projected emissions. It does however require struct evidence based and auditable carbon reduction claims.
In order to reach net zero, companies must understand their carbon footprint, design their climate roadmap and implement their climate action plan. We can’t act impactfully if we don’t know where we should spend our time and energy for the best (triple bottom line (ESG) measured) results.
Central to the carbon accounting framework is the GHG Protocol, an international standard developed by a multistakeholder partnership led by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). The GHG Protocol Corporate Accounting and Reporting Standard provides an essential guide to carbon accounting for companies, using methods of computation designed to measure three emissions categories classified as Scopes 1, 2 and 3. Over 90% of the world uses this measurement and reporting framework.
To calculate carbon emissions, a company multiplies its activity data (expressed using an input unit (e.g. litres, kilometres) by that item’s emission factor to produce the CO2 emissions per activity.
The CDP (formerly known as the Climate Disclosure Project) is an internationally recognised not-for-profit environmental impact database collecting information on GHG emissions through questionnaires and publishing CDP Climate Change Reports. It supports businesses (as well as cities, regions and governments) with their carbon disclosures. The results can be accessed by investors. Some authorities may mandate CDP reporting, but if not, a company can independently report its data as a self-selecting company (SSC).
In addition to fulfilling current and anticipated legislative mandates, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) which will oblige more companies to disclose data on their Scope 3 emissions, the strategic implementation of a robust decarbonization plan, anchored in meticulous carbon accounting, presents an important business opportunity. This approach not only identifies and mitigates emissions hotspots but also for example yields substantial reductions in energy, waste, material and water expenditure, thereby improving profit.
Carbon accounting and reporting serve as pivotal indicators for investors assessing both immediate investment risk and the long-term return outlook. Investors increasingly scrutinize companies on their ability to manage carbon emission risk and overall environmental performance. The Task Force on Climate-Related (and more recently Nature-Related) Financial Disclosures, conceived as an investor-centric environmental reporting initiative, underscores the growing importance of transparent and comprehensive carbon accounting practices.
Beyond regulatory compliance, quality data collection and analysis play an essential role for meeting net zero targets. Prioritizing the use of primary data from relevant supply chains where available ahead of secondary data improves accuracy, credibility and transparency when calculating carbon footprints.
If company emissions cannot be eliminated entirely through reduction efforts, then carbon offsetting and removal can be an option to achieve net zero.
Carbon offsets are managed through a range of Carbon Credits by various mandatory and non-mandatory carbon markets. Carbon offsetting should be a last resort reserved for unavoidable carbon emissions.
Carbon Capture and Storage (CCS) is a recent method of carbon removal. While investment opportunities exist in the sphere of CO2 removal technologies, these technologies have not yet been scaled and remain unproven and are not a first-step recommendation for decarbonisation plans.
The impacts of not reaching net zero would be increased global temperatures leading to unpredictable weather patterns, costs tied to resources and insurance and generally higher risks for businesses. In the extreme, it would ultimately lead to water scarcity, heightened resource competition, increased frequency of extreme weather events, climate-induced migration, social instability, and loss of life.
However, the opportunities for creatively lowering an organisation’s emissions include financial resilience and competitiveness, reputational and brand elevation and avoidance of environmental destruction. There is even an opportunity for helping nature regenerate and thrive – rather than just survive.
Given these commercial opportunities, many countries are increasingly monitoring greenwashing and imposing punitive measures on companies that are making hollow claims or not doing “the right thing”.
In the words of UN Secretary-General António Guterres, ‘Private sector commitments to net-zero cannot be a mere public relations exercise’.
We encourage all companies to engage immediately in sustainable initiatives and projects. Our collective future is being carved out by our daily decisions and happens as soon as tomorrow.
And if you don’t know where to start, no matter how large or small your company, contact www.simpli.today. We make Sustainability Simple. Today.
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