Taylor Gray, Ph.D.
The world is a better place when companies are good corporate citizens. I remain focused on developing meaningful and actionable insights from empirical data in pursuit of a better world.
The race to net zero emissions--or carbon neutrality--is on. Every day more and more companies are touting their commitment to be carbon neutral by 2030, or 2050, or some other less definite point in the future. The trend is clear, simple energy efficiency is out and carbon neutrality is in.
Net zero refers to the balance between the volume of carbon dioxide (and equivalent) emissions being released by a company into the atmosphere and the volume being removed from the atmosphere by this company. It is a form of carbon accounting developed under the premise that the atmosphere can not handle any more carbon emissions from commercial/industrial activities and so every ton of carbon emitted by a company should be matched to a ton removed (directly or indirectly) by the company.
Net Zero Is the New 'Sustainability'
As much as we want to support this development, we are also somewhat skeptical. Carbon neutrality is a key component to maintaining global climate change within safe limits--‘safe’ as in avoiding catastrophic and run-away climate change. But carbon neutrality is anything but simple, and certainly something to be engaged in much more meaningfully than just another hot trend in corporate social responsibility (CSR).
Yet again it will be up to consumers to try and make sense of grand promises and bold marketing claims which can at once both mean so much and so little.
Yet this seems to be what is happening right now. The term ‘Net Zero’ is the new ‘Sustainability’-- a term that can mean so much and so little at the same time. To the pioneers and the catalysts, to those who see a crisis calling for a drastic response, the term embodies daring ambition; to those seeking a simple solution to an inconvenient irritant, the term is coming to be a buzzword for techno-optimism and a promise of a near return to business-as-usual.
The issue is that although company promises to achieve net zero emissions are accelerating, the concept of carbon neutrality is only just now starting to be defined. Right now there are no clearly established standards of carbon neutrality for promises to be compared to or held accountable to. Even though efforts are now underway to establish such standards, these efforts are already weakened by the fact that competing standards are being established and all are being developed as being voluntary. This means companies will be able to pick and choose what they ascribe to and who they are accountable to and yet again it will be up to consumers to try and make sense of grand promises and bold marketing claims which can at once both mean so much and so little.
The race to net zero must not simply be yet another shell game for accountants to play with emissions ledgers.
Not a Fair Race
The race to net zero--to have any benefit to people and the planet--must entail meaningful and material improvements and advances to energy efficiency, energy substitutions, emissions mitigations, and direct (scope 1) carbon removal, and not simply be yet another shell game for accountants to play with emissions ledgers.
We follow companies’ net-zero promises very closely and are encouraged by a few leading companies taking meaningful stands...but we are also already seeing more and more loopholes, extended target deadlines, black-boxed plans, and vague accounting standards from companies jumping into net zero as it is gaining popularity. Perhaps this is to be expected when such a complex commitment to be materialized over a long time horizon captures the public attention, but this is no reason to let it be. Although only starting to emerge now, we will hold all net zero promises to the highest standards as these gain in stakeholder consensus.
Internally, we have started a list of all companies making net zero promises and statements of intention and we will review each and every company’s progress as time goes on. We already rate companies on their climate action, among many other pillars of corporate culture, structure, and performance. Delivering on promises made--even those made ten or more years ago--is a fundamental characteristic of a good company.
Many companies place a stock price ticker on their website, for a company committed to net zero, an equally prominent carbon emissions ticker should not be too much of an ask.
In the meantime we recommend any company that is meaningfully and materially committing to carbon neutrality to publish their current GHG emissions totals and profiles as prominently as they publish their net zero statements. If we can read a company’s net zero promise on their landing page but we can only find their actual current GHG profile buried at the end of an annual report to be downloaded as a .pdf file after submitting an email address and agreeing to whatever sorts of terms and conditions pop up on the screen, then we doubt they have the spirit to do what it takes to actually achieve net zero emissions in any way that will actually make a difference. To put it another way, many companies place a stock price ticker on their website, for a company committed to net zero, an equally prominent carbon emissions ticker should not be too much of an ask.
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[Note: The Science Based Targets Initiative is establishing some of the more comprehensive net zero standards and we encourage people to explore these to see how a net zero landscape could take shape more broadly.]