Net Zero Strategy: What is it and how to implement it?

Understanding net zero

Net zero means reducing greenhouse gas emissions to as close to zero as possible and offsetting any remaining ones through carbon removal solutions. This is a critical step in combating the effects of climate change and ensuring a sustainable future for our planet.

Why is net zero so important?

Climate crisis: Reports from renowned bodies like the IEA and the IPCC consistently highlight the need for immediate action to have a climate impact within the next decade.

In response, there has been a notable surge in the adoption of decarbonization commitments. Companies are swiftly and assertively taking measures by diminishing their carbon emissions and working to neutralize any residual environmental impact. But despite some good progress here, greenhouse gases continue to rise globally. We need more businesses to take climate action, and we need innovation within those industries that present greater challenges for decarbonization, such as iron and steel manufacturing, as well as transportation modes like aviation, shipping, and road haulage. At present, existing global climate policies are projected to lead to a global temperature increase of at least 2.7°C by 2100, far surpassing the 1.5°C target outlined by the Paris Agreement. That’s why companies pledging net zero targets need to strengthen their climate strategies now to deliver.

Regulatory pressure: Governments worldwide are implementing stricter environmental regulations, making net zero compliance essential for businesses.
Investor and consumer demand: Stakeholders, including investors and consumers, increasingly favor companies with strong sustainability commitments.

How can companies achieve net zero emissions?

Global warming is the greatest challenge humanity has ever faced, but there is a clear route ahead to change things for the better. The most important component is drastic reductions— by emitting less CO₂ to begin with, there will be less CO₂ to cancel out with carbon dioxide removal. More specifically, the Science Based Targets initiative, or SBTi, has stressed that we need to reduce emissions by at least 90% by 2050 and remove the remaining 10%. This is consolidated by the latest report from IPCC, which outlines that drastic emissions reductions will not be enough to get us to zero and, in doing so, limit global warming to 1.5°C. To reach net zero, companies will need to both reduce drastically and actively remove their remaining emissions from the air.

How direct air capture and storage (DAC+S) works

Both reductions and carbon removal are key in our guide to building your company’s net zero strategy – but let’s talk through the entire process step-by-step.

Step 1: Measure your baseline then set your net zero targets

The typical starting point for any net-zero strategy is to assess your company's emissions. This is known as carbon footprinting and provides a baseline from which to establish current environmental impact, including major emissions sources, so you can begin the work of identifying lower carbon alternatives. To measure this baseline as a business, you will need to work across these three scopes:

Scope 1: This includes your company’s direct greenhouse gas emissions. The key word to remember here is “burn,” as we’re talking about the emissions your company directly releases from the burning of fossil fuels — I.e., via boilers, furnaces, and vehicles.

Scope 2: This includes your company’s indirect GHG emissions. The key word here is “buy,” so consider your purchasing of electricity, heat, or steam.

Scope 3: This broad scope includes 15 different categories in total, spanning all indirect emissions not covered in Scope 2. The key word here is “beyond,” as these releases are often beyond an entity’s control but can account for more than 70% of a company’s footprint. Upstream, this might include emissions associated with external parties who source, extract, produce, or transport the raw materials and components used by a business. It might also include employee commuting and business travel. Downstream, it might also include the logistics involved in using or disposing of company produce and activities such as investing or franchising.

Once you’ve used all three scopes to measure your baseline, you can begin assembling your strategy.

Step 2: Set science-based targets, reduce emissions

From your baseline, the next step is to plan science-based targets in line with the SBTi’s Net Zero Standard framework, in which it’s detailed that businesses must commit to halving emissions by 2030 and approaching net zero carbon emissions by 2050. To achieve this, they should set near-term and long-term targets, both of which require emission reduction targets across Scope 1 and 2, but particularly 3. Here’s a brief overview of each:

Near-term targets are to be met within 5 – 10 years and address emissions across Scope 1 and 2. However, in cases where a company’s Scope 3 makes up more than 40% of its emissions, it’s also necessary to cover two-thirds (67%) of this scope emissions in near-term targets.

Long-term targets are to be met by the year 2050 or sooner. These cover 95% of the first scopes and 95% of the third. To effectively reach net zero, a company must have demonstrably reached its long-term targets.

Step 3: Build an emission reduction roadmap

Once you’ve set your baseline and agreed on the parameters, building a reduction roadmap must be your next priority. As detailed in the IEA’s recent Net Zero by 2050 roadmap, there are various milestones that policymakers and world leaders must follow over the coming decades, particularly in investing in low-carbon technologies and clean energy research and development. Here are some examples of how businesses can support this trajectory and minimize their ecological carbon footprint.

Transitioning to renewable energy sources such as solar or wind power. This decreases our reliance on fossil fuels and helps to cut down emissions, as outlined in the COP26 letter on the importance of clean energy.
Implementing energy-efficient practices, such as building insulation optimization, investing in energy-saving appliances, and adopting lighter transportation methods such as walking on foot or taking public transportation.
Encouraging remote work or flexible schedules for employees. This can contribute to reductions by minimizing company-wide commutes.
Prioritizing sustainable procurement practices by favoring suppliers who adhere to environmentally friendly standards.
Adopting recycling and waste management initiatives within your business operations to decrease releases associated with waste disposal.

With a comprehensive approach that factors in areas such as these, companies can make substantial strides in reducing their carbon dioxide emissions. However, reductions must be combined with carbon removal to have a true impact in the race to net-zero emissions.

Step 4: Commit to reach net zero

Once you’ve completed the steps, you’ll have a better understanding of exactly how much of your residual emissions you’ll need to remove. Now’s the time to start buying carbon dioxide removal in parallel with your reduction efforts; back planning your removals to ensure you deliver on your targets. There are many carbon removal solutions on the market to choose from – spanning nature-based, hybrid, and technological – you can visit Mckinsey’s buyer’s perspective guide for advice on which solution is right for you. No matter which solutions a company selects, it’s important to ensure the chosen services are high-quality. Here are some examples of non-negotiable criteria to look out for as outlined in Shopify’s carbon removal buying guide:

An impactful carbon removal solution must be net negative, i.e., remove more CO₂ from the atmosphere than it releases over its lifecycle.
Carbon removal suppliers should be able to measure and verify the quantity of CO₂ that has been captured and removed so that you can track your progress.
Carbon removal solutions should be truly additional, which means that without your purchase, the CO₂ would stay in the atmosphere.
As more players enter the carbon removal market, it’s essential to know your supplier is deploying their service in a responsible, trustworthy way. That means the solution is safe and works in harmony with the environment.

Aside from these considerations, it’s also likely your business will want to investigate the durability and capacity of prospective carbon removal suppliers. In terms of durability, carbon removal solutions can be roughly understood as fitting into the following categories: permanent, low risk of reversal, long-term temporary, high risk of reversal, and short-term temporary.

To go into more detail, a permanent solution, such as underground mineralization, traps CO₂ for over 10,000 years, which is as close to permanently removed from the atmosphere as we can get. A solution with a low risk of reversal, such as biomass buried in an anoxic environment, can remain dormant permanently unless disturbed. Long-term temporary solutions, such as biochar which decays slowly in soils, will eventually re-release their stored CO₂ back into the atmosphere. High risk of reversal solutions, such as forests, mangroves, or grasslands, store carbon in a short-term carbon cycle but will naturally release their CO₂ if they die after 50 – 100 years. And lastly, there are short-term temporary solutions, for example, where landowners are incentivized to wait for a time before harvesting their trees (to maximize their absorption of CO₂).

Ultimately, solutions with permanence or low risk of reversal are preferable due to the imbalance of carbon dioxide already in our atmosphere due to the burning of fossil fuels. With solutions that re-release their captured CO₂ in less than 100 years, there’s a risk that your business’s investment will be lost before we’ve slowed the impacts of climate change. That’s why it’s important to consider durability when broadening your portfolio to include high-quality tech solutions, such as DACS.

As for what you should look for in terms of capacity, it’s a question of which carbon removal solutions your business is choosing to support and, in doing so, helping to scale up. An effective carbon removal portfolio should include natural solutions, particularly for their additional environmental benefits, such as encouraging biodiversity, but also prioritize solutions with the capacity to capture CO₂ at the enhanced scale we need. Direct air capture, as an example, can remove 4,000 tons of CO₂ from the air each year on a land area of 0.42 acres. This same area would host 220 trees with an estimated capacity of 22kg each (source), i.e., only 4.62 tons of CO₂ per year.

Step 5: Lead the race to net zero

By incorporating carbon removal services into your climate goals, your business demonstrates proactive climate leadership and takes a comprehensive approach to achieving its net-zero goals. But beyond this, early participation in the nascent carbon removal market also enables your business to:

Contribute to the scale-up of new technologies and help shape a robust carbon removal market.
Secure future supply and demonstrate preparedness for the regulatory market.
Support opportunities for economic growth and job creation in this emerging sector.
Demonstrate a commitment to environmental stewardship and position itself as a leader in sustainability, appealing to environmentally conscious consumers and investors.