Last reviewed 19 October 2020

The UK is committed to net zero carbon emissions by 2050 and most of the world’s leading economies are following a similar path. Larger companies are falling into line and supply chain businesses will be expected to do the same. In this report, John Barwise looks at the drivers for net zero and what businesses can do to reduce greenhouse gas (GHG) emission and avert a climate crisis.

Net zero in transition

The transition to a net zero economy is gathering momentum. In June last year, the UK became the first major world economy to set legally binding commitments to achieve net-zero carbon emissions by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of 80% reduction from 1990 levels.

A growing number of countries, regional governments and city regions around the world have set out similar plans to achieve net zero by 2050, including Canada, South Africa and the world’s biggest polluter, China. The EU also aims to be climate neutral by 2050, in line with the bloc’s commitment to global climate action under the Paris Agreement.

This is an encouraging response to the overwhelming evidence that global warming continues apace, and action is needed now to avoid the catastrophic consequences of climate change.

Business and public sector response

Many of the world’s leading investment houses and shareholders are now urging companies to focus on reducing carbon emissions. The investor group Climate Action 100+, which is backed by over 500 global investors, has written to over 160 of the world’s largest GHG emitting companies, warning that future investment will be assessed on net zero business strategies, including their entire value chain and end use of products — known as Scope 3 emissions — in line with a maximum 1.5°C global warming scenario.

Larger businesses, including many operating in the UK, have already committed to net zero. EasyJet, P&G, Unilever and Severn Trent are amongst a growing list of companies that have pledged to meet net zero targets by 2050 or before. The NHS is the world’s first national health system to commit to become “carbon net zero” by 2040, whilst pharmaceutical giant AstraZeneca has also pledged to become carbon negative across its entire supply chain by 2030.

Future-proofing SMEs

The wave of climate commitments from national and local governments and larger businesses is now starting to spread across supply chains. SMEs need to engage in this process to avoid missing out on future contracts and growth opportunities, as the wider supply chain and customers increasingly demand low carbon products and services.

The problem for many SMEs is that they simply don’t have the time, resources or capability to track and report on their carbon emissions. In September, a new international SME Climate Hub was launched. Supported by multinational companies, financial institutions and governments, the Climate Hub aims to create clear opportunities and incentives for SMEs that commit to halving their emissions before 2030 and achieving net zero before 2050.

SMEs that commit to net zero targets will have access to a wide range of tools and resources that are tailored to support their industry sector. As an added incentive, those involved will also be recognized by the United Nations Race to Zero campaign, helping SMEs to build their business profile with existing and future clients. Financial and policy incentives will also form part of the support package.

Other larger businesses such as BT Group, Balfour Beaty, Ericsson, IKEA and Telia, are working directly with SMEs in their own supply chains to support efforts of reaching net zero or negative emissions before 2050.

Benefits of net zero

In October this year, the Government published a national Net Zero Strategy, setting out how the transition to a net zero economy will work in practice. According to the report, meeting net zero will require reductions in emissions across all sectors of the economy on a scale not previously seen.

The report is upbeat in its approach, arguing that whilst the net zero targets will be a challenge, it also represents a major opportunity for growth. The UK’s low-carbon economy already supports over 460,000 jobs and could grow 11% per year between 2015 and 2030 — supporting up to 2 million jobs. Longer term growth in the UK's 12 low carbon sectors could contribute £27 billion to the economy through domestic economic activity and £26 billion through exports by 2050.

In a recent NPower survey of around 100 businesses across manufacturing, retail, property, transport, professional services and the public sector, 75% of respondents believe net zero emissions by 2050 is an achievable target. Around 83% of respondents also believe net zero is a benefit that will deliver greater operational resiliency and cost savings in the long term, as well as reducing carbon emissions and improving reputation.

Net zero — the basics

Businesses have different levels of greenhouse gas emissions, depending on the nature of their activities, products and services.

The Greenhouse Gas Protocol, developed by World Resources Institute (WRI) and World Business Council on Sustainable Development (WBCSD), is a global standardised framework to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions.

Emissions are broken down into three categories: Scope 1 and 2 are mandatory to report, whereas scope 3 is voluntary and the hardest to monitor.

  • Scope 1 — all direct emissions from the activities of an organisation or under their control including fuel combustion on site such as gas boilers, fleet vehicles and air-conditioning leaks.

  • Scope 2 — indirect emissions from electricity purchased and used by the organisation. Emissions are created during the production of the energy and eventually used by the organisation for heating, lighting, computers etc.

  • Scope 3 — all other indirect emissions from activities of the organisation, occurring from sources that they do not own or control. These are usually the greatest share of the carbon footprint, covering emissions associated with business travel, procurement, waste and water.

A new set of net zero guides, commissioned by CDP, WRI, and WWF and developed by Science Based Targets (SBT) group, takes into account greenhouse gas emissions across different industry sectors. The Sectoral Decarbonization Approach (SDA) uses science-based targets to inform business stakeholders of the level of emissions reductions in their sectors to achieve the 2oC in different sectors and subsectors and how this information can be used to set and achieve company-specific greenhouse gas reduction targets in each of the three categories.

According to the SBT, organisations should look to include 100% of scope 1 and 2, and a minimum of at least 66% of scope 3 emissions, which is in line with the criteria for science-based targets. The Department for Business, Energy and Industrial Strategy (BEIS) publishes SDA emission factors for each of the three scopes — the latest calculations for 2020 are available here.

Using carbon footprinting to achieve net zero

Businesses need first to consider their net zero boundaries. This might be a single site, the whole organisation or a particular business asset or activity.

Once the boundaries have been set, businesses can use carbon footprinting tools to determine which aspect of the business generates most GHG emissions that are within the company’s control and influence, and what actions are needed to mitigate these.

Carbon footprinting is basically the sum of all GHG emissions associated with all processes, products, services and other activities across the supply chain and within a given timeframe. Carbon footprinting tools identify emissions associated with different products, processes and other activities. Further details of carbon footprinting are available on the Croner-i website here.

Getting started

Using carbon footprinting businesses can start to prioritise carbon reduction options associated with their activities, products and services.

Options might include the following.

Improving energy performance

  • Installing renewable energy on site or switching to renewable energy suppliers.

  • Installing renewable heat and cooling systems to replace fossil fuel heating.

  • Improving energy efficiency of appliances — eg switching appliances off when not in use, better heating controls, LEDs, insulation to reduce heat loss, etc.

Transport

  • Reducing transport use through improved logistics and/or switching to electric vehicles.

  • Consider online conferencing instead of travelling to meetings — especially reducing high impact air travel. Web-based conferencing has grown since Covid-19 restrictions were introduced and look set to continue.

Resources

Reducing business resource consumption will help mitigate emissions and reduce business overheads. This might include:

  • designing products according to circular economy principles: design for reuse, repair and recycling

  • materials efficiency: reusing offcuts and other production waste materials where appropriate

  • recycling redundant materials that can’t be reused

  • sourcing products and materials from companies with recognised net zero policies and commitments (value chain): the global Forest Stewardship Certification scheme is one example

  • segregating and minimising waste for easier recycling and reuse.

Offsetting emissions

Businesses are unlikely to mitigate all GHG emissions from their operations and may want to consider offsetting remaining emissions. Offsetting enables businesses to invest in environmental projects as a way of balancing their own emissions. It might involve supporting clean energy projects or sequestering carbon emissions through tree planting schemes or other nature restoration projects.

Carbon credits — a market-based process developed through the Emissions Trading Scheme (ETS), also allows for businesses to pay for the removal of a certain amount of carbon dioxide from the environment.

Further details of carbon footprinting and offsetting are available on Croner website here.

Moving on

The UK will co-host next year’s UN climate change summit, known as COP26. The event was originally scheduled for November 2020 but has been rescheduled for November 2021 due to the Covid-19 pandemic.

COP26 is billed as the most important climate summit since the landmark Paris Agreement was agreed at COP21 in 2015. This is the event when countries will have to set out more ambitious goals towards net zero emissions by 2050.

The UK has set the benchmark with its legally-binding net zero target by 2050 — others are pursuing similar ambitions. Many city regions and business groups are also playing their part. The challenge for COP26 is to secure a global commitment to net zero from all the major economies if a climate catastrophe is to be averted.