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17 Nov 2022, 14:00
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Global

How to unpick a company net zero target in 7 steps

More and more companies are racing to outdo each other with green pledges to strike net zero emissions. But what's behind these bids to wipe out their contribution to climate change? Journalists and consumers alike are often out of their depth when it comes to distinguishing ambition from greenwashing. Evaluating net zero targets is a complicated business, with pitfalls galore. Based on the methodology of the renowned NewClimate Institute, 91tv has produced a step-by-step guide to get to the bottom of corporate climate claims.
Cartoon by 91tv / Mwelwa Musonko [CC BY 4.0](https://creativecommons.org/licenses/by/4.0/)
Cartoon by 91tv / Mwelwa Musonko

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Net zero targets are spreading like wildfire through the corporate world. Faced with increasing pressure to act on climate, one company after another is announcing plans to eliminate its carbon footprint. The big question is: Do these corporate net zero pledges prove that companies have finally woken up to their urgent responsibility to help contain the rise of global temperatures?

On closer inspection, countless ambitious-sounding pledges ring hollow. Many commitments are little more than vague declarations of intent. Others hide huge chunks of a company鈥檚 CO2 pollution, or rely on dubious promises to compensate continued emissions, while lacking efforts to reduce fossil fuel use.

Concern about unsubstantiated net zero claims has become widespread as a result. 鈥淲e must have zero tolerance for net-zero greenwashing,鈥� 聽Antonio Guterres at the Climate Conference (COP27) at Sharm el-Sheikh during the presentation of an on net zero targets.

But for the uninitiated, it鈥檚 hard to tell greenwashing from serious commitment because scrutinising company climate pledges is complicated. For example, net zero target years trumpeted in advertising are meaningless if they only cover a small part of a company鈥檚 total emissions, or if they are not backed up by a serious strategy to cut greenhouse gas output.

Setting and achieving a net-zero target involves many challenges for companies. Cartoon by 91tv / Mwelwa Musonko [CC BY 4.0](https://creativecommons.org/licenses/by/4.0/)
Setting and achieving a net-zero target involves many challenges for companies. Cartoon by 91tv / Mwelwa Musonko

Net zero targets only advance the fight against climate change if they fulfil a whole range of conditions, and only a complete assessment will reveal whether they do. Also, it鈥檚 important to keep in mind that a company can be ambitious on climate action without having a net zero target at all. A convincing plan for deep emission cuts in the near term is much more laudable than a distant net zero target that lacks a credible strategy for reaching it.

To make deciphering net zero targets as easy as possible, 91tv has compiled a list of seven key criteria, based on the method used by the NewClimate Institute in their and other publications. Only if the answer to all of the seven following questions is 鈥測es鈥� can a net zero target be called truly robust:

  1. Does the company publish complete data on its emissions?
  2. Does the company鈥檚 net zero target cover all of its emissions?
  3. Does the company have concrete plans to quickly reduce its own emissions, without relying on carbon offsets?
  4. Does the company have interim targets which show it intends to act fast?
  5. Is the company鈥檚 net zero target in line with the Paris Climate Agreement?
  6. Does the company have a plan to exit oil, coal, and fossil gas?
  7. Does the company promote renewables in its energy procurement?

The questions cover three general topics that must be dealt with before a verdict on a net zero pledge can be reached: The disclosure and coverage of emissions (questions 1-2); emission reductions and stepping stones (questions 3-5); and actions to achieve the targets (questions 6-7).

All seven criteria include tips, tricks and examples from the NewClimate Institute's or other publications.

1.听聽 聽Does the company publish complete data on its emissions?

Companies should present complete and transparent data on their entire greenhouse gas emissions every year, including those stemming from their value chains and the use of their products or services.

Before a company can set a credible net zero target, it must have a detailed overview of all the emissions it causes. This not only entails accounting for the greenhouse gases it emits directly, but also for the emissions it causes indirectly - for example by using electricity, raw materials, transport, and during the use and disposal of its products and services.

The categories of 鈥溾€� emissions are commonly used to describe these different types of emissions. Scope 1 emissions are the direct greenhouse gas emissions from sources that are owned or controlled by a company. Scope 2 refers to indirect emissions from using electricity, heating and cooling in a company鈥檚 operations. Scope 3 emissions occur as a consequence of a company鈥檚 activities, but are not controlled directly by the company. They arise in a company鈥檚 value chain 鈥� for example during the extraction of raw materials, the production of packaging, product transport, and from the use of the company鈥檚 products or services, or investment portfolios. Scope 3 emissions are the most difficult to track, but they often dwarf a company鈥檚 direct emissions. In the extreme case of Volkswagen, Scope 3 emissions 98 percent of the group鈥檚 total 鈥� mainly through use of their cars. [This factsheet explains the basic terminology of company climate claims.]

Tips & tricks, examples

  • Carefully examine the language of scope coverage, including footnotes. This often reveals major loopholes in emission coverage - and consequently the net-zero targets. Sometimes when a company says that their disclosure includes 鈥渁ll xyz鈥�, consider what is excluded from xyz rather than interpreting this at face value as a confirmation of comprehensiveness.
  • Check if disclosure is consistent between documents. Some companies achieve A-ratings for transparency from the (CDP) by disclosing all emissions in detail to CDP, while then disclosing a different and much more limited set of emissions in public reports. Information disclosed to CDP is not accessible without registration, technical knowledge and in some cases a paywall.
  • Check if scope 3 emissions are really complete. Some companies include one category of scope 3 emissions in their reporting (e.g., business travel) to make it look like they have included scope 3 emissions, although in reality this category only accounts for maybe 1% of their scope 3 emissions, while the use of products and the supply chain are much more important. If companies do not set out emissions explicitly for , be suspicious.

Examples from the NewClimate Institute鈥檚 &

  • Around 97% of Brazilian meat processing company 闯叠厂鈥檚 emissions are caused by the production of meat on farms. 闯叠厂鈥檚 emission disclosure and targets cover meat production on 鈥�all JBS feedlots and farms.鈥� What they do not point out is that there are very few JBS feedlots and farms, because almost all of their meat comes from a network of partner farms. Accordingly, their disclosure and target only cover less than 3% of their emission footprint.
  • French retailer Carrefour reports that its emissions disclosure and target cover 鈥�all integrated stores in all nine integrated countries.鈥� While this sounds like confirmation of comprehensiveness, it actually accounts for less than 12% of Carrefour stores in France and less than 20% of Carrefour stores worldwide. All activities in non-integrated stores, and in the other 21 countries that Carrefour operates in, are excluded.
  • Swiss pharmaceutical maker Novartis appears to report on scope 1, 2 and 3 emissions in its public report (Environmental Sustainability Strategy), and claims a CDP A-rating for transparency. But for scope 3, it includes only business travel which accounts for only 0.3% of the scope 3 emissions in their CDP disclosure, which is not easily accessible. Overall, this means that their public reporting of emissions includes only 20% of the emissions they report elsewhere.

Where do I find more in-depth guidance?

  • Section 1 of the methodology for the
The principles for net zero targets as spelled out by the

2.听聽 聽Does the company鈥檚 net zero target cover all of its emissions?

Companies should clearly state that their net zero target encompasses their entire emissions, including full value chains and end-use of products and services.

A net zero target is only meaningful if it covers all of a company鈥檚 emissions. Many businesses omit scope 3 emissions in their net zero target, even though these often constitute the lion鈥檚 share of their climate footprint. For example, a fossil fuel producer might say it aims to reach net zero emissions for the production and supply of oil, gas and coal. This would not include the 鈥� massively larger 鈥� emissions its products cause when burned in cars, factories, and power stations across the world. The UN expert group on net zero pledges is also very clear on this point. It a net zero target must include end-use by covering 鈥渁ll scope emissions and all operations along its value chain in all jurisdictions [鈥 Where data is missing for scope 3 emissions, businesses should explain how they are working to get the data or what estimates they are using.鈥�

Tips & tricks, examples

  • Take a very careful look at how a company phrases its net zero target, especially what scope emissions are covered, including footnotes (as for emissions disclosure above).
  • Ambitious-sounding targets that only cover scope 1 and 2 emissions can simply be greenwashing a carbon-intensive industry if the main issue lies in the emissions-intensive nature of the product. Several oil companies and are good examples for companies with plans to green the production of things that are inherently incompatible with climate targets. 聽聽聽聽

Where do I find more in-depth guidance?

Section 2.1 of the methodology for the

Cartoon by 91tv / Mwelwa Musonko [CC BY 4.0](https://creativecommons.org/licenses/by/4.0/)
Cartoon by 91tv / Mwelwa Musonko

3.听聽 聽Does the company have concrete plans to quickly reduce its own emissions without relying on offsetting?

Companies should have a specific greenhouse gas emissions reduction target alongside its net-zero target which does not rely on CO2 removals or offsetting.

Setting a net zero target requires a company to act on its own emissions, instead of leaving the heavy lifting to others via compensation schemes. Reaching the objectives of the Paris Agreement 鈥� such as the goal to limit global temperature increase to 1.5掳C 鈥� means that total CO2 emissions have to be reduced by more than 90 percent by 2050 (compared to 2010 levels), the said.

Companies have to do their part and rapidly reduce their own emissions, without relying on carbon offsets. Several institutions such as the and the NewClimate Institute say companies must reduce their emissions by at least 90 percent by the target year below 2019 levels to justify the use of a net-zero label.

The UN expert group that too many firms 鈥渁re currently engaging in a voluntary [carbon offset] market where low prices and a lack of clear guidelines risk delaying the urgent near-term emission reductions needed.鈥� To avoid the troubles related to many carbon offsets, firms can finance climate action elsewhere on the planet, but without claiming that these neutralise their own emissions (so-called climate contributions).

If a company鈥檚 pledges rely on emitting and subsequently removing CO2 from the atmosphere, then these removals must be permanent. If a company relies on biological carbon storage such as planting trees for their net zero target, they create the risk that forest fires, land disturbances, and other developments cause the CO2 to be re-emitted 鈥� thus, these removals cannot be considered permanent.

Tips & tricks, examples

Watch out for misleading base year practices.

  • British pharmaceutical maker to reduce scope 3 emissions by 16% by 2030 from a 2017 base year translates to no significant further emission reduction compared to 2019 levels, when the target was set.
  • US pharma company has a net-zero target that includes a commitment to reduce 2019 emissions by at least 90%, but their emissions inventory for 2019 shows emissions that are around double that of the years before or after.

If a company uses carbon removals, carefully check whether they classify as permanent

  • Most companies are pursuing removals with biological storage. Some report measures to 鈥渋mprove the risk of non-permanence,鈥� but these are often not credible. They are based on closely monitoring for the re-release of carbon into the atmosphere and promise to take action to compensate for any forestry stock changes caused by forest fire, for example. This can only work in practice if there was a guarantee that the company and the crediting standard keep their promise for at least 100 years, which is nigh impossible.听
  • 鈥淚nsetting鈥�: some companies (IKEA, 狈别蝉迟濒茅) are trying to establish the term 鈥渋nsetting鈥�, a concept they sell as 鈥渞emovals within the value chain鈥�. This is a highly misleading and even less-regulated version of offsetting which itself is a fundamentally flawed approach.

Where do I find more in-depth guidance?

Sections 2.2 and 4.1 of the methodology for the

from the NewClimate Institute & illustrates net zero nuances

4.听聽 聽Does the company have interim targets which show it intends to act fast?

Companies should make clear that their net zero pledges are not just long-term visions, but that they start to act now. Interim targets which require immediate action to sharply reduce emissions in the short and medium term in line with the Paris Climate Agreement are necessary to make their pledges credible.

Companies must not delay the start of emission reductions to the far future to reach a net zero target. If they do not start out with ambitious and rapid efforts to reduce their climate impact, they are responsible for higher cumulative emissions in the long term, and also increase uncertainty surrounding their climate action. 鈥淎 net zero pledge must contain stepping stone targets for every five years,鈥� the UN expert group, adding that a company with a net zero target 鈥渘eeds to start fast and not delay action to the last minute.鈥� Interim targets should only refer to cutting the company鈥檚 own emissions, without relying on compensation. The UN group stressed that carbon credits 鈥渃annot be counted [toward] interim emissions reductions required by its net zero pathway.鈥�

Tips & tricks, examples

  • Long-term targets can simply act as a delay and distraction mechanism. It is important to check whether (a) interim targets exists, (b) they cover the same emissions scopes, and (c) the company explains how they align with its long-term vision.
  • Medium-term targets should require immediate action and align with 1.5掳C-compatible decarbonisation milestones for specific sectors.

Examples:

  • Many companies set out long-term visions for 2040 or 2050, but don鈥檛 specify interim targets.
  • British pharma company for 2030 are based largely on the implementation of a single measure (changing technology for inhalers); their pathway shows that the 2030 target (even though relatively near-term) does not require short-term action, since the measures are foreseen to be implemented in 2028 and 2029, just in time for the target achievement in 2030. In the meantime, the implementation of available measures is delayed.

Where do I find more in-depth guidance?

Section 2.3 of the methodology for the

Cartoon by 91tv / Mwelwa Musonko [CC BY 4.0](https://creativecommons.org/licenses/by/4.0/)
Cartoon by 91tv / Mwelwa Musonko

5.听聽 聽Does the company have a net zero target in line with the Paris Climate Agreement?

Companies should show in a transparent and verifiable manner whether and why their net zero target and any interim targets are compatible with the Paris Climate Agreement. That means the target must be in line with 1.5掳C emission pathways for the particular sectors the companies operate in. 聽

A well-defined net zero target does not automatically align with 1.5掳C emission pathways for a particular sector. For example: A 2050 net zero target for a European carmaker is not compatible with the Paris Agreement, because this sector has to be decarbonised much sooner to be in line with the 1.5掳C goal. While this point can be difficult and time-consuming to investigate 鈥� due to the different standards and evaluations out there 鈥� it is a crucial step in assessing company climate targets. In the words of the , a company鈥檚 net zero pledge must reflect its 鈥渇air share of the needed global climate mitigation,鈥� and it must also align or exceed national targets.

Tips & tricks, examples

  • Companies often claim that a single verification by the or another standard is fully sufficient to claim Paris Agreement compatibility for its entire business operations. Sometimes these verifications even cover just single emission sources. The claim of 1.5掳C Paris Agreement compatibility for net zero target and their interim target should require a broader justification.
  • Different standards and evaluations can be compared to get a more comprehensive overview of how a given target compares to global and sector-specific milestones, for example as defined by the , the , the , , the , and/or the .听聽
  • Companies often falsely imply that the verification of a specific target by one single organisation as 1.5掳C/or 2掳C compatible implies its entire operations and specific reduction measures can be seen as 1.5掳C/or 2掳C compatible.听聽

Examples:

  • There are several carmakers whose emission reduction targets only have a low integrity (see Volkswagen and BMW in ) or medium integrity (Stellantis in ), according to the NewClimate Institute.
  • 狈别蝉迟濒茅 that 鈥淚nformation on our approach to climate change can be found in our 狈别蝉迟濒茅 Net Zero Climate Roadmap released in late 2020. This document has been validated by the Science Based Targets initiative (SBTi) and the work that went into it is rigorous and extensive.鈥� The company thus implies that its entire roadmap has been validated by SBTi. But firstly, SBTi does not validate any measures or plans to achieve targets as included in the roadmap. Secondly, , 狈别蝉迟濒茅 has only committed to SBTi but its 2050 net zero target has not been verified by SBTi, while only its 2030 targets (not measures) have been verified.

Where do I find more in-depth guidance?

Section 2.2 and Section 2.3 of the methodology for the

6.听聽 聽Does the company have a plan to exit oil, coal and gas?

Companies should have a plan to phase out fossil fuels and emission-intensive products.

A net zero target requires that firms quickly end the use of oil, coal, and gas, as well as emission-intensive products. Many companies emphasise that they heavily invest in clean technologies. However, these investments can only be considered as significant emission reduction measures if the main sources of emissions are phased out at the same time. For example, oil and gas majors might advertise that they are building wind and solar parks, while at the same time continuing their fossil business. Likewise, simply selling emission-intensive fossil assets to subcontractors doesn鈥檛 help the climate. The UN expert group also warned that net zero plans must not support new fossil fuel investments, but instead 鈥渄ecommission and cancel existing assets.鈥�

Tips & tricks, examples

  • Some companies with emission-intensive business operations are simply shifting emissions off their accounts. Targets covering specific emission scopes can be highly misleading if the company tweaks its business model to let emissions happen elsewhere. For example:
    • For electricity generation companies, scope 1 emissions typically account for a lion鈥檚 share. Some of those companies set deep decarbonisation targets for scope 1, while transitioning fully or partially from a generation to a retail company. By selling their generation facilities to other (sometimes spin-off) companies, and purchasing the electricity from them, the company appears to make huge emission reductions while in reality the emissions are just shifted from scope 1 to scope 3.
    • Logistics companies might also focus on their scope 1 and scope 2 emissions from delivery vehicles. This allows them to achieve dramatic reductions, by fully or partially subcontracting delivery to other companies, which is already common practice in the sector.

Examples:

  • German utility E.ON is an example of a company that transitioned nearly fully from a generation to a retail company, and scope 3 emissions from energy sales
  • Reductions in Italian utility Enel鈥檚 scope 1 emissions are also by an increase of external electricity purchases, and therefore a shift towards scope 3 emissions. There is no clear phase out plan for gas.
Image shows products with "climate neutral" labels. Photo: 91tv / Finley Smee
Some products are inherently incompatible with net zero targets. Photo: 91tv / Finley Smee,

7.听聽 聽Does the company promote renewables in its energy procurement?

Companies should use its energy procurement to boost the roll-out of renewables, and be transparent about it.

It matters a great deal for emissions where and how a company sources its energy. Businesses should not only ensure that they use the highest possible share of renewable sources, but also maximise their climate impact while doing so. Simply buying renewable power on the wholesale market does not necessarily reduce total emissions, because it doesn鈥檛 directly affect a country鈥檚 overall power mix 鈥� it simply means there is less green power left for other users. Ideally, a company installs its own renewable power generation 鈥� this is the best guarantee for emissions reductions. In a second-best, its procurement incentivises the instalment of new and additional renewables capacity 鈥� projects which would not have happened without the company鈥檚 financial support.

Tips & tricks, examples

  • Some companies purchase electricity directly from renewable power operators using power purchase agreements, which are high-quality constructs in principle. But if the companies don鈥檛 take the associated renewable energy certificates, they allow the renewable plant operator to sell those to other customers, leading to double counting the renewable energy.

Examples:

  • Google and innovative with addressing this problem. In 2020, it set the target to achieve
    24/7 carbon-free energy by 2030, meaning that it will ensure its consumption is matched by locally produced
    renewable energy, matched on an hourly basis. This good practice approach has subsequently been adopted
    by other companies.
  • Accenture to procure energy from PPAs, but without the associated renewable energy certificates.

Where do I find more in-depth guidance?

Section 3.2 of the methodology for the

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