A net zero business reduces its emissions wherever possible and offsets emissions that can’t be reduced any further. The goal is a 50% emissions cut by 2030 and an overall emissions balance that’s equal to zero by 2050. By emissions, we’re referring to greenhouse gasses (GHGs), like carbon dioxide (CO2).
Scientists have reported higher-than-average temperatures on Earth since the Industrial Revolution (between 1760 and 1840). This is causing more extreme weather events. For example, we witnessed record-breaking summer heat across the U.S. in 2023, as published by Scientific America. These weather changes are described under the term climate change and are linked to rising emissions.
If we, as business owners, keep doing things the same way and releasing excess emissions, then Earth’s average temperature will continue to increase. The consequence is more unwanted changes in our weather. That's why business leaders worldwide are striving for net zero. Net zero, as a concept, aims to prevent Earth’s average temperature from rising further.
Net zero is becoming the standard in the corporate world, with 65% of the world's largest companies setting net zero targets.
As you work toward net zero, use this guide as your reference. Learn why achieving net zero is crucial for business success. E.g. strategizing to lower business emissions will reduce costs over the long term, help you better serve your customers, attract investors, and retain top talent.
Net zero meaning: Know why you need to reduce your business emissions
Net zero for a business involves reducing its climate footprint, and then financially supporting efforts to mitigate the remaining greenhouse gas emissions by investing in offsetting projects. This results in the annual elimination of the business's total emissions, ensuring the company takes responsibility for its fair share of emissions reduction.
To help you understand, think of net zero like trying to keep your room at a constant, comfy temperature. You have to carefully control your heating and cooling systems to make sure the temperature is just right. For example, you install better insulation to trap heat in. You only turn your heating on for a certain amount of time. And you open your windows to remove heat and keep the balance.
It’s a big deal to reach net zero because it will stop the Earth’s average temperature from rising further. The Paris Agreement emphasizes the need to achieve net zero in business.
Getting to net zero means not just cutting emissions but also finding ways to cancel out any emissions left. This might mean changing how we get energy (such as switching to renewables), how we make things, and how we use land. And whatever changes we make need to be permanent, so they keep reducing and removing GHGs forever.
“[Net Zero requires entities to] achieve a balance between anthropogenic (human-caused) emissions by sources and removals by sinks of greenhouse gasses in the second half of this century” - United Nations, Paris Agreement
Understand the link between business emissions and extreme Weather
Emissions trap heat from the sun keeping our planet warm. The most prevalent GHG is carbon dioxide (CO2). GHGs are released into our atmosphere through business activities that burn fossil fuels (e.g., gasoline, diesel, natural gas, or coal).
Using data from the National Oceanic and Atmospheric Administration, between 1960 and 2022, atmospheric CO2 increased by approximately 30%. Following this increase is a rise in the Earth's average* temperature. For instance, scientists from NASA's Goddard Institute for Space Studies (GISS) have found that the average global temperature on Earth has gone up by at least 1.1 degrees Celsius (which is about 1.9 degrees Fahrenheit) since 1880. And these higher average temperatures on Earth are causing more extreme weather events. This is called climate change.
*Note we’re referring to an average temperature rise across the entire planet. Some places will experience colder weather, and other places will experience hotter weather as a result.
Glossary: Understand net zero and related jargon
The scientists from the Intergovernmental Panel on Climate Change tell us that as a planet, we must achieve net zero by the year 2050. This way, we can stay on track to limit Earth’s average temperature rise to 2.7°F (1.5°C) higher than temperatures from before the Industrial Revolution (between 1760 and 1840).
Net zero is the globally agreed-upon objective for addressing climate change in the latter part of this century.
To achieve this goal, it's important businesses come together and take action. Every business should have a plan to reduce and remove their emissions. To assist your business in this process, we've provided a 12-step roadmap on how to set and accomplish net zero goals.
However, before we go further, it's crucial you understand the important words and phrases used in this field so you don't get mixed up.
Define real zero
‘Real zero’ also known as ‘absolute zero’, ‘zero emissions’, or ‘gross zero’, is a theoretical idea that means getting rid of all emissions completely, without using offsetting projects. This would mean a business doesn't produce any emissions at all.
In reality, reaching "real zero emissions" is very tough and is not possible for most industries or activities.
When we say something is ‘climate positive,’ it means that a company does more than just balance out its emissions. They actually take out more greenhouse gasses from the air than they put in. This helps reduce the total amount of these gasses in our atmosphere and has a positive effect on our climate. Another way to say this is ‘carbon negative’.
Science-based targets (SBTs) are clear and measurable goals for reducing emissions that organizations have set. They make sure these goals match what scientists and international agreements say is needed to reduce the impact of climate change. Like staying under 2.7°F (1.5°C) higher than temperatures from before the Industrial Revolution.
SBTs show a commitment to reducing emissions based on the best climate science we have. The standards for net zero were set by the Science Based Targets Initiative.
Carbon insetting is when an organization works on lowering its own emissions, both in its own operations and in how it gets its supplies, instead of depending on outside offsetting projects.
Carbon insetting involves reducing business emissions directly while the business promotes similar practices throughout its sphere of influence.
A carbon footprint is the total amount of GHGs that a company produces directly or indirectly through its activities. It's a way to measure how much impact that business has on the environment in terms of climate change.
Carbon accounting is when a business keeps track of all the GHGs it releases into the atmosphere while figuring out ways to reduce or remove them. Think of carbon accounting as keeping tabs on your carbon footprint and trying to make it smaller.
Carbon neutralization describes the process of extracting greenhouse gasses from the atmosphere and storing them for an extended duration to completely offset the emissions a business releases from operations. Neutralization is a key process for achieving net zero and takes into account emissions from inside and outside a company’s value chain.
Abatement is a process that tackles emissions from within a company’s value chain. Measures are taken to prevent, reduce, or eliminate sources of emissions from within a company’s value chain. Abatement is a key process for achieving net zero emissions.
Compensation is a process that tackles emissions from outside a company’s value chain. Measures are taken to prevent, reduce, or eliminate sources of emissions from outside a company’s value chain. Compensation is a key process for achieving net zero emissions.
GHG reductions refer to the steps a company takes to reduce emissions.
GHG removals are the actions that take GHGs out of the air, which helps lower the amount of these gasses in the atmosphere and lessens the impact of climate change.
Net zero vs. carbon neutral: Understand the difference
‘Net zero’ and ‘carbon neutral’" are terms people sometimes use interchangeably, but they actually have slightly different meanings when it comes to reducing the emissions of your business.
While both ‘net zero’ and ‘carbon neutral’ talk about balancing emissions, the main difference is in how they handle the emissions a business releases.
Carbon neutrality means a business measures its emissions and then balances them out by supporting offset projects outside of its operations, like planting trees or investing in renewable energy. It doesn't necessarily mean the business is reducing its own emissions.
Net zero, on the other hand, has a stricter goal. It pushes businesses to significantly cut down their emissions within their operations and supply chain. In 2021, the Science Based Targets Initiative set the standard for net zero. It says that to claim net zero, a company has to reduce at least 90% of its emissions and can only offset the remaining 10% with permanent removals. This final 10% of a business's emissions should be removed from the atmosphere as the business invests in carbon offset projects.
In short, carbon neutrality means you can compensate for your emissions (often with offsets), while net zero demands that you also actively reduce your emissions, using things like energy efficiency, renewable energy, and other methods.
Other key differences between the two terms include:
The GHGs included: In carbon neutrality, the focus is on one major greenhouse gas, carbon dioxide. However, in net zero, all greenhouse gasses are considered, like methane, not just carbon dioxide. There are six major categories of greenhouse gasses (as previously discussed). These categories include carbon dioxide, methane, refrigerants, and various industrial gasses. Each have different negative impacts on the climate. To account for that, all gasses are converted to an equivalent value of carbon dioxide, hence the focus on “carbon”.
Scope: Carbon neutrality focuses on making sure that an entity's emissions are balanced out by offsets.
Ambition: Net zero is seen as a more ambitious and long-term goal, with more extensive steps taken to remove emissions from the air.
Timeframe: Carbon neutrality can be achieved pretty quickly by offsetting emissions. In contrast, net zero usually takes a longer commitment with a specific date in mind, like 2050.
Policy and global goals: Net zero is becoming a big goal for governments, organizations, and countries in response to our warming planet. It's in line with international agreements like the Paris Agreement, which aims to combat climate change on a global scale.
To sum it up, both carbon neutrality and net zero are methods used to lessen the impact of climate change. They make sure business emissions are balanced out by removals or offsets. But net zero is a more ambitious and detailed goal that looks to completely get rid of net emissions in the future.