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Becoming a carbon neutral business: actionable steps

Rising global average temperature and rapid global warming are causing alarming consequences worldwide. To limit global warming, carbon neutrality is essential. But what does it mean and how to become a carbon-neutral company?

Climate change is affecting the entire world, and it is already manifesting its impacts on ecosystems, economy, and people’s health. To limit global warming to 1.5°C (34.7 °F) – a threshold the Intergovernmental Panel for Climate Change (IPCC) suggests is safe – carbon neutrality by mid-21st century is essential. This target is also laid down in the Paris agreement signed by 195 countries. But what means carbon neutrality? What are the steps a company should undertake to become carbon neutral? Is carbon neutrality the ultimate goal?

What do carbon footprint and carbon neutrality mean?

The carbon footprint expresses the amount of CO2 (carbon dioxide) released into the atmosphere as a direct or indirect consequence of the results of activities associated with a product, an organization, or a service. Carbon footprint may be measured for a product or process/activity:

  • Organizational carbon footprint measures CO2 emissions from all the activities across the organization, including energy used in buildings, industrial processes, and company vehicles.
  • Product carbon footprint measures CO2 emissions over the whole life cycle of a product (goods or services), from the extraction of raw materials and manufacturing right through to its use and final reuse, recycling, or disposal.

Carbon neutrality is reached when the same amount of CO2 is released into the atmosphere as is removed by various means (offsets, removals, or absorptions), leaving a zero balance.

Key steps to becoming a carbon neutral business

Let’s look at what are the steps a company should undertake to reach carbon neutrality.

  1. Define the scope: first, a company needs to decide whether to make the whole company or a particular product/service/activity carbon neutral.
  2. Measure: total CO2 emissions covering the defined scope should be calculated. This is done by identifying and collecting data, which may vary according to the location and sector of the company; data needed includes things like fuel consumption on site and for company-owned vehicles, purchased energy, waste and business travel. It’s important to use a robust approach to calculating carbon emissions: the Greenhouse Gas Protocol Standard provides detailed guidance on method; another recognized standard is ISO 14064 from the International Organization for Standardization, useful for measuring emissions of organizations; ISO 14067 is a useful standard for product analysis.
  3. Verify and certify the results (optional): a company may choose to have a third party verify its carbon footprint, to add credibility and confidence to carbon reporting for public disclosure. Certification will also enhance reputation and build trust with customers, investors, and stakeholders. ISO 14064-3 is the standard that specifies principles and requirements and provides guidance to third parties for verifying GHG statements.
  4. Reduce: once the baseline is set, emissions should be reduced. The company should adopt a carbon management system aimed at the identification and implementation of interventions to reduce its emissions, promoting the use of cost-efficient technologies that use low carbon. The footprint report will highlight where the most significant emissions hot spots are for the company; the best measures to deliver internal reductions will be very different for each company but typically the focus is on three areas: energy use, waste, and travel. Internal reductions can range from the relatively simple, such as changing to energy saving light bulbs, to those which may require a greater degree of behavior change, such as reducing travel and using technology for meetings, to significant structural investment such as updating buildings or manufacturing processes.
  5. Offset: compensate emissions that cannot be avoided in the short term, funding an equivalent carbon dioxide saving elsewhere. Many organizations are not able to reduce their emissions to zero immediately, as it may take a few years for them to make the technological investments and changes that carbon neutrality requires. However, companies can – in addition to the reductions they can make now – also invest in emission reductions outside their organization. Investments can be made to fund actions somewhere in the world that remove the same amount of carbon out of the air, or to prevent carbon emissions: this is achievable through activities that are economically efficient (e.g., planting of trees, funding renewable energy projects and energy efficiency projects), many of which bring additional social and community benefits in developing countries as well as reducing greenhouse gases.

You may now be wondering, is carbon neutrality for all, even small businesses? The answer is yes. It is not an easy process, and it is important that companies acknowledge that and take the process seriously, but there are tools helpful for companies willing to calculate their carbon footprints, and there are professionals qualified to help small up to big companies achieve carbon neutrality, during every stage of the process.

Carbon neutrality certification

Once achieved, if the process has been robust enough and performed following international standards, carbon neutrality can be certified. A carbon neutral certification demonstrates a company’s commitment to decarbonization as it cuts the organizational or product footprint and compensates for any remaining emissions through the purchase of carbon offsets.

PAS 2060, published by BSI (British Standards Institution), is the internationally recognized specification for carbon neutrality. It sets out the requirements for quantifying, reducing, and offsetting emissions for organizations and products. To get the certification – applicable to companies of all sizes and sectors -, an organization shall:

  • Calculate CO2 emissions within a clearly defined boundary (for example, a specific product/service, or the whole company emissions)
  • Prepare a so-called Qualifying Explanatory Statement (QES), which includes:
    • A statement of commitmentA timescale for achievementA carbon management plan and targets for emissions reductions
    • A plan demonstrating how the company intends to reduce its emissions, progressively limiting resort to offsets
  • Purchase high quality offsets (such as Gold Standard and Verified Carbon Standard) to compensate for all remaining emissions.

It is advisable that, if a company is willing to have its carbon neutrality certified according to this standard, PAS 2060 requirements should be taken into consideration since the beginning of the carbon neutrality journey: indeed, as highlighted above, achieving the certification requires specific actions to be undertaken by companies.

Companies going carbon neutral

A growing number of companies have jumped on board with climate action. Here are some examples of big companies that became carbon neutral:

  • Microsoft, who is leading climate action, and became carbon neutral back in 2012
  • Google, carbon neutral since 2007
  • Gucci, who achieved carbon neutrality in 2018
  • Burberry, who recently became carbon neutral across its own operations globally
  • Estée Lauder, who in 2020 achieved carbon neutrality and sourced 100% renewable electricity for its direct operations

And many more big companies (like Apple and Amazon) are committed to achieving carbon neutrality in the upcoming years.

What’s next? Going the extra mile

The compensation part is a temporary solution, not a replacement for cutting down on companies’ emissions. Even if offsetting is an important tool, especially in the short term, companies should anyway find solutions to reduce their direct emissions.

Also, even if carbon neutrality and net-zero are often used as interchangeable terms, they are not the same. Both carbon neutral and net zero refer to different actions that are essential to combat climate change, but the scale and kind of emissions removed are different:

  • Carbon neutral can cover a defined part of business operations and typically accounts for CO2 emissions, but not other greenhouse gases, such as methane (CH4), nitrous oxide (N2O) and other hydrofluorocarbons. Carbon neutrality wouldn’t prescribe a specific reduction trajectory. Also, as per the reporting boundary, the inclusion of Scope 3 emissions is not mandatory, even if it’s suggested.
  • Net zero emissions mean that a company reduces all greenhouse gas emissions across its whole supply chain, setting and achieving long-term science-based targets, which involve deep cuts to emissions and the permanent removal of any remaining greenhouse gases through sequestration. A net zero target should be in line with limiting temperature rise to 1.5°C for Scope 1, 2 and 3 emissions.

But the journey does not end at “zero” or “neutrality”: the ultimate destination is to become “climate positive” or “carbon negative”. In other words, to absorb more emissions than we emit once we’ve reduced as much as is needed to limit global warming to 1.5°C. At that point, companies have a negative amount of carbon emissions and positively impact the climate.

Climate action is complex and urgent, and what matters the most is that companies join the transition with other businesses that are taking real action to address the climate crisis and to strengthen the implementation of response with an aim to create a resilient planet.

Further reading:

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