Net zero and decarbonisation

Net zero is a state in which an organisation’s greenhouse gas (GHG) emissions are balanced by an equivalent amount of emissions removed from the atmosphere. Net zero goes beyond the concept of carbon neutrality (emissions offset by reductions) as it requires deeper emissions cuts and less reliance on offsets. Net zero is increasingly becoming the standard for corporate and national climate commitments, in line with international agreements such as the Paris Agreement.

Some of the key steps required to achieve net zero include: getting buy-in from key stakeholders, measuring and defining a baseline, setting science-based targets, developing a comprehensive decarbonisation strategy, engaging suppliers to reduce Scope 3 emissions, monitoring and reporting on your progress, and tackling non-abatable emissions through high-quality carbon removal projects. Finally, it’s important to continually review and adapt your strategy based on the latest scientific research and emerging best practices and technologies. This approach ensures a structured path to net zero that focuses on significant emissions reductions.

Scope 3 emissions encompass all indirect greenhouse gas (GHG) emissions that occur in a company's value chain, both upstream and downstream. These emissions come from sources not owned or directly controlled by the reporting organisation and are grouped into 15 categories, such as purchased goods and services, transportation and distribution, business travel, employee commuting, investments, and the use and disposal of sold products.

Scope 3 emissions typically account for the largest proportion of a company’s total carbon footprint and are on average 11.4 times greater than operational emissions. In certain industries, Scope 3 emissions can account for up to 90% of an organisation’s GHG emissions. Given the scale of Scope 3 emissions, decarbonisation strategies that do not include their measurement and targeted reduction are considered incomplete. As a result, investors, customers and regulators are increasingly demanding transparency and action on Scope 3 emissions.

The Greenhouse Gas (GHG) Protocol is the primary international standard for GHG accounting and reporting and provides a comprehensive framework for organisations to measure and manage their Scope 1, 2 and 3 emissions. Complementary standards and frameworks such as the International Sustainability Standards Board (ISSB), the European Sustainability Reporting Standards (ESRS) and the Science Based Targets initiative (SBTi) further support and enhance GHG reporting and target-setting practices.

In response to the growing importance of comprehensive emissions reporting, regulatory bodies around the world are introducing more stringent requirements, particularly for Scope 3 emissions. Notable examples include the California Climate Corporate Data Accountability Act (SB 253) in the United States, the Corporate Sustainability Reporting Directive (CSRD) in the European Union, the Canadian Sustainability Disclosure Standards (CSDS) and TCFD-aligned reporting in Japan. These regulations underscore the global shift towards mandatory, standardised sustainability reporting and the need for organisations to align with established GHG accounting standards and frameworks.

A carbon credit represents one metric tonne of CO2e greenhouse gas emissions that has been reduced (compared to a baseline), avoided or removed through climate projects around the world. The most common types of carbon credits are technology-based and nature-based reductions and removals. Removals allow carbon to be neutralised and include methods such as reforestation and afforestation, biochar, carbon capture, utilisation and storage (CCUS), and other technologies, while reductions only allow carbon mitigation. These credits should be quantifiable, independently audited and based on transparent methodologies to ensure their credibility in mitigating climate change impacts. Credits should be verified to be of the highest quality and should only be used to complement a robust decarbonisation strategy and concrete action, compensating non-abatable emissions.