• Net zero commitment

What is net zero?

 

 

What is net zero?

Put simply, ‘net zero’ means that the total greenhouse gas (GHG) emissions that an entity (e.g. an organisation, city, state, country or person) adds to the environment are equal to or less than the emissions that it removes.

Think about it like a bath – turn on the taps and you add more water, pull out the plug and water flows out. The amount of water in the bath depends on both the input from the taps and the output via the plug hole. To keep the amount of water in the bath at the same level, you need to make sure that the input and output are balanced.

Reaching net zero applies the same principle, requiring businesses, households and global societies to balance the amount of greenhouse gases that they emit with the amount they remove. When what we add is no more than what we remove, we reach net zero.

Importantly, achieving net zero is not the same as being ‘carbon neutral.’  Carbon neutrality requires a balance between emitting carbon and absorbing carbon emissions from carbon sinks. Carbon sinks are any systems that absorb more carbon than they emit, such as forests, soils and oceans.  Notably, to date, there are no artificial carbon sinks that can remove carbon from the atmosphere on the necessary scale to fight global warming.

In a business context, reaching net zero means achieving a state in which the activities in the value chain of an organisation result in no net impact on the climate from GHG emissions.  This commitment is consistent with the objective of limiting global warming to a maximum of 1.5°C above pre-industrial levels by 2050 - and keeping it steady thereafter. BDO recently committed to supporting this goal by becoming part of the Net Zero Financial Service Providers Alliance.  More information about what this means for BDO as a whole (and for our firms specifically) will be communicated shortly.  


Net zero and emission scopes

GHG emissions are grouped into three categories or scopes.  In order to reach net zero, an organisation needs to address its impact across all three. 

Scope 1 emissions are those that a company produces and controls directly – for example, by burning fuel in a boiler, using a diesel generator in its facilities or by driving its own vehicles.

Scope 2 emissions are indirect emissions that are associated with the electricity or energy that a company buys to heat or cool its buildings. 

Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both ‘upstream’ and ‘downstream’ emissions. These are often the biggest issue and the toughest to measure as scope 3 includes emissions from goods or services bought and/or sold, air travel and daily commuting to the office. Tracking scope 3 emissions requires an organisation to question everything, including ‘Where are my paper supplies coming from (upstream)? Who is my supplier? How did the company produce the products that we are using e.g. IT and office equipment, cleaning chemicals and packaging? How do we dispose of and/or recycle our office waste (downstream)?’
 

Can ‘carbon offsets’ be used to reach net zero?

To get to net zero, organisations may have to use carbon offsets, especially to compensate for hard to measure scope 3 emissions. A carbon offset broadly refers to a reduction in GHG emissions – or an increase in carbon storage (e.g., through land restoration or the planting of trees) – that is used to compensate for emissions that occur elsewhere.

A typical example is Lufthansa, a German airline that calculates the CO2 footprint of passengers then offers them the chance to offset their flight emissions by supporting the increased use of lower CO2 aviation fuel or sustainable offset projects worldwide.

Carbon offset credits should not be seen as a substitute for the reduction of an organisation’s own GHG reductions.  There is a role for offsetting in net zero strategies, but it remains complicated.

Experts and scientists from many leading climate change organisations, including the Science Based Targets Initiative (SBTi), state that organisations should reduce their emissions as much as possible along the full value chain (scopes 1, 2 and 3), in order to be consistent with limiting global warming.  In addition, they should neutralise the impact of any emissions that cannot be eliminated by permanently removing an equivalent volume of carbon from the atmosphere.

This removal of carbon should ideally happen through activities in the organisation’s own value chain - including use of ‘nature-based solutions’ that sequester emissions; such as restoring natural carbon sinks like forests, wetlands and peatlands or by investing in natural flood management and other ecosystem services. 

Others look to new technologies offering a removal solution, such as carbon capture and storage - the process of capturing and storing CO2 (for example in disused mines or oil fields) to avoid release into the atmosphere.

We should not pretend that the achievement of net zero is easy, given the complex interplay of political will, the required private and public investments and the availability of mature and scalable technologies. However, global societies do need to recognise the urgency, prepare for the transition and act together to combat climate change effectively.

As individuals, it is our responsibility to be a net zero hero and ask those promoting the concept (whether they be companies, local authorities or colleagues within BDO) two very important questions – HOW? and WHEN?

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Trond-Morten is the is the global sponsor of the BDO sustainability programme and responsible for the development of the approach, framework, governance and support around how BDO firms and the BDO Global Office can adopt and integrate sustainability into their business and culture.