How to tell if a company’s ‘net zero’ goals are serious—or just greenwashing

The number of companies that have set net-zero climate goals—meaning that they’ll cut their CO2 emissions as much as possible, and any they still emit will be offset by projects that capture carbon—has more than tripled over roughly the last year. Nestlé, the world’s largest food company, says that it plans to reach net-zero emissions by 2050. Unilever, another consumer product giant with hundreds of brands, plans to get there by 2039. Duke Energy, the North Carolina-based electric utility with a long history of using coal, plans to reach net zero by 2050. Even oil companies such as BP now say that they are aiming for the same thing. Others, including Amazon and Microsoft, plan to hit the goal much sooner.

Climate scientists say that society as a whole needs to reach net zero by the middle of the century, at the latest, to avoid the worst impacts from climate change. That means that businesses, along with governments, have to do the same. But when companies set net-zero goals, some plans are more credible than others.

“Not every net-zero target is the same,” says Angel Hsu, the founder of the Data Driven EnviroLab at Yale-NUS College and one of the authors of a recent report with NewClimate Institute examining net-zero pledges in detail. “Part of the problem is that there isn’t a unified single definition of what net zero actually means. And there are many different opinions about what that should mean too.”

A company might set a net-zero target, but then not actually cut emissions as much as it feasibly can or as much as is needed for society to stay on track for climate goals. A recent report from the Sierra Club gives Duke Energy an “F” grade for its net-zero strategy: The report faults the company for not yet having plans to retire the majority of its current coal plants, and for planning to build new gas plants rather than shifting fully to clean energy. The report says that this is “entirely incompatible with limiting warming to 1.5°C,” a threshold for avoiding the worst impacts from climate change.

So what makes net-zero goals truly ambitious—and when are they the latest version of greenwashing?

Do they have more than just a 2050 goal?

“I think the most important thing that a company can do is, in addition to the long-term net-zero commitment, they can commit to medium-term goals or targets,” says Steven Clarke, the director of corporate clean energy leadership at the nonprofit Ceres. “That ensures that they’re actually taking action now to start getting them on that trajectory to net zero.”

Many of the massive transitions that have to happen take time, and without clear interim goals, there’s a risk that companies won’t be able to make changes quickly enough. And as company leadership changes, the company might also later say that it’s no longer possible to meet the net-zero goal. (Companies have already missed major environmental targets, such as pledges to end deforestation by 2020, with little public blowback.) Right now, according to a recent report from DataDriven EnviroLab and the NewClimate Institute, only 8% of companies with net-zero goals have interim targets.

The world also needs to cut emissions now to avoid blowing past 1.5 degrees of global warming long before 2050. A 2018 UN report warned that the world would need to cut emissions roughly in half by 2030. For some companies, a 2030 goal to halve emissions makes sense. But because some industries can move faster than others, they need more aggressive goals to ensure that society as a whole can meet its target.

Solar and wind power, for example, is already so affordable that electric utilities should be aiming for cuts of at least 80% by the end of the decade, says John Romankiewicz, a senior analyst for the Beyond Coal Campaign at the Sierra Club. “We’re looking at a sector that has the technology on hand to do a really steep cut,” he says. “That will also enable other sectors like buildings and transportation to take off and have a clean electricity supply.” That’s why the organization gave Duke Energy a failing grade, even though Duke is aiming to reduce its emissions by 50% by 2030.

For other companies that can feasibly reach net zero sooner than 2050, it makes sense to act much more quickly. Microsoft, for example, plans to become “carbon negative” (a step beyond net zero, meaning that it removes more carbon from the atmosphere than it emits) by 2030.”We know that to get to the ultimate outcome we want, which is a net-zero carbon economy, that there is all a lot of work that needs to happen,” says Lucas Joppa, chief environmental officer at Microsoft. “And Microsoft strongly believes that if there’s a lot of work you need to do you better get started now.”

The company is working to virtually eliminate all of the emissions that are in its direct control; it’s shifting to 100% renewable energy, including the backup generators at its data centers that currently run on diesel, and moving to electric vehicles for its company fleet. Because its products are still responsible for other emissions that it can’t directly control, including the electricity used in customer’s homes, the company will also be relying on carbon offsets.

What do they mean when they say “net zero”?

As companies set emissions goals, they don’t always use the same language. Some, like Microsoft, talk about becoming “carbon negative.” Some use “climate positive” or “net-negative emissions” to mean the same thing—removing more CO2 from the atmosphere than the company is responsible for emitting. Some say they’re aiming for “net zero” while others use the phrase “carbon neutral” to indicate that any remaining emissions from the business will be offset by projects that remove carbon, such as tree-planting. One nonprofit that works with companies to measure their carbon footprint, reduce emissions, and offset remaining emissions uses the phrase “climate neutral,” which some prefer because it refers to all greenhouse gases, not just carbon dioxide. Some organizations use “zero-carbon” or “carbon-free” as a synonym for net zero.

The mix of phrases can be confusing for consumers, but the even bigger challenge is differences in how companies are measuring their footprints. When some companies say they’re aiming for net zero, they’re only talking about the emissions that come directly from their own operations. Some oil companies, for example, have a goal to get to net zero at oil and gas wells but don’t include the much larger amount of emissions from the customers actually burning the fuel. (BP, for instance, doesn’t count most of these downstream emissions in its goal.) Others are setting broader goals, such as Apple, which plans to reach net-zero emissions across its entire supply chain by 2030. Emissions beyond a company’s control, including what its suppliers and customers are responsible for, are called “Scope 3” emissions.

If companies don’t look at the full impact of their products and services—including these so-called “Scope 3” emissions—the world won’t stay on track to actually address climate change. “I think you have to look at the whole picture, from supply chain to end-state user, if we want to achieve this goal as a society,” says Andrew Poreda, a research analyst at Sage Advisory, an investment management firm. “I think that’s essential. If we saw 90% of companies make a pledge and then the 10% didn’t include Scope 3, like in the oil and gas sector and utilities, we would still be experiencing global warming, and then ultimately, the whole net-zero goal is not achieved.”

Are they cutting emissions as much as possible, as quickly as possible?

The biggest challenge for businesses is how to steeply cut emissions. One early step, typically, is switching to renewable electricity, but even that can be done in different ways—some more effective than others. Google, for example, was an early corporate buyer of renewable energy, but then shifted to funding the construction of new wind and solar projects, not just paying for power from existing plants. Because the facilities were new, it was a way to ensure that the company was actually helping reduce overall emissions.

Now, it’s working to make sure that all of its operations run on renewables from local electric grids. (Companies often just purchase renewable energy from other locations, buying enough to match their own energy use. If a solar or wind farm is on another grid, it’s a little misleading to say that the company is running on renewable power.) By 2030, it plans to run the entire business on carbon-free energy 24-7, a more challenging goal, since wind and solar power aren’t available continuously and need to be paired with energy-storage infrastructure that isn’t yet fully in place. The company is shrinking the emissions from everything under its control, from company shuttles to Nest thermostats, and then, like Microsoft, using carefully vetted offsets for the rest. In September 2020, it announced that it had used offsets to eliminate its operational carbon footprint for the entire history of the company.

Shrinking emissions is harder for some companies than others. For a tech company with a carbon footprint that mostly depends on electricity use, shifting to renewable energy has a huge impact. Others have emissions that are harder to eliminate—such as the cement industry, which collectively emits more greenhouse gases than most countries; the emissions come both from burning fuel and from the chemical process of making cement. But even for something such as cement, solutions may soon be available. New technology is making it possible to run heavy industrial processes on renewable energy for the first time. Pollution from cement plants can be captured and sequestered in the cement itself. For every company, planning for net zero involves understanding what technology and systemic solutions are available, what’s feasible for the future—and how their business model should change if emissions are impossible to eliminate. Some fossil fuel companies, for example, are now transitioning completely away from fossil fuels.

Hsu argues that as companies invest in new technology to cut future emissions, they should also be very clear about what can happen feasibly now. “I think what we would like to see from the scientific perspective is that companies be realistic about what they can actually do, and be really transparent,” she says. “So they can really only reduce their emissions by 50% by 2025, or 2030, to me, that’s a much more credible target than if a company says we’re going to go net zero by 2050, and they have no way of actually achieving that goal. Then it becomes an exercise in greenwashing or offsetting and questionable offsets.”

What offsets are they using?

When companies can’t eliminate some emissions, they turn to carbon offsets to account for them—supporting projects such as reforestation, or capturing methane pollution at landfills, or making changes in agriculture to capture more carbon in the soil. But offsets are challenging to do right. “Many companies have set net-zero targets without making substantial changes to their operations, and offset their carbon footprint without any discussion on where the offsets came from and how they verified their quality,” says Hsu.

Offset programs that plant trees, for example, can be hard to track, and there’s a risk that the trees might still later be lost to logging or forest fires. Because offsets are cheap, she says, some companies also might not be motivated to actually do the work of reducing emissions as much as possible—it could be easier to pay to keep polluting. “We have seen a lot of companies that have come out and they said, we’re only going to reduce emissions by 50%, and then we’re going to be offsetting the rest,” she says. “And there’s a big risk in that because it could be a form of greenwashing.”

Microsoft is trying to fix some of the issues in the current offset market. With natural ways to capture carbon, including reforestation or changes in agriculture that can store more carbon in soil, one problem is how to measure how much extra carbon a forest or farm is absorbing. “The measurement is actually pretty difficult,” Joppa says. “We still need to mature our ability to measure and verify the carbon sequestration that’s actually occurring.” Companies selling offsets also need to factor in risks such as forest fires and offer insurance policies such as planting extra trees.

Hsu says that projects such as tree planting could be used in the short term if they’re high-quality projects, meaning that they’re carefully tracked and account for challenges such as forest fires through planting extra trees as insurance, for example. But in the long term, we’ll need to shift to a more diverse set of projects that remove carbon, such as “direct air capture” machines that pull CO2 out of the air. When United Airlines recently announced that it would reduce its greenhouse gas emissions 100% by 2050, it made a point of choosing not to use traditional carbon offsets. Instead, the company is investing in direct air capture, something that it says is necessary. “The reality is that traditional carbon offset programs simply can’t come close to offsetting the 4,000-times increase in annual carbon emissions since the industrial era began,” CEO Scott Kirby said at the time. “It is just mathematically impossible to find enough land to plant 4,000 times as many trees.” But the technologies involved in capturing carbon still need to scale up and come down in cost for them to be a fully effective offsetting strategy. If they don’t, companies counting on them will have to rethink the pathway to their goals.

How transparent is the process?

When companies don’t have clear plans for reaching net zero, their goals lack credibility. The bank HSBC recently announced that it would reduce “financed emissions”—that is, the emissions from the companies they invest in—in line with the Paris Agreement, but it didn’t say how it planned to phase out its funding for oil, gas, and coal projects. Activists derided the announcement, saying it was “like saying you’ll give up smoking by 2050, but continuing to buy a pack a week, or even smoking more.”

Few companies with net-zero pledges have shared the details of their plans, says Hsu. Her team is currently working with CDP, a nonprofit that asks companies questions each year to disclose climate risk, to add new questions that delve into the details of net-zero goals—from what policies a company has in place to whether they’re including customer or supplier emissions in their calculations. “All these questions are really important to understanding how credible that zero target is,” she says. “And the fact of the matter is that we don’t really have that information.”

As companies share information, they can also help others move faster. Microsoft, for example, partnered with Nike, Starbucks, and several other companies in 2020 to launch a new organization, Transform to Net Zero, to help build road maps for others to reach the same net-zero goals. “If we achieve our carbon-negative goals by 2030, and we don’t help anybody else do that, it’s not a win for us,” says Joppa. “And it’s not a win for society.”

Correction: By 2030, Google will use all carbon-free energy, rather than all renewable energy (which leaves it open for sources other than renewables).