5 key steps to creating a credible net-zero plan

Out of the 2,000 largest publicly traded companies in the world, more than 680 now have climate pledges to reach net-zero emissions. But some of those plans are arguably greenwashing: Exxon, for example, says that it will cut emissions in its own operations, but doesn’t count the pollution from customers burning its fuel. In a recent report, the nonprofit NewClimate Institute evaluated net-zero plans from 25 large companies and concluded that they would reduce emissions by only 40% on average, not 100% as claimed. “We set out to uncover as many replicable good practices as possible, but we were frankly surprised and disappointed at the overall integrity of the companies’ claims,” Thomas Day, lead author of the report, said in a statement. Here’s what experts say companies need to include to make net-zero pledges credible.

1. Pledge to hit net zero as soon as possible—and include interim goals

To avoid the worst impacts of climate change, the global economy will need to reach net zero by 2050, meaning that any remaining greenhouse gas emissions can be balanced out by CO2 removal from nature or technology. For companies, that means setting net zero goals that are no later than midcentury. Earlier is obviously better, and some companies are moving quickly: Microsoft, for example, has pledged to be carbon negative by 2030. Those with goals to reach net zero by 2050 need to have clear interim goals so emissions start to drop now. In its report, NewClimate Institute recommends setting a first goal that’s no more than five years away, so it requires immediate action and accountability.

2. Focus on radically reducing emissions, not buying offsets

Companies need to make deep cuts in their own emissions rather than relying on tree planting or other projects that offer carbon credits. The Science Based Targets initiative, which evaluates and validates corporate goals to reduce emissions in line with climate science, has a Net Zero Standard that explains that in most industries, companies will need to directly cut emissions by 90% or more no later than 2050. (In a few industries, such as agriculture, the goal is an 80% reduction because those emissions are inherently harder to eliminate.) “Decarbonization must be the overarching priority of any net-zero strategy,” says Julie Nash, a senior program director at Ceres, a nonprofit that released a report today with guidance for investors to evaluate the validity of net-zero commitments and the use of carbon credits. “Carbon credits alone cannot be used to achieve the net-zero goal,” Nash says.

3. Include emissions from the full value chain

For most companies, most of their products’ emissions are outside their direct control (in climate jargon, “Scope 3” emissions). The majority of the typical carbon footprint of a pair of jeans, for example, comes from growing the cotton and making the fabric and from consumers doing laundry. So to truly tackle emissions, companies need to include the whole value chain in their goals. Working with suppliers can also help whole industries move faster to decarbonize. “You really need to be able to understand the embedded emissions in what you’re selling,” says Nash. “What we’ve also seen is that so much of the innovation can actually be between business-to-business members of a value chain when they work together.”

4. Be transparent

Ceres says that companies should disclose their short, medium, and long-term targets publicly, along with their transition plans to achieve those targets. “The goal is one part of the whole, but you really need to be able to see the concrete actions that a company is going to take to be able to achieve those reductions,” Nash says. Companies should also disclose the “residual” emissions that they expect can’t be eliminated, and the percentage of those they plan to offset through carbon credits.

5. Choose the right carbon credits

As companies reduce emissions as much as possible, the carbon credits they choose to buy to offset the rest need to be carefully chosen. The voluntary carbon market—which exceeded $1 billion last year—has flaws. Some projects are less credible than others. Still, the funding that comes from offsetting plays an important role in protecting forests and other projects that are necessary to reach climate goals.

“We recommend that companies source credits from a credible greenhouse gas program,” says Carolyn Ching, a senior manager at Ceres. One example in the voluntary carbon market is the Gold Standard. “And they should conduct a little bit of extra due diligence just to make sure that all the i’s are dotted and the t’s are crossed when it comes to their carbon credits.” That includes, for example, making sure that a project to protect the Amazon rainforest safeguards local indigenous communities, and doesn’t unintentionally create new problems.