What to do when net-zero falls short

Higher impact climate strategies for businesses large and small

This is a guest post by Lucia Simonelli. Lucia is a Senior Climate Researcher for Giving Green. Prior to joining Giving Green, Lucia was a Senior Policy Fellow at Carbon180 where she specialized in federal policy for direct air capture (DAC) and other carbon removal pathways. She also served as a AAAS Science & Technology Policy Fellow in the Office of Senator Sheldon Whitehouse, working on climate initiatives and learning about the legislative process. Lucia holds a BSc in mathematics from the University of Texas and PhD in mathematics from the University of Maryland.

The concepts of neutrality and net-zero continue to play a central role in private sector climate strategies. The conventional approach to carbon neutrality generally consists of a company performing an inventory of Scope 1, 2, and sometimes Scope 3 emissions, identifying a subset of these emissions to reduce, and committing to the purchase of offsets to ‘neutralize’ remaining emissions. Net-zero frameworks build on the concept of carbon neutrality, but tend to require an ambitious target for emissions reductions and the purchase of carbon removal to compensate for any residual emissions. Increasingly, however, these climate strategies are being scrutinized to ensure good faith, viability, and progress. As a result of this scrutiny, more companies are looking to go beyond conventional approaches in order to elevate true impact over ineffectual claims.

While resources do exist to rigorously guide corporations to net-zero, like the Science Based Target Initiative (SBTi), for some businesses this guidance can be inaccessible and even incomplete. As outlined in a new white paper by the nonprofit Giving Green, we suggest instead that companies consider shifting from rigid accounting frameworks to strategies that both maximize impact as well as enable future net-zero goals. We share some of our ideas in this post.

Challenges

While we think that direct emissions reductions should definitely be prioritized when possible, the reality is that many businesses, especially SMEs, are finding it difficult to reduce all or even much of their emissions at present – due to e.g., reliance on the grid, complex supply chain factors, or lack of resources for a dedicated team or hired consultants/paid platforms. This inability to tackle emissions reductions, paired with an emphasis on ton-for-ton accounting, has resulted in an over-reliance on low-quality offsets and encouraged the practice of using avoided emissions credits as neutralizing factors in climate math – a course of action that is increasingly drawing criticism. Given that the quantity of purchased carbon credits is often linked to the quantity of emitted tons, companies may be inclined to choose credits based on price rather than quality. As a result, these neutrality commitments often do not achieve what they claim, and even worse, may be contributing adversely to progress toward addressing climate change.

“But the very nature of net-zero plans drives companies toward solutions that look quantifiable on paper. By embracing cheap offsets and other dubious tools, they can tally up a somewhat credible-seeming ton-for-ton decarbonization plan. It’s time to stop that.” - James Temple, MIT Technology Review

Limitations

Foundational to devising a climate strategy is determining the goals and framing. A convenience of neutrality or net-zero frameworks is that the objectives and methodologies are generally predetermined. However, there are downsides to this rigidity. First, the need for careful accounting central to these frameworks encourages climate investments that are easily quantifiable, limiting opportunities to fund less measurable but arguably more effective approaches. Second, by design, these frameworks constrain the climate responsibility of a given company to the size of their own emissions. For many companies, addressing the full scope of their emissions is beyond reach at present. But for other companies, limiting action to their own footprint is not ambitious enough – we think they can actually do more. 

“While the world will need to reach net zero, those of us who can afford to move faster and go further should do so.” - Brad Smith, Vice Chair and President, Microsoft

Targeted technological development

We want to be clear, emissions reductions using existing tools should undoubtedly be prioritized when possible – but full decarbonization of the economy will rely on continued innovation. Supporting this innovation can be a component of almost any company’s climate action plan, but it may require thinking a bit differently. This doesn’t and shouldn’t keep a company from  tracking its emissions. In fact this information is quite helpful to understand which emissions sources are the largest or even the most difficult to address – knowledge that could spark out-of-the box ideas leveraging internal demand and even expertise. When companies choose to address their most difficult emissions, they can meaningfully reduce their carbon footprint while also developing systems and technologies that can reverberate across their sector. Take for example CarbonCure’s partnership with Heirloom to explore low-carbon concrete, Google’s commitment to purchasing 24/7 carbon-free energy by 2030, or Fortescue’s investment in R&D, renewable technology, and workforce training to enable the transition to green steel. Yes, these companies are working toward the realization of their own climate goals, but the impact of their efforts will extend beyond their own operations.

Carbon removal investment

The above examples may seem niche or exclusive to resource-rich companies, but there are more widely accessible options for businesses of all sizes to have an outsized impact on decarbonization. For example, companies can support the emerging carbon removal sector, a pillar of climate action that will be needed to achieve global net-zero goals. While there are some suppliers offering direct purchases of high quality carbon removal – projects that store carbon for hundreds to thousands of years – the reality at present is that not much of this high quality supply is available. And, that which is available is too expensive to create broad demand. At this early stage, supporting carbon removal through catalytic contributions – e.g. supporting R&D, funding a portfolio of projects in various stages of innovation, or entering into longer term purchasing commitments – could be more impactful than a one-off purchase of tons. And the good news is that there are an increasing number of ways companies can do this. Two examples are Frontier and Milkywire’s carbon removal portfolio. While they differ in scope, magnitude, and structure, they both support a portfolio of vetted carbon removal projects at various stages of innovation and offer pathways for contributions of any amount. 

Policy engagement

It’s also worth noting that innovation is not solely a private sector endeavor. Public policy is a key driver of the technological, market, and human behavior changes necessary to address climate change. Many important emerging technologies have relied, and continue to rely, on public policy through interventions including R&D funding, subsidies, and even regulatory structures. 

Historically, the private sector has remained on the sidelines with respect to supporting regulation and policy to mitigate climate change. In fact, evidence points to a prevalence of private sector contributions funneled toward climate policy obstruction, including via trade organizations. We believe that companies stand to benefit from moving beyond obstruction or inaction toward proactively advocating for robust climate policy. For example, the bulk of the climate provisions in the Inflation Reduction Act of 2022 (IRA) take the form of tax credits, and corporations are eligible for around $216 billion of these credits. 

Some businesses may not have policy arms, and therefore have limited tools to influence policy directly. If they are members of trade associations or coalitions, they can push for these groups to proactively support innovation policy. An even more broadly accessible option is to fund  highly effective nonprofits advocating for innovation policy in a given sector (see Giving Green’s recommendations for some examples).

Climate funds

Companies interested in effecting change across a portfolio of different initiatives, including technological innovation, can create or contribute to funds that allocate resources across various types of climate interventions. Examples of these funds include Microsoft’s Climate Innovation Fund, Milkywire’s Climate Transformation Fund, and the Giving Green Fund.

“A new model for corporate climate action is needed for a number of reasons, but they can be boiled down to one key meta-problem - a mismatch between the current solution set available and the scale of the problems they are trying to solve.” WWF and BCG, Beyond Science-Based Targets

In practice, what the best climate strategy is for businesses may not have one right answer. But, to begin, we should question the efficacy of conventional frameworks and explore how a business can maximize climate impact given its available resources. This alternative framing allows for creative, new ideas to enable broader impact, while a narrow focus on carbon accounting may limit the impact of a company’s strategy. Ultimately, each company will face its own set of challenges and constraints when devising a climate plan, but it will also have a unique set of opportunities. 

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