Our experts explain what a Net Zero Transition Plan is and what they can mean for your business or organisation’s success.
Net zero means achieving a balance where the amount of greenhouse gas (GHG) emissions released into the atmosphere is equal to the amount permanently removed. Here you will find explanations of Net Zero Transition Plans and their significance for businesses.
What net zero means for business
Long-term business planning will increasingly focus on addressing climate change and net zero. Businesses are urging their value chains to actively contribute to achieving their net zero commitments. Tender and bid requirements increasingly demand transparent and measurable carbon reduction targets and comprehensive Transition Plans for regulatory compliance.
What is a Net Zero Transition Plan?
The Intergovernmental Panel on Climate Change (IPCC) published a report in 2018 emphasising the pressing need to halve the world’s emissions by 2030 and achieve net zero emissions by 2050 to ensure global warming stays below 1.5°C. Natural disasters caused by climate change are already taking effect at an alarming rate. Achieving net zero aims to limit global warming to 1.5°C to mitigate these effects.
A Net Zero Transition Plan details how an organisation intends to reduce emissions produced either directly or indirectly by their activities. The plan should include targets and metrics for reducing different types of emissions, as well as finding ways of removing carbon through nature-based solutions like sequestration through planting trees, or through technological interventions such as carbon capture and storage. Most importantly, robust Net Zero Transition Plans must be both pragmatic and practical.
Benefits to business
- Lower costs: Reducing costs and increasing profits through measures such as increasing energy efficiency.
- Competitive advantage: Increasing demand from larger businesses in the wider supply chain for low carbon products and services.
- Customer expectations: Many customers want environmentally and socially friendly products and services and are willing to pay more.
- Accessing new markets and funding: Offering innovative sustainable products, services, or business models may unlock low-carbon business opportunities.
- Regulatory requirements: Proactively navigate the legislative landscape as governments consider regulations to achieve their net zero timelines.
UK context
In 2019, the UK was the first major economy to create a legally binding target to bring GHG emissions to net zero by 2050. Many companies have since mirrored this, setting their own decarbonisation goals to demonstrate a commitment and access the benefits of a net zero business sooner.
Standards
Due to stakeholder demands along with current and expected regulatory mandates, businesses are increasingly obtaining external assurance on sustainability information from net zero standards. These standards support businesses with achieving their net zero goals. The SBTi’s Corporate Net-Zero Standard helps businesses set net zero targets that align with the Paris Agreement by providing a clearly defined path to reduce emissions.
What is involved?
A good Transition Plan relies on accurate data, holds the business accountable for its actions, is transparent for stakeholders and can be verifiable. This is achieved by:
- Aligning with a standard, such as the Science-Based Targets initiative (SBTi).
- Identifying and measuring Scope 1, 2, and 3 emissions to reduce them.
- Setting GHG reduction targets with the inclusion of a net zero commitment.
- Creating short, medium and long terms actions for achieving net zero target, including how these actions will be financed. g. supplier sustainability analysis, circular economy practices, embodied carbon assessments, carbon mitigation.
- Integrating your business strategy and Net Zero Transition Plan.
- Implementing governance and accountability mechanisms for the plan’s delivery with robust periodic reporting.
- Addressing material risks and leverages opportunities for the natural environment and stakeholders, including the workforce, supply chains, communities, and customers.
- Annually reviewing your Net Zero Transition Plan is essential for ensuring its alignment with evolving business objectives and regulatory changes.
Net zero challenges
Transitioning to net zero presents complex challenges to businesses, such as:
- Business implementation: Implementing greenhouse gas emissions accounting may be an unfamiliar process, creating challenges for leadership in justifying this and proving benefits internally. Developing transition plans for effective change management is essential, aligning actions with organisational objectives and strategy.
- Technological integration: Technological integration facilitates the transition to net zero and enables data-driven decision making. Technological solutions must be effectively incorporated into existing business operations.
- Accessing finance to transition: Transitioning to net zero requires investment and may require the assessment of available finance options, including sustainability-linked bonds. Accessing such investment requires aligning with sustainable taxonomies and achieving disclosure requirements.
Global challenges
Creating robust Net Zero Transition Plans relies on international collaboration between various stakeholders.
For businesses, there are external considerations to account for such social and political factors. These shape the global economy and must be accounted for in the net zero transition to ensure effective GHG reduction solutions. For example, changes in leadership can impact climate policies, meanwhile affordability concerns must be addressed to ensure the financial burden is fairly distributed across differing socio-economic households.
Corporate leaders are those seeking to go beyond net zero. To achieve the most significant positive impacts, an approach must be taken that measures, reduces and removes carbon emissions simultaneously, rather than a sequential order of measure, reduce, remove emissions. In turn, this allows organisations to take greater control of their carbon emissions.
