What does net-zero actually mean and what are the implications for businesses?
‘Net-zero’ has become a common part of language in the energy and sustainability world since the UK government legislated to hit net-zero carbon emissions by 2050.
It requires businesses to actively reduce their carbon footprint by implementing strategies that reduce their greenhouse gas emissions as far as possible. This can involve reducing energy consumption, switching to low-carbon energy sources, working with low-carbon service and goods providers and using low-carbon modes of transport.
Although there is no universal definition of net-zero, the Science-Based Target initiative defines net-zero as an at least 90% reduction in operational (Scope 1 and 2) and value chain (Scope 3) emissions by 2050 at the latest. Businesses can then use carbon removal offsets to balance any remaining emissions, up to a maximum of 10% of their baseline emissions, that cannot be reduced through their own actions.
Why pursue net-zero?
- Customer demand: Customers, including major contractors like the NHS and UK Government, increasingly require businesses to have a ‘Carbon Reduction Plan’ as a part of their tender process. This plan should outline emissions, a commitment to net-zero by 2050, and strategies for emission reduction.
- Cost efficiency: Reducing energy consumption can result in cost efficiency and savings. With current energy prices, reducing consumption is an even bigger win than before. From a Scope 3 perspective, the more a company purchases, for example raw materials, the higher the Scope 3 emissions footprint will be. Thus, improving usage efficiency, such as packaging and raw materials will reduce costs as well as emissions.
- Investor and lender appeal: Investors value ESG (Environmental, Social, and Governance) performance during decision-making processes. So, for businesses looking to attract investors, a net-zero plan goes a long way toward demonstrating ESG credibility.
- Employee preference: Employees are showing increased preference towards employers that have good sustainability credentials. Recent research demonstrated that 46% of respondents want their company to demonstrate a commitment to ESG, while 20% of respondents turned down a job due to ESG reasons.
- Regulation: While not yet mandatory, the UK has legally committed to net-zero by 2050. As a result, we are seeing increasing ESG regulation across the UK, Europe and US which will impact businesses of all sizes.
Is manufacturing a key player in the journey to net-zero?
Manufacturers are pivotal in developing new decarbonisation technologies, designing and making the products and providing the services that will allow other businesses and the UK to decarbonise. Such technologies include carbon capture, CO2 storing cement, and low-emission plastics. They also support the growing demand for existing low-carbon solutions such as electric vehicles and wind turbines. Manufacturers play a critical role in various decarbonisation sectors, including resource efficiency, transportation, low-carbon energy, green supply chains, and product standards, essential for the UK’s overall decarbonisation by 2050.
How can businesses start their journey to net-zero?
To effectively track progress, businesses must start by comprehensively assessing their greenhouse gas emissions (Scope 1, 2, and 3). This assessment not only enables improvement demonstration but also pinpoints emission hotspots, crucial for crafting a decarbonisation strategy. While prioritising emission hotspots is essential, it’s equally important to develop a detailed short, medium, and long-term plan that aligns with company goals, budget, and technological possibilities. Setting Science-Based Targets that link to the decarbonisation plan, while considering competitive and customer factors, is key to ensuring progress.
Anything else businesses, especially manufacturers should know about net-zero?
The manufacturing industry will be challenging to decarbonise due to unique processes and emission sources. Changing existing processes and workflows will require upfront investment and innovation. Yet, starting to look at net-zero now will increase manufacturers’ resilience to new regulations, changing consumer preferences and allow manufacturers to take full advantage of the opportunities net-zero offers. Net-zero will become the norm and acting earlier reduces costs and business stress in the long-run.