Net Zero Strategy 101: Definition & Impacts

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A few centuries ago, no one worried about the air quality index, greenhouse gases, or carbon emissions. We used to have pure air, clean rivers, and the forests with full of thriving wildlife.

But now, we’re living in an era in which greenhouse gas emissions, enormous carbon footprint, polluted air, and climate change have become the norm. Most of us will never know what it feels like to live in an environment that is natural and clean—thanks to mass-scale consumption and industrialization.

However, things are changing now. Governments all around the globe are rolling up their sleeves to commit to net zero. So, what is net zero strategy? Why should businesses care about it? And what are its limitations?

Let’s find out.

What Exactly Is a Net Zero Strategy?

An analogy can easily explain the concept of a net zero strategy. Suppose you turn on the tap to fill your bathtub with water. You know that if the water keeps flowing into the bathtub constantly, it will overflow. To keep the bathtub from spilling water, you can do two things: Turn off the tap or remove the plug at the bottom to let the excess water drain.

Now, let’s apply this analogy to the real world. In this case, the Earth would be the bathtub, the water from the tap would be the greenhouse gases that companies emit, and removing the plug refers to reducing greenhouse gases from the atmosphere to ensure a safe level is achieved.

That’s net zero in a nutshell. For every unit of greenhouse gases emitted, another unit is removed from the atmosphere so that the net increase in greenhouse gas emissions remains zero.

There are many different ways to achieve a net zero. For example, business owners could be charged for carbon credits. Each of which allows them to emit one ton of greenhouse gases. In other words, the more gases they emit, the more they have to pay. Another way is investing in carbon offsetting projects, such as reforestation or using renewable energy. Through that, we can reduce the total amount of greenhouse gases. Carbon accounting is also a popular corporate strategy to achieve a net zero. As the name suggests, through carbon accounting, companies can keep track of their emissions. These calculations are crucial in maintaining a safe level of greenhouse gases on the planet.

Of course, there are more ways to reduce emissions and every company has a different corporate strategy to neutralize emissions. But now that you have the basic idea of what a net zero strategy is, let’s understand why it is so important.

KEY TAKEAWAYS

In simple terms, net zero refers to reducing the quantity of greenhouse gases in the atmosphere and bringing it as close to zero as possible.
To contribute towards a global net zero, business owners could use carbon accounting to keep track of their emissions, buy carbon credits and pay for emissions, or engage in carbon offsetting projects.
Governments in many developing countries are intervening and they may make it mandatory for companies to have a net zero strategy.
In the future, investors and customers may be more likely to engage with businesses that take net zero seriously and contribute to the effort.
A sustainability strategy consultant can help companies get started with net zero and create a strategy that ensures that companies become more sustainable and also remain profitable after employing net zero practices.

Why Should Companies Implement a Net Zero Strategy?

“Have you been living under a rock?” is what you might hear if your company does not have a plan to reduce its emissions in the coming years. Sustainability is no longer a civilian movement in which activists demonstrate their concerns in public places—now, even the governments are getting involved. According to the UN, more than 70 countries have set targets in order to bring greenhouse gas emissions as close to zero as possible. The UN Secretary-General António Guterres created an expert committee with the aim to encourage non-state entities to commit to net zero.

“Governments have the lion’s share of responsibility to achieve net-zero emissions by mid-century. Especially the G20. But we also urgently need every business, investor, city, state, and region to walk the talk on their net-zero promises,” the Guterres said.

It won’t be long before governments worldwide make it mandatory for companies to have a corporate strategy aligned with net zero. So, it may be wise for business owners to create a net zero strategy and adapt their company to foreseeable changes that are bound to occur in the near future.

The other reason why you may need a net zero strategy is investors. Yes, investors are aware of the rise in climate change concerns and they may be unwilling to invest in businesses that are basically open chimneys that emit greenhouse gases. Corporate shareholders are requesting companies to commit to net zero and shape their corporate strategy around it.

And last but not least, the final reason why you should implement a net zero strategy is your customers. In a survey of more than 6000 people, more than half were ready to pay more for sustainable products. The internet is filled with such surveys and the conclusion is simple: Although not everybody truly understands the definition of a net zero strategy, many customers will choose sustainable products over destructive ones (example: creating pollution, destroying forests, or contaminating oceans).

What Are the Limitations of Net Zero?

Well, here comes the part that may raise your eyebrows. Although a net zero strategy sounds like a good idea (which it is for the most part), there are some limitations to it. Let’s understand what they are.

Injustice in developing countries

Both the first and the new Industrial Revolution which began and spread in western countries in the past couple of centuries brought a lot of wealth and prosperity to America and Europe. Of course, with this prosperity came a lot of pollution. Fast forward to the present day. Now when poorer and developing countries are trying to gain their share of prosperity and economic freedom through industrialization (like western countries did in the past), they’re being told to reduce emissions—which may cost them a lot of profit. This is why many developing countries are hesitant to commit to net zero and focus on profit first.

Challenges with reaching net zero goals

Anyone can say that their goal is to reduce greenhouse gas emissions by 45% in 3 years. But how? What’s the plan? And will everybody follow the plan? For example, in the Indian capital of New Delhi, the government created a strategy to tackle pollution by imposing a system in which cars with odd and even number plates were banished from roads on alternate days—so no even-numbered cars on Mondays, no odd-numbered cars on Tuesdays, and so on.

Although it seems like a calculated strategy on paper, it may be slightly different in real life. For instance, in such a big city, how can the authorities ensure compliance from all drivers? Also, what about the inconvenience that a lot of people faced all of a sudden?

Getting companies to participate

As of now, there are no strict requirements to create a net zero strategy. And if net zero is imposed by governments all of a sudden, it would cause a massive disruption in the day-to-day life of consumers. So right now, companies can only voluntarily commit to net zero. But will they?

Let’s suppose that Company A and Company B are two companies in the same sector. They both generate $10 million in revenue each year. But if Company A commits to reducing emissions, it will have to spend an extra $500,000 to implement a net zero strategy and incur a revenue loss of $3 million a year. Company B, on the other hand, only cares about profit and doesn’t have a net zero strategy.

Now the question is: Why on Earth will Company A go through so much headache to contribute minimally to the overall climate change of this giant planet of ours?

Apart from these, there are some more limitations. For instance, a decrease in carbon emissions in one place may result in an increase in another place where laws around net zero are lenient. Also, even if we achieve net zero right now, the results may take a lot of time to appear as nature adjusts at its own pace. Finally, there are more gases to worry about than just CO2. Did you know that methane and nitrous oxide can trap way more heat than carbon dioxide? Yet carbon emissions receive a lot of the blame.

How Can Consultants Help Facilitate a Net Zero Strategy?

Getting started with net zero may be a daunting task. Completely changing a company’s operational processes, raw material procurement, or manufacturing practices may be easier said than done. This is when sustainability strategy consultants can be of great help.

Sustainability strategy consultants can conduct a sustainability audit, examine the capabilities and implement practices in your company. On top of that, they can also collect data about your overall carbon footprint and create strategies to help you reduce it. Of course, they can also create a net zero emission strategy for your company and help you implement it.

As markets emerge together with the legislation and moral obligation around net zero get more complicated. Sustainability strategy consultants will assist you in transforming business model, ensuring the business remains profitable even after incorporating net zero practices.

Here at Consultport, we have some of the most competent and experienced sustainability strategy consultants in our talent pool. If you want to get started with your net zero journey, get in touch with us now. Your journey towards sustainability may be just an email away.

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