Defining Net Zero
The terms ‘Net-Zero’ and ‘Carbon Neutral’ are both broadly misused. As a result, rather vague definitions appear from companies that have set their own standards and boundaries, leading to market-wide confusion and distrust. As we are now firmly in Phase 3 of Net Zero target setting and implementation according to the latest Net Zero Tracker, there is little room left for confusion.
- Net Zero as defined by the Greenhouse Gas Protocol and conclusively by the Science-Based Target initiative (SBTi) which requires companies to make an absolute reduction in emissions across Scopes 1, 2 and 3 by at least 90%. Scope 1 involves direct emissions i.e. from direct consumption of fuels. Scope 2 involves indirect emissions i.e. from purchasing electricity. Scope 3 involves emissions from up and down the supply chain. In the case of an oil company, this would involve emissions from products sold i.e. the oil, which is by far their largest source of emissions. To satisfy this definition, organisations must then offset the remaining 10% of their emissions.
- Carbon Neutral (as per PAS 2060) is defined as a ‘condition in which during a specified period there has been no net increase in the global emission of greenhouse gases to the atmosphere as a result of the greenhouse gas emissions associated with the subject during the same period’. In simple terms, a company can achieve a given amount of reductions in Scopes 1 and 2, and offset the remaining emissions through carbon credits.
Therefore, oil companies can technically achieve Carbon Neutral by definition; by reducing their direct emissions and offsetting the remaining emissions for Scopes 1 and 2. If well implemented, a Carbon Neutral plan is still a welcome achievement.
The fossil fuel industry remains the villain of the climate dialogue, so how can they possibly be part of the solution? Despite being the antagonist, their contribution to decarbonisation plays a vital role in achieving global reduction targets. For example, BP has:
- Reduced their Scope 1 emissions by 32.5% in 2022, over the 2019 baseline.
- Reduced their Scope 2 by 53.8% in 2022 over 2019 baseline. This reduction since 2019 of 18.8MtCO2e for Scopes 1 and 2 is not trivial, it is equivalent to Croatia’s entire annual CO2 emissions in 2021.
To qualify for the accepted ‘Carbon Neutral’ definition, BP would be required to offset the remaining 67.5% for Scope 1 and 46.2% for Scope 2. Although this is theoretically possible, there is no mention of Carbon Neutrality in their strategy as it is probably not desirable because of the enormous volume of carbon credits required. However, the scale of their reductions is not to be underestimated and rightly should be the main focus point of their sustainability strategy.
‘Net Zero Operations’
There are examples of bending terminology to suit the needs and means of the company. Across the fossil fuel industry, the market is riddled with variations of ‘Net Zero’ that don’t correspond with the established definitions. Under BPs plans to become ‘Net-Zero’ by 2050, they define their target as ‘Net-Zero Operations’. This would include their Scope 1 and 2 emissions and partial Scope 3, thus not qualifying for ‘Net Zero’ as per the accepted definition created by SBTi.
Pursuing and achieving a Carbon Neutral status would be a more appropriate ambition for BP, but maybe this doesn’t sound ambitious enough for such a large entity. Their Scope 3 is 9 times higher than their Scope 1 and 2 emissions combined. The term ‘Net Zero’ is fundamentally incompatible with the operation of an oil company; reducing Scope 3 emissions by 90% would require an oil company to either go bankrupt, or no longer be an oil company. So, any reference to ‘Net Zero’ would be somewhat hollow and misguided.
The issue here is not in the ambitions, but in the definitions. Obscuring and twisting the terminology to gain the kudos of pursuing a Net Zero target only confuses the market further. Incorrectly applying this term will create a distrust amongst companies and consumers, and any belief that they might have had will quickly harden into cynicism. It should be noted that this does not just apply to the climate bogey man of oil companies, many other organisations are playing the same game – F1 and FIFA being high profile examples. Ultimately, this does mean that some companies will need to accept a position interpreted as ‘less ambitious’ than others because of what they produce and their business models. However, their achievements could be just as valid as those who commit to Net Zero, as highlighted by BP’s Scope 1 and 2 reductions.
The terminology needs to be applied universally. The more these words are poorly used, the more vacuous they will become. SBTi have now paused any certification of oil and gas companies until they work out the appropriate pathway for them – if one exists under the current conventions. This was an inevitable move as the reality of such pathways clearly are unrealistic. It is vital that we enforce a robust application of standards that cannot be misunderstood. Part of the challenge is down to who is going to do the ‘enforcing’? This will ultimately have to be treated as a Trading Standards issue, and be regulated by the same bodies who can apply the same vigour and penalties as a company selling misleading advertised products. However, whilst we wait for the regulatory system to catch up, we need to not kid ourselves by flirting with ‘Net Zero’ terminology when the actions cannot align.
No More Virtue-Signalling
This is not to dampen any ambition to decarbonise and set Net Zero targets, but to encourage the opposite. By ensuring the integrity of these commitments are upheld and true, we discourage any virtue-signalling, and inspire greater transparency of the serious reductions that take place. This way we have a more accurate picture of climate accomplishments so far, and the solutions that will achieve these real commitments moving forward. By bringing more clarity and regulation to key definitions (‘Net Zero’ and ‘Carbon Neutral’) the corporate sector will take Scope 3 emissions more seriously. It’s clear we need to bring credibility, trust, and objectivity to corporate Net Zero commitments, so let’s start with accurate use of the terminology.
Chris Hocknell, Director
Chris brings over 17 years’ experience of supporting the built environment and corporate world with their sustainability goals. Specialising in sustainability strategy development, Chris works closely with clients to assess and understand their carbon and environmental footprint.