Understand Net Zero
Environmental Defense Fund
Companies need to set long- and short-term science-aligned goals to reduce all greenhouse gas (GHG) emissions across corporate operations and their value chains. These targets must be accompanied by a robust and transparent net zero transition plan. Companies should also prioritize investments that contribute to a global net zero transition – such as in natural climate solutions within and beyond their value chain - and align their governance, advocacy, engagement, and policies with a just transition to net zero.
Net zero as a scientific concept refers to a state where any greenhouse gas (GHG) emissions produced are balanced by an equal amount being removed from the atmosphere.
Human activity, particularly past burning of fossil fuels (coal, oil, and gas), has led to dramatic increases in the amount of GHG in the atmosphere, resulting in a global surface temperature rise of 1.1°C (2°F) since the pre-industrial era. This level of warming has already caused widespread and rapid changes in the climate systems that are unprecedented in recent human history.
The Paris Agreement set the goal for countries to limit global warming to well below 2°C and pursue efforts to limit it to 1.5°C above pre-industrial levels to avoid worsening the impacts of climate change. Science from the Intergovernmental Panel on Climate Change (IPCC) makes it clear that a warmer world, even by half a degree Celsius, will escalate the risks and adverse impacts on human and natural systems, disproportionately affecting vulnerable communities. Limiting human-caused global warming to 1.5°C above pre-industrial levels implies reaching net zero carbon dioxide (CO2) emissions globally in the early 2050s, along with deep reductions in other GHG emissions, particularly methane. Pathways that limit warming to 1.5°C reach net zero for all GHG emissions around the 2070s. Achieving these net zero goals requires rapid and strong reductions across all sectors.
At EDF, we believe that the transition to net zero is the greatest economic challenge and opportunity of our generation. While companies are significant sources of emissions – they are key to implementing and innovating climate solutions. The action that companies take in the next decade will determine our success in preventing the most catastrophic and irreversible damages from climate change.
In 2022, the UN High-level Expert Group (HLEG) on the Net-Zero Emissions Commitments of Non-State Entities set out to develop standards for net-zero emissions pledges. These recommendations should be seen as the end goal for corporate action on climate and we recommend companies review the Integrity Matters report for their detailed recommendations.
To achieve net zero goals in line with the 1.5°C pathway, EDF recommends that companies cut their absolute GHG emissions across operations and value chains dramatically by at least 90% by 2050 and balance any remaining emissions with high-quality carbon removal.
- The path taken to reach net zero is as important as reaching net zero itself. Reducing emissions in the short-term yields better long-term climate outcomes and can make reaching net zero cheaper and easier in the long run. We recommend that companies set science-aligned interim emissions reduction targets to ensure early action for both short- and long-lived GHGs separately (most notably methane and CO2, respectively).
- In the transition to net zero, companies should balance their remaining emissions by purchasing high-integrity reduction or removal carbon credits – especially those that protect critical ecosystems and carbon stocks. At net zero achievement and beyond, companies should balance unavoidable emissions with high-integrity carbon removals.
- Transformation of business to align with a just and equitable global net zero future is crucial. Companies should integrate justice and equity principles from the start of their net zero planning process to ensure durable and effective outcomes for the climate without leaving anyone behind.
Scopes 1, 2, and 3 Emissions
To prepare for their net zero journey, companies need to measure and understand their current emissions. This involves creating a comprehensive GHG emissions inventory that classifies emissions by source and distinguishes between different types of GHGs. This inventory, or emissions profile, allows companies to gain a holistic understanding of their carbon footprint and identify key areas for reduction efforts.
Emissions can be defined as direct or indirect emissions and are measured and categorized in terms of Scopes 1, 2, and 3. These definitions and measurement standards are governed by the Greenhouse Gas Protocol and are widely recognized across industries and geographies.
- Scope 1 encompasses direct emissions from a company’s own activities, such as fuel consumption for heating or vehicle fleets.
- Scope 2 includes indirect emissions from consumption of purchased electricity, heat, steam, or cooling. Emissions are indirect because they occur somewhere else, for example, at a power plant where coal is burned to produce electricity.
- Scope 3 covers indirect emissions associated with the entire value chain, including upstream and downstream activities beyond a company’s direct control. Examples of Scope 3 emissions include product shipping, waste disposal, and business travel. Emissions from the value chain often represent a company’s biggest greenhouse gas impacts.