FVP Holdings
7 Strategies for Becoming a Successful Carbon Neutral Business
05 May 2022

Carbon neutrality may be a trending idea, but what does it really take to get there?

Companies, universities, and some governments are making pledges to neutralize their organizations’ carbon footprints or become “carbon neutral.” This typically means reducing direct emissions as much as possible and then turning to solutions outside of the fence line for the rest. While this is not a new concept, the idea of an organization or business taking responsibility for its own carbon footprint is resonating more strongly since the signing of the Paris Agreement. Carbon neutrality also provides great opportunities for expanding climate mitigation ambition.

Carbon neutrality is embedded in the goals of the Paris Agreement, which states that to keep global average temperatures from rising less than 2 degrees C, emissions and sinks need to be net-zero sometime in the second half of this century. Given the uncertainty of national policy regimes aimed at meeting this goal, several organizations that support the Paris Agreement are pledging to achieve long-term carbon neutrality on their own.

Many organizations are making other ambitious climate commitments – for example, momentum is growing behind initiatives such as RE100, a group of companies committing to 100% renewable energy. Others have committed to the Science-based Targets initiative – SBTi, setting emissions targets in line with scientific evidence. So why commit to carbon neutrality?

 

Building Corporate Ambition with Carbon-neutral Goals

Setting a carbon-neutral goal enables a natural progression toward more ambition while providing flexibility in how an organization defines and achieves that goal. Current policy frameworks do not provide clear options for how emissions from every sector will be addressed, nor do they provide a way for organizations to consider managing emissions associated with growth and activities beyond their own operations. By looking at an organization’s complete emissions profile, including direct emissions from operations, indirect emissions from energy use, supply chains, manufacturing processes and the use of its products, and achievable glide path begins to emerge.

Several organizations have recently set carbon-neutral goals, but those goals differ in several ways based on what the entity owns guides or influences. For instance, a company may choose to focus on going carbon neutral with one product or product line as an interim step toward making greater organizational reductions. The flexibility in how carbon neutrality can be defined is particularly important for organizations with significant emission profiles.

Addressing a large carbon footprint is not the only reason to embrace the flexibility of a carbon-neutral approach. Some sectors have limited direct emission reduction opportunities, either because of the nature of their operations or because a large portion of their emissions is associated with their supply chain.

 

Carbon Neutrality can Boost Efficiency and Competitiveness

Tools that companies use to go carbon neutral include energy efficiency investments, signing power purchase agreements for their energy needs, implementing an internal price on carbon, or investing in offsets for emissions that cannot be immediately or directly reduced. Expanding the tools available to meet reduction targets, particularly by “pricing” any remaining emissions through real, measurable, verifiable, and additive offsets allows for a gradual reduction of emissions.

Most companies have found inherent business value in a carbon-neutral strategy. Typically, businesses that invest in improving their efficiency operate more cost-effectively. Plus, in a society that increasingly values environmental sustainability and climate action, it provides a point of differentiation as well as assists with employee recruitment and retention.

Organizations doing their part to meet the net-zero goal of the Paris Agreement are sending an important signal to their peers, national and sub-national actors, and the global economy. They are demonstrating that mitigating climate change globally is achievable and that it is in the best interest of companies, universities, local governments and others to act. However, to achieve this collective objective, more entities will need to set carbon-neutral goals and develop pathways toward implementation. And, due to the extended period of time that emitted GHGs remain in the atmosphere, actions taken earlier will have a higher return on investment.

 

7 Strategies for Becoming Carbon Neutral

If your organization is considering establishing a carbon-neutral goal and developing an associated implementation plan, the following strategies can help you get there:

  1. Define a goal boundary as broadly as possible, but don’t let perfection get in the way of progress (e.g. include operational emissions only or if possible, expand to include supply chain or purchased energy).
  2. Consider the activities your organization may be able to take to reduce emissions within and outside of that boundary before finalizing your goal—you may find you can achieve more than you would have thought, especially if you develop a long-term implementation plan consistent with the timeframe associated with the Paris Agreement.
  3. Don’t forget to consider other criteria important to your organization, such as job creation, financing, or local impacts.
  4. Set interim targets and engage in other relevant initiatives, such as RE100, SBTi, or the Renewable Thermal Collaborative.
  5. Be transparent about what you are committing to and how you will get there.
  6. Track your progress publicly and consider third-party verification or certification. Be honest about what is working and what might not be.
  7. Tell your story. To lead, you must inspire and encourage others to join you.