Emerging Net Zero Best Practice (Jan 2024)

Frederic Hans

10 years: Senior Climate Policy Analyst

In this video, Frederic explores the rise of corporate net zero commitments and the importance of distinguishing credible strategies. He also discusses the convergence of voluntary standards, analyses good practices, and identifies areas for improvement. Additionally, he emphasises the urgent need for legally binding regulations to ensure transparent and effective climate action.

Sector and Region Transition

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Emerging Net Zero Best Practice (Jan 2024)

10 mins 11 secs

Key learning objectives:

Understand the critical role of transparency and integrity in corporate net zero commitments
Understand the significance of converging emerging voluntary standards, guidelines, and accountability frameworks in guiding corporations towards credible net zero strategies
Identify the key practices that distinguish credible net zero commitments
Understand the urgent need for legally-binding regulations to ensure mandatory and transparent climate action

Overview:

With the increase in corporate net zero target setting since 2020, distinguishing credible and effective commitments has become paramount. The convergence of emerging voluntary standards offers harmonised guidelines for meaningful corporate transition plans. However, there's a pressing need for further convergence on specific operational criteria and addressing gaps like fossil fuel financing and equitable target-setting. Analysing over 70 multinational companies revealed good practices and significant areas for improvement, notably in setting specific emission targets, focusing on critical periods towards 2030, and catalysing transformational change. There is a necessity for legally binding regulations, informed by voluntary standards and a joint effort to enhance the integrity of corporate climate strategies, thereby urging companies, investors, researchers, policymakers, and civil society to collaboratively advance ambitious and genuine climate action.

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Summary

Why are transparency and integrity essential when establishing net zero commitments?

Transparency and integrity are foundational to ensuring that net zero commitments are not just ambitious in theory but also credible and effective in practice. They guarantee that corporate strategies are clear, measurable, and verifiable, enabling stakeholders to distinguish genuine efforts from superficial or misleading claims. This builds trust in the company's commitment to climate action and ensures that strategies are aligned with global goals like those outlined in the Paris Agreement, thereby contributing meaningfully to the global effort to mitigate climate change.

How are voluntary standards converging and what areas of improvement remain?

Voluntary standards, including those set by the UN Secretary-General’s High-Level Expert Group on net zero commitments, the International Organization for Standardization, and the Science Based Targets initiative, are converging at a high level. They identify similar components necessary for meaningful corporate transition plans and share guiding principles. However, improvement is needed in operationalising guidance more consistently, especially regarding science-aligned emission reduction targets and the use of offsets. Additionally, there's a call for guidance on halting fossil fuel financing and equitable target-setting within net zero strategies.

What are examples of good practice when it comes to establishing net zero commitments?

Examples of exemplary practices in establishing net zero commitments include companies that detail their pledges with clear, quantifiable emission reduction targets across their entire value chain. These targets, aiming for a reduction of at least 90% to 95% below a historical baseline such as 2019, align with the decarbonisation pathways necessary for industries like transport or steel production, showcasing a genuine commitment to systemic change.

Prioritising the critical period leading up to 2030, leading firms set interim targets at five-year intervals, ensuring their strategies are in line with the urgent need for significant emissions reductions within this decade to stay below the 1.5°C warming limit. This approach addresses a crucial gap, as many current corporate pledges fall short of the required ambition.

Furthermore, good practice entails a focus on transformational change, with companies developing comprehensive transition plans to shift away from emission-intensive products and processes towards zero-carbon solutions. These strategies are backed by transparent reporting on the scope, timelines, and expected impact of these measures, showcasing a roadmap for genuine decarbonisation efforts. Such practices not only demonstrate a commitment to ambitious, science-based targets but also highlight actionable, transformative strategies for effective climate action.

Where do we go from here?

The future direction calls for a push towards legally binding regulations to make transparent and meaningful climate action mandatory across jurisdictions. Voluntary standards and good practices should inform these regulations, reflecting the latest scientific research and establishing a common, science-aligned basis for regulation. Additionally, a collective effort is needed to enhance the integrity of corporate climate strategy, involving companies, investors, researchers, policymakers, and civil society in a joint effort to spur transformation and hold companies accountable for their climate commitments.

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Frederic Hans

Frederic Hans is a senior policy analyst at NewClimate Institute, a non-profit think tank focused on international climate policy. He co-leads NewClimate's corporate accountability work and the annual Corporate Climate Responsibility Monitor report, assessing global multinational companies' climate strategies. He also supports the Net Zero Tracker's analysis team, aiming to increase transparency and accountability of global climate commitments.

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