Let’s face facts: we need to take meaningful climate action now to have any hope of limiting global warming.

Here’s what the U.N. says: “to keep global warming to no more than 1.5°C — as called for in the Paris Agreement — emissions need to be reduced by 45% by 2030 and reach net zero by 2050.”

The good news? A skyrocketing number of companies are stepping up to meet the call, pledging to reach ‘net zero’ carbon emissions by a specific date.

But here’s the catch: there’s a right way to achieve net zero — and a wrong way.

The right way is to focus first and foremost on adopting more sustainable practices to reduce carbon emissions as much as possible. Only then should a company turn to high-quality carbon credits to mitigate any emissions that remain (for now) unavoidable.

The wrong way is for a business to use carbon offsets to simply buy its way out of the responsibility to first measure and reduce emissions.

Let’s dig a bit deeper.

What does it mean to be a net-zero business?

A net-zero business is one that’s achieved a balance between the greenhouse gasses (GHG) it emits from its operations, and the gasses it removes from the atmosphere.

It may sound simple, but it involves a lot of hard work. To achieve net zero, a business must calculate its carbon footprint, and do everything it can to reduce emissions — that takes time and effort to do right. Finally, it must compensate for emissions it can’t eliminate yet, by contributing to GHG removals through investments in high-quality carbon credits.

Why do corporations even need a net-zero strategy?

For starters, maintaining a livable planet will require everyone — individuals, governments, and businesses alike — to do their part in the transition to a carbon emissions-free future.

That reality alone means a sustainability strategy is no longer a ‘nice to have’ for companies, but other factors are also at play: regulatory requirements, stakeholder demands, and — increasingly — consumer expectations.

Corporations are under growing pressure to prioritize environmental and social sustainability (or risk finding themselves at a major disadvantage). And that can be good for business: a company that integrates sustainability into its strategy is more likely to attract and retain customers and employees, enhance its reputation, reduce costs, and improve long-term financial performance.

The three steps to achieve net zero (the right way)

A business’s journey to net zero boils down to these three critical steps: Measure, Avoid/Reduce, and Invest.

1. Measure

Step one is to measure and assess your current emissions — including direct (“scope 1”) emissions, like those produced by your company's operations and vehicles, and indirect ("scope 2") emissions, like those from the electricity your business uses. Ideally, you’re also considering "scope 3" emissions produced by the supply chain and other activities that your business is indirectly responsible for.

Accurately assessing your company’s current emissions makes it possible to effectively set target reductions and timelines. At this point, you should definitely check out the Science Based Targets Initiative (SBTi), which has developed a widely-used and respected targeting methodology.

2. Avoid and Reduce

Once you’ve got a solid understanding of your current volume of emissions, you can get to work shrinking it down. That means getting serious about finding ways to reduce or avoid emissions. Ask yourself:

• Could we be using more renewable energy sources, like solar or wind power, to power our operations?
• Do we need to travel so much? Can we avoid it by encouraging more remote work, or at least find more sustainable modes of transport?
• Are we making sure we work with vendors who are also committed to reducing their own emissions?
• Is there any way we could be using more recyclable materials in our products or packaging?
• Are there any new, more energy-efficient technologies or practices we could implement?

3. Invest

Ok, you’ve done the hard work of reducing your company’s emissions as much as possible. Good. Now your company can turn to high-quality carbon credits to offset your unavoidable (otherwise known as ‘residual’) emissions.

There are a variety of different carbon removal or avoidance projects that can generate carbon credits, including nature-based projects (think tree-planting or improved agricultural practices) and renewable energy projects.

The key here is making sure you’re only buying high-quality credits, from vetted and verified projects that are truly making a positive impact on the climate.

For an in-depth discussion on what makes a carbon credit high-quality, you should review our guide to gain a more thorough understanding. But in brief, a high-quality credit is one generated by a carbon project that:

• Produces real, additional, and permanent climate impact
• Is rigorously monitored
• Accounts for leakage
• Does no harm
• Delivers co-benefits beyond carbon mitigation

Why businesses can’t rely solely on carbon credits

It’s important enough to bear repeating: offsetting emissions should only come into play after all avoidance and reduction opportunities have been explored and acted on. It may be tempting to avoid the hard work of reducing your business’s emissions, but buying your way to net zero isn’t a good strategy — for a few reasons.

First, the price of carbon credits is expected to rise significantly over the coming decades. One analysis concluded the price of carbon credits could rise somewhere between 220% and 500% by 2035 — driven by rising demand from the increasing number of companies making net-zero pledges, and constrained supply.

What’s more, international bodies like the EU are already looking to place caps on carbon permits, forcing companies to reduce emissions or pay increasingly steep prices.

As a result of these factors, the cost of mitigating your company’s footprint will only increase over time.

Second, relying entirely on carbon credits opens your business up to claims of greenwashing, particularly if you plan to include your net-zero status in marketing materials.

Businesses have already begun to face consumer backlash when they claim to be net zero despite having made no effort to switch to renewable energy, or still engaging in destructive environmental practices.

Some of the best net-zero target methodologies, such as SBTi, won’t allow companies to claim they’ve hit their targets through offsetting alone. Similarly, the Voluntary Carbon Markets Integrity Initiative (VCMI)’s recently-released Claims Code of Practice demands that companies set and show progress toward near-term emissions reductions targets before making any claims related to carbon offsetting.

Reducing emissions is a difficult but necessary leg of the net-zero journey for any company serious about tackling climate change.

In business and beyond, the combination of avoidance, reduction, and removal strategies offers us the best chance of achieving net zero by 2050.

The bottom line

By following the three steps to achieve net-zero emissions the right way, businesses can do their part to turn the tide on global warming and protect the future of this planet, while also remaining competitive in the changing landscape of climate action.

If you’re ready to discuss partnering with Catona Climate to achieve your net-zero goals through high-quality, nature-based solutions, get in touch with our carbon experts.