Net zero 
emissions

What does net zero mean?

Net zero describes a state in which greenhouse gas (GHG) emissions caused by humans are balanced with emissions removed from the atmosphere. The Science Based Targets initiative (SBTi) first defined the term for corporate use.

To understand net zero, it helps to understand the carbon cycle: the exchange of carbon-containing compounds between the atmosphere, hydrosphere, biosphere, and lithosphere. These systems store and release gases such as carbon dioxide (CO₂) and methane (CH₄). Plants absorb large amounts of CO₂, while the biosphere releases methane through the nutrient cycle between plants and animals.

When humans burn fossil fuels like coal and oil, more carbon enters the atmosphere than natural sinks can absorb. The cycle is thrown out of balance, GHGs accumulate, and the result is climate change.

What are net zero emissions?

Reaching net zero emissions requires two steps:

1. Emissions reductions

Companies must significantly reduce emissions across their value chain by, for instance, cutting energy consumption, switching to renewable energy, or reducing chemical fertiliser use.

In practice, this is a major challenge. Energy, agriculture, manufacturing, transport, and construction each account for a large share of global emissions. A net zero economy demands transformation across all sectors: energy-efficient construction, investment in renewables, and an accelerated shift to alternative transport.

2. Neutralising residual emissions

Even with significant reductions, an emission-free business is not possible. Companies must also remove carbon from the atmosphere and store it permanently, either within or outside their value chain.

Direct Air Capture (DAC) filters carbon directly from the air, while moors and forests serve as important natural carbon sinks.

Why does net zero matter?

To limit the effects of climate change, the carbon cycle must quickly return to balance. Passing tipping points, such as the permanent melting of the Greenland ice sheet or the collapse of the Amazon rainforest, make some effects of the climate crisis irreversible.

The Paris Agreement aims to limit global warming to 1.5–2 °C compared to pre-industrial levels. The 2023 IPCC report makes clear this requires significant and rapid emission reductions: without drastic action, we will miss the Paris Agreement target by the early 2030s.

Meeting these goals means reducing global emissions by 45% by 2030 and reaching net zero by 2050.

Net zero targets, commitments, goals

Companies have enormous influence on global emissions, both as a source and as a driver of reduction. Science-based targets ensure reduction commitments match what is necessary for a company's industry and size.

The SBTi's Corporate Net-Zero Standard provides the framework. Based on IPCC recommendations, it covers a company's entire value chain: scope 1, scope 2, and scope 3 emissions. Companies that commit through the SBTi can have their progress transparently tracked.

Under the SBTi standard, companies must:

• Set a short-term reduction target
• Reduce absolute emissions across scopes 1–3 by more than 90% by 2050 at the latest
• Neutralise residual emissions by removing carbon from the atmosphere

The SBTi also recommends financing climate projects to avoid emissions elsewhere in the world, reinforcing a company's broader net zero commitment.

How companies achieve net zero emissions

In practice, companies achieve net zero by reducing emissions as far as possible and neutralising any that remain.

Climate projects

Climate projects play a key role, but what is the difference between avoiding and neutralising emissions?

Carbon avoidance projects use technologies ranging from renewable energy to forest protection and social impact initiatives. Forest protection, for example, preserves carbon sinks that would otherwise be lost to deforestation. Social impact projects, such as replacing traditional cooking methods with improved cookstoves, avoid the emissions that burning wood would have caused.

Carbon removal, or neutralisation, can be achieved through both natural and technical solutions. The goal is to remove emissions from the atmosphere and store them permanently. Afforestation is the best-known natural approach, while technical solutions such as direct air capture and storage are gaining ground.

Decarbonisation as business value

Done well, decarbonising lowers costs, reduces risk, strengthens brand trust, and unlocks access to capital. But the path from ambition to action is often unclear and moving too slowly risks falling behind competitors who are already making carbon reduction part of how they work.