What is ‘Net Zero’ and ‘SBTi’?

January 18, 2024
8 Minutes
Photo by Oscar Sloane

Why is Net Zero making headlines every other day?

In order to avoid the unprecedented effects of climate change on our lives, we need to limit global temperature rise to 1.5°C above pre-industrial levels. We’re already approximately 1.1°C above where we were in the late 1800s, and we continue to see emissions, and climate-related devastation, rise (source).

To achieve The Paris Agreement - an outline that was agreed upon by world leaders at COP21 (UN Climate Change Conference) in 2015 - global targets include reducing emissions by 43% by 2030, and reaching net zero by 2050. 

To reach that target, organisations around the world have to essentially transform the way they do business. So you would have no doubt heard that both companies and governments have been setting net zero targets between now and 2050. 

For the most part, everyone realises that unless we see BIG changes, the earth is going to be a pretty awful place to be and humans will genuinely suffer. Stuff will be wildly expensive (e.g. insurance premiums, if we can even get it) and the capital required to rebuild after every climate disaster will continue to rise. Supply chains will continue to be disrupted and customers will be very unhappy (we can only assume you heard about the early 2023 potato shortage in Tasmania, try turning up to a fish and chip shop without chips and see the reaction, let alone what’s coming!) So you get the idea. Net zero is a big deal. 

What does Net Zero mean?

When we talk about net zero, we’re referring to the state where there’s a balance between the amount of greenhouse gas emissions produced, and the amount removed from the atmosphere.

That requires a lot of hard work, removing our reliance on fossil fuels (no more petrol and diesel), switching to renewable energy and buying goods and services from companies that have also made these changes. You’ll have heard many companies setting 2030 and 2050 net zero targets - there’s a lot to do between now and then to meet those targets. So is the target credible? Good question. Many companies have been criticised for setting a target and talking about it without an actual plan to get there (big no). The Science Based Targets Initiative (SBTi) is one of the most common ways a company verifies that its’ net zero target is in fact credible - more on that below. Bottom line, it’s not a quick fix - this is the systems change stuff we need to get done fast and we all have a role in that.  

What about 'Carbon Neutral'? What does that mean? Check out our handy blog explaining What is the difference between net zero and carbon neutral?

What is involved in setting a science-based net zero target?

Setting a science-based net-zero target involves a company committing to reduce its greenhouse gas emissions to net-zero by a specific point in the future consistent with achieving the goals outlined in the Paris Agreement. The process begins with the company understanding its emissions and setting a base year for comparison - so yes, you need to set a baseline to set a credible target, meaning, you’ll need carbon accounting. 

The company can then use this data to define a clear pathway for reducing emissions to net zero, in line with what the latest climate science says is necessary to avoid unleashing far more severe climate change impacts, including more frequent and severe droughts, heatwaves and rainfall.

This involves reducing emissions in absolute terms, and neutralising any remaining emissions with an equivalent amount of carbon removal (so no, avoidance credits won’t count toward reducing emissions). 

The company must then submit its target to the Science Based Targets initiative (SBTi) for validation, to ensure it is in line with the goals of the Paris Agreement.

Once the target is validated, the company must regularly report on its progress and adjust its strategies as necessary.

SBTi provides a step-by-step process on its website here.

Who is onboard with setting net zero targets so far?

As at January 2024, over 140 countries including some of the biggest polluters - China, the USA, and the EU - have set a net zero target, accounting for approximately 88% of global emissions (source). Over 10,000 businesses, of which around 7,000 are SMEs, are working with SBTi and have pledged to take immediate action with the aim to halve global emissions by 2030 (source)

Do you need to set a net zero target?

Large companies

Makes sense, just ensure it’s actually credible. Red flags that it’s not:

  • You don’t know the emissions of the organisation across scope 1, 2 and 3
  • You do but you’ve never actually contacted your suppliers to understand when they will be able to provide primary emissions data themselves so there’s no road out of averages 
  • You don’t have a budget to execute on projects that are forecast to reduce emissions or a plan for getting that approved. 
  • For large organisations with equally large suppliers, you don’t know what their transition plan for net zero looks like at all 
Small and medium businesses?

You too can play your part, but the starting point is credible carbon accounting. Get your accountant to prepare a baseline emissions assessment across scope 1, 2 and 3 and give your suppliers the heads up you’re doing this and would love to support them to get started themselves. It’s best practice, your accountant will most likely ensure that’s affordable and accessible to you and Sumday makes that process simple too. Every Sumday customer, no matter their size, can pass on training, software and support to their suppliers (10 or 10,000 - up to you) so they can take you up on the help if they need it to really come along on this journey and provide you with the data you need. 

How are we tracking towards the targets that have been set by governments and large corporates?

We hope you’re sitting down. 

Last year’s inaugural Global Stocktake report highlighted the urgent need to accelerate action. Although progress has been made since the Paris Agreement, most would say it’s not fast enough. Government commitments are falling way short of expectations and for many businesses, progress is there but reducing scope 3 emissions remains a real challenge. This is where the majority of emissions come from and most companies don’t even know the baseline emissions of their supply chain based on the specific companies they buy from or invest in (nearly everything is still based on averages). So even credibly tracking scope 3 emission reduction is difficult at this point (the good news is, Sumday is tackling that head on by making robust carbon accounting as normal as filing your taxes). 

The transformation needed is no joke. The UN describes it as ‘one of the greatest challenges humankind has faced’. 

Can we still achieve net zero?

What the Global Stocktake and COP28 have reminded us of is - We have a window of opportunity, albeit it’s shrinking, it’s time everyone’s on board for rapid action.

To achieve net zero in time, we need to start carbon accounting properly, so we can track our actions and progress - Sumday has your back here.

What can you do?

Big corporates and small businesses, we are all on the same journey. 

If you’re a small business and just read through all that, thinking, ‘what on earth am I supposed to do about this’. You know what, that’s fair. You need to travel for business? Yes you can be conscious about your flights, but it’s the airline that needs to implement technology and alternative fuels that dramatically reduce emissions at the bigger scale. There’s always something we can all do, but net zero requires huge transformation, and it needs everyone onboard. So what can we all do?

Here’s the realistic steps list, we believe it can be done:

  • Start carbon accounting properly so you know where you stand and can track where you’re going - build your internal knowledge with the Sumday Academy or tap your accountant on the shoulder to take this type of accounting on. 
  • Reach out to your supply chain and let them know you need to understand their emissions, that their efforts in carbon accounting will be valued and that you’re here to support them. Sumday helps you pass on access to training, software and support if your suppliers need it. This is a wildly positive domino effect that doesn’t take much more than a contacts list and a few clicks for you to at least start the conversation. 
  • Review your baseline and determine the actions that are likely to reduce your impact - what’s your biggest bang for carbon buck? What’s it going to cost financially? Out of reach? Is there a strategy that would change that? Your accountant can likely help and Sumday has templates and tutorials. 
  • Execute and track progress.
  • Tell the world you’re actually carbon accounting to this audit ready standard, engaging and supporting suppliers and tracking your progress over time. 

DIY calculators and industry averages have been relied on in the past to establish a rough estimate of a company’s emissions for the purposes of working out how many offsets to buy, but auditable carbon accounting, where the supply chain is engaged, is increasingly being demanded so we can track progress towards net zero. And it’s about time.