What is carbon neutrality?
Carbon neutrality stands for a neutral or positive impact on the environment through reduction and/ or offsetting of your CO2 emissions. To become carbon neutral, one needs to (1) avoid their emissions, (2) reduce the remaining and (3) offset unavoidable emissions by removing an equivalent amount of CO2 from the atmosphere. Such a goal can be defined on individual, organizational, community, country, or global levels. Each organisation can set a goal to avoid, reduce and offset its CO2 emissions to become net-zero – it is just a matter of time and determination, regardless of the size of the company or the type of activity.
What is a carbon neutral company?
Carbon neutral companies are companies that have a neutral or positive impact on the environment, firstly avoiding, what is possible to avoid, reducing, what is possible to reduce and offsetting the remaining of their GHG emissions.
During a regular business activities like production or supply chain processes, companies emit GHG into the atmosphere and thus negatively contribute to climate change.
Usually carbon neutral companies have to transform their operations to zero GHG emitting processes (avoiding GHG emissions) or implemented a number of reduction and later offsetting activities, which allow them to achieve a neutral or positive environmental impact.
Why it is important to be a carbon neutral company?
We need to be responsible
The world today is facing the effects of climate change - rains and floods, temperature fluctuations and droughts. Crop losses and poverty are increasingly affecting all countries of the world. That is why we all, from companies to consumers, are an important part of the ecosystem and should be responsible for our planet’s future.
Consumers are looking for carbon neutral companies
Society's attitude towards goods and services is changing and consumers demand proof from producers on their sustainability. Today’s consumer chooses food products that are healthy or organic, a similar shift can be seen in the selection of clothing - consumers pay attention to the ecological label and whether the composition includes recycled materials. More and more consumers are also paying attention to CO2 footprint while choosing goods and services. It is expected that CO2 emissions and carbon neutrality will become one of the main criteria for consumers deciding which products to buy.
Business partners are requiring suppliers to be responsible
At the same time, large companies are implementing ESG policies in their strategies and cascading down environmental and social KPIs to their partners and suppliers. This causes a spill over effect where a change starts with large corporations and spreads into smaller companies. Large corporations are also starting to communicate about their carbon neutrality along with the products they sell, thus educating the consumer, who is starting to demand carbon neutrality from other suppliers too.
How to become a carbon neutral company?
Credible carbon neutrality is not something you can achieve overnight. It is a long process that is usually structured in the following five steps – carbon footprint calculation, strategy preparation, avoidance, reduction, and offsetting.
Becoming carbon neutral is a company’s choice, as well as are the means to implement it. However, as nowadays many companies communicate about their sustainable choices, it is easy to be accused of greenwashing, or trying to appear more environmentally conscious for publicity. To help evaluate their true sustainable impact, more and more organizations are engaging with third parties to verify their carbon neutrality calculations and prepare action strategies. Third parties are usually certified and using commonly recognized standards, such as the GHG Protocol.
Calculate your carbon footprint
To achieve a net-zero emission goal and become a carbon neutral, a company must first understand and know their carbon emissions. This is usually done by conducting an emissions assessment. Assessment can be done by a 3rd party. 3rd parties usually are certified and experienced in the provision of such services.
Assessment is structured into two parts:
Identification of carbon footprint sources
To identify main carbon footprint sources company must perform emissions assessment that will identify all the sources of the company's GHG emissions, including manufacturing processes, supply chain process. back office operations, etc.
The GHG Protocol Corporate Standard is the world’s most widely used GHG accounting standard, where activity-related CO2 emissions are divided into scopes 1, 2 and 3:
Scope 1 include all direct CO2 emissions from sources that the company owns, or controls (e.g. due to fuel burning in the boiler room, due to the use of fuel in the company's vehicles, or the operation of refrigeration systems).
Scope 2 include indirect CO2 emissions owned by the company and assigned to scope 2 must also be included. These emissions are released during the production of the energy required for the company's activities and purchased from suppliers (i.e., electricity, heat and cold).
Scope 3 covers indirect CO2 emissions which are not owned by the company (e.g. purchased goods or services, business travels, waste management, etc.)
Scope 1 and 2 emissions must be included in the CO2 footprint calculation while scope 3 emissions are included depending on the selected assessment method.
CO2 emissions value estimation
After determining sources of CO2, it is necessary to collect data on them and perform carbon footprint calculations.
Understanding the sources, levels of emissions and other significant parameters, it is possible to calculate emissions per period. Calculations can be done on various levels in organization – e.g. on overall organizational level, sub-process level, process level and unit level.
The results are taken further for a strategy design, to put priorities, cost estimates, specific actions and timelines.
Prepare a CO2 reduction strategy
Having CO2 emissions estimates in place, a CO2 reduction strategy design process can be initiated. Process should be structured on the emission level allocating specific actions firstly avoiding emissions, then, if not possible, reducing and only later offsetting.
It is a lengthy and time consuming task as it includes broad discussions within the organization how to change existing processes, supply chain and other cornerstones of the company in order to implement changes. This usually requires capex budgets and long delivery timelines.
After identification of specific actions, prioritization should take place, deciding if there are some quick wins and how the transformation budget should be allocated for the rest in order to define a sequence.
The above becomes a plan, and for the implementation of a plan, it is necessary to appoint responsible persons on an initiative level as well as set a timeline.
Such CO2 reduction strategies often help to reveal the positive contribution of your organization’s decisions and goals to mitigating climate change to the public and interested parties.
Company can start it’s path to carbon neutrality immediately and offset carbon emissions by purchasing carbon credits. Nevertheless, to become transparently carbon neutral company must systematically reduce and avoid emissions to a minimum and offset unavoidable emissions. Company’s carbon neutrality is credible when it is verified by a 3rd party.
Implementation
Knowing an organisation’s CO2 reduction strategy goals and timeline allows you to see which GHG emissions can be reduced, and which can be avoided and minimized.
Strategy implementation should prioritize quick, simple actions that can be taken immediately. First of all, the aim should be to reduce and avoid them where the company has direct influence, so it is easier and faster to do this (i.e. inside the company - changing the type of fuel, improving water treatment process, purchasing more efficient devices, changing habits - document management), later expanding the area of influence (i.e. outside the company - when choosing raw materials, suppliers, logistics methods, etc.).
Meanwhile it is possible to offset existing company’s emissions while working on more difficult avoidance and reduction initiatives. If an organisation can't eliminate all its emissions, it can offset them by acquiring carbon credits. Read more about offsetting here.
In order not to generate any new emissions, all future business decisions should also be based on CO2 reduction strategy for mitigation methods.