Achieve net zero for SMEs: A Carbon Trust guide

Achieving Net Zero for business: Exploring business decarbonisation with The Carbon Trust.

As part of Vodafone's ongoing partnership with the Carbon Trust on issues of sustainability, we discuss the topics surrounding net zero for businesses – including implementing a net zero strategy, monitoring carbon footprints, and achieving third-party verification on sustainability efforts. In this interview, Matt Anderson from the Carbon Trust takes us through how SMEs can decarbonise and be doing more to aid the journey to net zero.    

There's a lot of confusion about net zero, and the terms net zero and carbon neutral are often used interchangeably - so are they the same thing?

No, net zero and carbon neutral are not the same, but they have some similarities which can cause confusion.
 
In terms of what net zero means, it's the technical definition of balancing the amount of carbon emissions produced and the amount removed from the atmosphere to achieve net zero emissions - you do that by reducing emissions to as close to zero as possible and then removing the remaining emissions through activities like carbon capture and storage or reforestation. Very simply, net zero means you're reducing your emissions aligned with the Paris Agreement 1.5 degrees Celsius global warming limit goal, and then at the end of that pathway you have a very small amount of emissions left – that's what you're addressing with carbon removals.
 
Carbon neutral means not adding new carbon emissions into the atmosphere, which is normally achieved as a result of carbon offsetting. With carbon neutrality, there isn’t always the stipulation that you have to meet a specific carbon reduction threshold in order to make a carbon neutral claim. Net zero targets must align to a 1.5°C science-based target, whereas the level of ambition of a carbon management plan for carbon neutrality is not specified. 
 
Another key difference between carbon neutrality and net zero is that the boundary of a net zero target includes scope 1, 2 and 3 emissions of the organisation, whereas carbon neutrality for an organisation only requires scope 1 and 2, with scope 3 emissions encouraged, but not mandatory. The approach to residual emissions also differs, with specific greenhouse gas removals required for net zero targets, whereas carbon offsets are accepted for carbon neutrality.

So, if you run a small business, what should you be aiming for most – net zero or carbon neutral?

For businesses looking to set their own long term carbon reduction targets in line with the science, such as through the Science-Based Targets initiative (SBTi), net zero is good to aim for. Essentially the concept is aligning to the goals of the Paris Agreement, which aims to limit global warming to 1.5 degrees Celsius. The small amount of residual emissions are then addressed through carbon removals, because there's an acknowledgement that the reality of reducing emissions completely to zero is very difficult – just because of the limits of physics and technology.
 
Lately there's been more scrutiny around offsetting schemes and carbon neutral claims as there's more greenwashing risk to mislead consumers about what the claim actually means and how its achieved.

What to consider about being carbon neutral as an SME?

There's more scrutiny from governments, regulators and customers around carbon neutrality claims, partially because carbon neutrality doesn't have such a clear definition. In some cases, it can refer to just CO2 emissions, and in others it can refer to all greenhouse gas emissions, which is more than just carbon dioxide.
 
There is a standard called PAS 2060, which is the international standard for carbon neutrality that defines what carbon neutrality means, and basically it's counterbalancing through carbon offsets. When we're talking about the SBTi and net zero, carbon offsets aren't recognised as a valid carbon emission reduction.

What would you recommend to business owners who want to get serious about a net zero strategy – where should they start?

There are SME climate hubs out there such as the UK Business Climate Hub. I'd recommend that SMEs be aware of the good resources out there to start with, so that there's a clear understanding of net zero and how to start to think about reducing your emissions. Then implement a strategy within your business and make good on it, by carefully measuring the emissions within your business, which fall into three scopes. The fuels you use and the electricity you use as part of your business activities fall under scopes 1 and 2 (scope 2 is mostly electricity related), and then scope 3 emissions are emissions in your value chain. When we're talking about net zero, you need to have a full picture across all scopes.

How can an SME start to focus on decarbonisation?

A good starting point for all small businesses is focusing on energy efficiency. Being energy efficient is going to be a core part of your decarbonisation effort, especially as you plan ahead for the future of your company. Renewable electricity is going to play a big role in decarbonisation.
 
If for example you are moving offices, or let's say your fleet is due for an update, having a greater focus on electricity is something to think about. Those business activities that were relying on diesel or petrol or natural gas can be electrified, and then you can consider how to source electricity from renewable electricity sources.
 
With your sites and buildings – you want to be aiming for high efficiency building design, making sure you have things like efficient LED lighting, and a modern energy management system to make your energy consumption on site more efficient and effective as well as reducing your energy costs. By building this process into your business planning and getting leadership buy-in in your organisation, that's where you can really start to make progress.

So how can SMEs demonstrate to their customers that they're taking the net zero strategy seriously?

Seeking third-party certification is a good way to give some credibility to figures that you're communicating publicly, putting in your annual report or providing directly to customers. If you're making a claim in an advertisement, having the figures certified gives credibility to that statement and also reduces the risk of greenwashing.
 
Having said that, it isn't necessary for every small business to get every certification possible. It really depends on what an SME’s own business goals are – and what it is trying to achieve by getting a certification. Having the right relevant certifications can give a business an advantage and demonstrate that its numbers are accurate. On the carbon front, it's not a certification, but there is a validation process. I would look at the science-based target initiative framework, because that's one way to set a credible carbon reduction target that you can make public – and it has a whole validation approach, framework and criteria you have to satisfy. Part of that is building up your scope 1, 2 and 3 footprint against the greenhouse gas protocol standard.

Do you think more consumers are wanting information and want to buy into products and services that are more aligned with all things green?

Yes, but this is also being caused by regulators and governmental bodies. I actually looked up a stat for this point, and there's a report from First Insight that was published last year and claims that nearly 90% of Gen X customers said they're willing to spend an extra 10% or more for sustainable products (compared to just over 34% two years ago). So the willingness of customers to consider sustainability credentials, and improved customer awareness of what makes a product really sustainable is increasing, and they can tell when they're being misled. Governments can also see this, and that's why we're seeing more directives and regulation governing how these claims work, so that consumers are protected (to some extent) from being misled.

For more support on how your business can achieve net zero, discover our free business support helpline and speak to one of our Business Advisers by phone, contact form or web chat. Wondering what you can ask? Our team can help with a range of digital topics. 
 
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