Why Most Companies Fail at Net Zero (And How to Get It Right)
Net zero strategies have become vital for businesses worldwide. The path to put these strategies into action remains challenging. Companies must reduce emissions by 45% before 2030 and reach net zero by 2050 to keep global warming below 1.5°C. The Earth's temperature has already risen about 1.1°C higher than in the late 1800s, and emissions continue to increase.
Many companies have adopted net zero strategies, but current global climate policies point to a temperature rise of at least 2.7°C by 2100. This misses the Paris Agreement's 1.5°C target by a wide margin. The Science Based Targets initiative (SBTi) states that emissions need a 90% cut by 2050, with the remaining 10% removed.
Net zero targets have become standard practise for organisations of all types. The biggest problem lies in turning these targets into reality. No company can achieve net zero alone. They need to eliminate their excess greenhouse gas emissions as well.
This piece will show why companies find it hard to reach their net zero goals. You'll find practical guidance to develop science-based approaches that create real climate impact. We'll get into common mistakes, explain core concepts, and outline steps to build strong net zero strategies that mean more than just marketing promises.
Why net zero is more than a marketing slogan
Net zero pledges now cover 92% of global GDP and 88% of emissions worldwide. The concept has become a standard part of corporate vocabulary. In spite of that, people often misunderstand the term, water it down, or mix it up with other climate commitments.
The real definition of net zero
Net zero means creating a balance between greenhouse gases released into the atmosphere and those removed from it. We stop adding to the total amount of greenhouse gases in the atmosphere when we reach net zero. This stops their contribution to global warming.
The Science Based Targets initiative (SBTi) gives us a clear, science-based definition. Net zero needs two things: you need to cut value-chain emissions enough to stay within 1.5°C warming limits, and you need to cancel out any leftover emissions by removing an equal amount of carbon dioxide from the atmosphere permanently.
Net zero requires changes throughout operations and value chains. The energy sector produces about three-quarters of greenhouse gas emissions today and holds the answer to preventing climate change's worst effects. Companies must switch from fossil fuels to renewable energy sources and cut emissions across all areas.
How it is different from carbon neutrality
People often mix up carbon neutrality and net zero, but they represent different climate goals:
Carbon neutrality only looks at balancing carbon dioxide emissions and lets you use as many carbon offsets as you want. It usually only covers scope 1 and 2 emissions (direct emissions and those from bought energy). Scope 3 (value chain) emissions are good to include but not required.
Net zero includes all greenhouse gases like methane, nitrous oxide and fluorinated gases. You must follow a 1.5°C reduction plan and can only offset "leftover emissions" (usually just 5-10% of original emissions) through permanent carbon removal.
Reduction requirements vary a lot. Carbon neutrality doesn't tell you how much to cut before offsetting. Net zero needs you to cut 90-95% before any offsetting.
Offset quality plays a bigger role in net zero. You need permanent carbon removal instead of avoidance credits.
Carbon neutrality can apply to specific products or services. Net zero usually includes a company's entire operations and value chains.
Why clarity matters from the start
Companies have interpreted net zero in many ways. This creates confusion and leads to greenwashing accusations. Businesses face real risks - 96% of the largest 250 companies report on sustainability, but without standard frameworks, vague claims using terms like "net-neutral" keep expanding.
The stakes for transparency and meaningful goals have gone up. New laws, like California's bill, require companies making more than €0.95bn yearly to report greenhouse gas emissions by January 2025. This law will affect about 5,300 companies.
You need to talk to stakeholders early. They should understand your definition of net zero and agree on both your goals and your plan to achieve them.
Government and private sector net zero commitments can't just be PR exercises. The UN High-Level Expert Group on Net-Zero Emissions Commitments sees this problem. They've created recommendations to make net zero pledge standards stronger, especially for non-state groups like businesses.
The most common reasons companies fail at net zero
Many companies fail to turn their net zero promises into real action, despite making bold commitments. Research shows four major roadblocks that keep derailing corporate net zero strategies.
Lack of clear emissions data
Companies face huge challenges getting accurate emissions data from day one. Businesses and financial institutions need quality climate data to blend climate considerations into their operations and risk management. Companies cannot measure, manage, or report their emissions without strong data. The Network for Greening the Financial System found big gaps in climate-related data quality, availability and comparison.
Collecting and measuring greenhouse gas (GHG) emissions data remains tough. Companies run into practical problems, including differences in how emissions metrics get calculated. The NGFS puts it simply: "We cannot manage what we cannot accurately measure". This lack of reliable data blocks real progress toward net zero targets.
Over-reliance on offsets
Carbon offsets serve as a smokescreen for companies to keep up their "dirty, business-as-usual activities". Research by Oxfam reveals that governments and corporations "hide behind unreliable, unproven and unrealistic carbon removal schemes" to reach their targets. These offset schemes need massive amounts of land. Oxfam found the total land needed could be five times India's size, matching all farmland worldwide.
The offset industry creates several problems:
Many offset programmes store carbon temporarily in trees that release it back when they die from droughts or wildfires
Carbon accounting for credits has proven flawed, unreliable and sometimes fraudulent across multiple studies
Research into Verra, the world's leading carbon standard, revealed that more than 90% of their rainforest offset credits are likely "phantom credits" that don't represent real carbon cuts
Ignoring Scope 3 emissions
Most companies don't deal very well with their Scope 3 emissions - those created throughout their value chain. These emissions make up over 80% of total carbon footprint for many organisations. Companies often overlook these emissions because they can't control them directly and struggle to measure them.
Scope 3 emissions could be a company's biggest source, with several times the effect of Scope 1 and 2, though they rarely get tracked. Companies must address these emissions to stay 1.5°C compatible, or their whole strategy falls apart. Getting primary data from suppliers and handling confidentiality issues remain key challenges.
Setting vague or unrealistic targets
Companies often fail because they set unclear targets decades ahead without solid plans. More than 702 companies have net-zero targets, but two-thirds haven't explained how they'll achieve them. A Columbia University study found that 94% of companies set long-term targets spanning decades, but only 43% set vital short-term targets that drive immediate action.
Companies also lack proper tracking metrics. Only a quarter say they have company-wide ESG KPIs, and just 3% have complete metrics. Without these measures, companies struggle to tie executive pay to ESG targets.
Global fossil fuel dependence has grown 55% since 1997. The 2050 net-zero target faces huge economic, political, and practical hurdles. Companies must develop clear, specific, and achievable approaches to succeed where others failed.
How to build a science-based net zero strategy
A science and data-driven systematic approach works better than vague commitments to build a net zero strategy that works. Your organisation needs a reliable framework to move from aspirational targets to achievable action plans.
Start with a full carbon footprint assessment
A complete carbon footprint assessment will give a baseline of your emissions. This forms the foundation of any credible net zero experience. The first step maps emissions across operations and value chain. It covers Scopes 1, 2, and 3 emissions according to the GHG Protocol standards.
You need data from multiple sources to get a full picture. These include energy consumption records, facility operations, transportation logs, and supplier information. The assessment spots emission hotspots and reviews potential reduction initiatives. Your progress measurement and action priorities will stem from this baseline.
Carbon footprint assessments that work must:
Measure the sum of all greenhouse gases from your organisation's activities
Set realistic goals to reduce carbon
Provide clear steps to tackle your emissions
Set near-term and long-term targets
Net zero strategies need both near-term and long-term science-based targets to work together. Near-term targets cover the next 5-10 years as stepping stones. Long-term targets extend to 2050 or earlier.
The SBTi needs near-term targets to include at least 95% of a company's direct emissions (Scopes 1 and 2). Companies must set targets for at least 67% of value chain emissions (Scope 3) if they make up more than 40% of total emissions.
Companies must cut emissions by at least 90% across the value chain by 2050 for long-term targets. Most companies don't deal very well with this step. Research shows they set long-term targets but skip interim targets between 2030 and 2050. This makes tracking progress difficult.
Line up with the SBTi Net Zero Standard
The Science Based Targets initiative (SBTi) adds credibility and structure to your net zero strategy. The Corporate Net-Zero Standard offers companies a framework to make their targets science-based. These targets must line up with limiting global temperature rise to 1.5°C.
The SBTi's Corporate Net-Zero Standard has four key components:
Near-term targets (5-10 years) for immediate accountability
Long-term targets requiring at least 90% emissions reduction before 2050
Neutralisation of remaining emissions at the net-zero target year
Beyond Value Chain Mitigation to support additional climate actions
Companies should commit by signing the SBTi Commitment Letter to seek validation. They can then submit their targets through the Target Validation booking system for review. This validation process confirms your corporate net zero strategy meets global climate science standards. It also gives stakeholders confidence in your approach.
Reduction before removal: the right order of action
The right sequence of actions in a net zero experience plays a vital role in affecting the climate. Many corporations buy carbon offsets too quickly before they address their emissions. Real sustainability needs a more structured approach.
Why emissions reduction must come first
We cannot limit global warming to 1.5°C without quick and deep emissions cuts in all sectors. Quick reductions today help prevent irreversible climate tipping points and limit peak warming. Net zero strategies work best when organisations cut emissions first, before they think over carbon removal.
Research shows a clear path forward. We need to focus on cutting emissions and rely less on carbon dioxide removal (CDR) to reduce climate risks. Higher temperatures and dangerous weather events result from scenarios that depend too much on CDR while continuing fossil fuel use. The IPCC confirms that global carbon dioxide emissions must reach net zero by the early 2050s to stay within 1.5°C.
Examples of effective reduction strategies
Organisations can cut emissions through several practical approaches:
Energy transition: This means using fewer fossil fuels, switching to electric power, and optimising energy use
Material efficiency: Industries can cut emissions by using materials better, reusing products, and creating less waste
Urban planning: Cities are a great way to get results through compact development, electric transport, and nature-based solutions
The 1.5°C pathway needs zero-carbon sources to power 98-100% of electricity by 2050. The EU showed progress by cutting greenhouse gas emissions by 8% in 2023 compared to 2022.
The right time and method for carbon removal
Some emissions will stay hard to eliminate, especially in agriculture, aviation, and heavy industry. Carbon removal should focus only on these "hard-to-abate" leftover emissions after trying all reduction options.
IPCC projects we need to scale carbon dioxide removal to 5-16 gigatons yearly by mid-century. CDR solutions range from nature-based options like reforestation to technological methods like direct air capture. Organisations must check how permanent and sustainable their removal strategies are, as CDR has its limits.
Organisations should set clear, separate targets for emissions reductions and removals. This helps everyone understand how each part fits into their net zero experience.
Choosing high-quality carbon removal solutions
Companies need to pick the right carbon removal solutions as part of their net zero strategies when they can't avoid emissions. The market has many options available. Each option comes with its own features and quality standards.
Nature-based vs technology-based options
Carbon removal solutions come in two main types. Nature-based removals (NBR) include forests and soil carbon sequestration. Technology-based removals (TBR) feature direct air capture and bioenergy with carbon capture. NBR solutions are budget-friendly and ready to scale now. TBR options keep carbon stored longer but cost more right now.
What makes a solution 'high quality'
Quality carbon removal needs to show it's adding something new, counting carbon correctly, and not harming the environment. The European Commission sees CDR as a vital part of the solution and prefers nature-based options. The best solutions should help both nature and people. They protect biodiversity and help local communities grow their economies.
Understanding permanence and risk of reversal
The quality of carbon storage depends on how long it lasts. People call a project "permanent" if it keeps carbon stored for at least 100 years. Nature-based solutions face more risks. Wildfires, changing land use, and climate effects can release stored carbon. Geological storage works better - it can last thousands of years.
How to evaluate suppliers
A good supplier check should look at their tracking systems, risk plans, and verification methods. Many groups use buffer pools to protect against possible carbon releases. Look for projects that show their methods clearly and have certificates from well-known carbon standards.
Conclusion
The road to net zero is tough but achievable through systematic, science-based methods. Companies everywhere have set bold targets. Many fail because they see net zero as a marketing tool rather than a complete business transformation. Success needs clarity from day one. Companies must understand that net zero means deep decarbonisation at every level, saving offsets only for emissions they can't avoid.
Good emissions data forms the bedrock of any solid strategy. You can't make real progress without measuring your entire value chain properly. Scope 3 emissions usually make up more than 80% of total carbon footprints, so they're crucial for real climate action. Companies that overlook these indirect emissions hurt their net zero plans from the start.
A mix of short and long-term targets creates the right framework for accountability. The Science Based Targets initiative gives great guidance to match your targets with the 1.5°C warming limit. This well-laid-out approach helps organisations turn vague promises into concrete action plans.
Reduction comes before removal - always. The main goal should be deep cuts in operations and value chains. Carbon removal solutions should target only those leftover emissions that are too hard or expensive to eliminate. Picking removal projects needs careful evaluation of permanence, additionality and environmental benefits.
Net zero strategies need real change, not just token efforts. Companies succeed when they use complete carbon accounting, set clear deadlines, focus on cutting emissions, and work on their whole value chain. The challenge might look huge, but business as usual brings bigger risks for both company survival and our shared future. The right approach to net zero isn't just good for the planet - it's smart business in our fast-changing world.
