4 Pillars for a Credible Net Zero Journey

The path to net zero can challenge even the most responsible company.

Google “Net Zero” and “Carbon Neutrality” and you’ll be buried under articles on fraudulent claims, empty promises, and questionable practices. On top of this, the media and NGOs continue to stress the impact of climate change and the need for the private sector to make an impact.

Pretty overwhelming, right?

In the heat of a PR onslaught on the oil & gas industry and 20+ pages of search results, many operators make the unfortunate mistake of overpromising and under delivering on carbon emission reduction goals, leading to claims of greenwashing. Whether you’re starting your journey toward net zero or well on your way, the following 4 pillars can help you deliver a credible net zero outcome:

1. Understand the various protocols appropriate for your geography and industry; use this as your framework

There are a variety of protocols and frameworks – some industry-specific and others more general, some U.S.-Centric and others more Euro-Centric / global. For reference, many of our clients are using OGMP 2.0, TCFD, ONE Future, or GHG Protocol. Learn the alphabet soup of current and proposed carbon frameworks, talk to peers operating against these protocols and recognize the business benefit. Choose the one that works best for your organizational profile. For investors, customers and the general public alike, using a well-defined and known protocol gives them confidence in your data and your net zero claims. A protocol is something that can be audited and understood broadly.

While this may seem obvious, how do you know which one works best for you? Consider these five elements and key questions when “shopping” for protocols:

• Relevance: What does the protocol consider material information? How does it address the reporting of joint ventures or minority interests? Is the protocol industry-specific or more general? Is it used by your peers and recognized by your stakeholders?
• Completeness: What does the protocol consider “complete,” and can your organization meet those standards? If not, does the protocol accept explanations for incompleteness?
• Consistency: What is the protocol’s policy around reporting any accounting changes? Are the impacts from M&A and divestitures distinguished from organic growth or emission reductions?
• Transparency: How detailed should my disclosures be (e.g., showing formulas and assumptions)? Will my emissions be reported publicly, at the aggregate level, or kept confidential?
• Accuracy: What does the protocol consider “accurate?” To what degree will I need to use statistical estimates, actuarial assumptions, or IoT sensors?

Some protocols are very prescriptive while others are open-ended. Regardless, pick a protocol that balances meeting your goals with attainability.

2. Track your progress

Use the protocol you’ve selected to quantify where you are in your journey. The adage “what gets measured, gets managed” accurately applies with net zero. There are many elements of the net zero journey from operational discipline to capital outlay that should be tracked and visualized. It’s important that the quantitative measurement of progress is transparent and auditable; this will serve your company well when your net zero progress is interrogated by investors, regulators, and NGOs. Focus on performance measures that you can control and influence - don’t be trapped by metrics that are out of your hands. Provide a mechanism for internal and external stakeholders to analyze trends over time and understand the impact of the emission reduction work your company is investing in. Further, by keeping good data for stakeholders, you will prove a record of operational excellence and return on capital investment.

3. Have a realistic map to net zero

Simultaneously, you should set your carbon emissions reduction goals and draft a realistic pathway to get there. Companies that set targets without knowing how they will achieve those targets or measure against those targets will end up with a turbulent start to their journey. Keep the goals and measures simple so that both your internal and external stakeholders can understand them. Use core project management principles to execute your net zero journey. Know who’s accountable, how much is being invested, what are the actions, and how often will you measure. Make sure you have clear, realistic milestones on your journey - setting a goal of net zero by 2050 without intermediate targets will set you up for failure. While you should absolutely adjust your path as you gather data and learn, you should not adjust your goals. This will only diminish credibility. Set attainable goals at the onset, whether they are of strategic, internal importance, or science-based targets in line with the Paris Agreement.

4. Communicate Progress

Finally, as Albert Einstein once said, “If you can’t explain it simply, you don’t understand it enough.” Sustainability and net zero is an area where, if you asked ten people to define it, you would receive 12 different definitions. What it means to your organization has been shared in a way that is concise, precise, and simple. Homing in on key metrics with sensible visuals, frequent updates during earnings calls or investor meetings, and tying it to the whole company’s compensation are all tools to help you communicate your net zero goals, targets, and progress. Visualize your data in a way that is intuitive to all stakeholders and communicate progress at a regular cadence. Use the data to share narratives and examples of what you are doing to reduce carbon emissions. Regular communication of progress will not only hold you accountable and improve auditability but also assuage any stakeholder concerns around execution risk.

Overall...

Think of your net zero journey just as you do your financial reporting. Credibility in accounting is paramount, setting financial and growth targets is essential, and stakeholders expect clear and consistent communication. Taking this systematic approach with your net zero journey will improve the overall management and embed the principles of net zero into your workforce. Don’t think of net zero as a separately managed program; think of it as core to your company’s DNA.