Lola Damski is a Stanford Graduate School of Business MBA/Environment & Resources MS student, an engineer, and an ex-Bain consultant determined to fight climate change. Lola dives into carbon neutrality, specifically where company pledges may not paint the whole picture. 

Shell, BP, and many more are now talking about climate action and pledging to become carbon neutral. Real commitment or PR stunt? 

Pledging to become Carbon Neutral is the new hype for companies. Scientists and the IPCC are using this term as the way to go to fix our climate, so these pledges must be legit, right?

BP, Shell, Apple, Microsoft, Amazon, Uber, HSBC ... have committed to being net zero by 2050. Great, isn’t it? Well, yes and no. Let’s start with the basics.

What does carbon neutrality mean for science? It means that globally, our net emissions are zero and our greenhouse gases emissions are compensated by sinks (think trees, oceans, or high tech direct carbon capture and storage). This target needs to be reached by 2050 to limit global warming to 2°C, a threshold that if crossed would trigger climate catastrophes we’d rather not describe as we are still trying to sleep at night. To get there we need to drastically reduce our emissions AND invest in our carbon sinks.

Let us address the first elephant in the room: why do we need to reduce our emissions if we can capture them back? The short answer is: because we are too late and don’t have enough space for natural solutions. And technological solutions are nowhere near a scale that would make them alone a safe bet against climate change.

So, what does carbon neutrality mean for companies? That’s where it gets blurry: it means whatever companies want you to believe. Carbon neutrality (even with the most conservative definition) should not be an end goal, just a crucial milestone. Companies should be “Net Zero compatible” meaning that they should reduce their emissions as much as possible and compensate not only current but past emissions too.

When looking at climate pledges, there are 3 features that matter: the scope, the timeline, and the actions.

The scope. It’s easy to mislead your constituents and the public when you are only looking at a small part of your emissions. There are three scopes of emissions defined. 

• Scope 1 refers to direct emissions, which include gas released from fuel burnt for transportation, heating, etc.

• Scope 2 refers to your energy emissions, such as from the production of the electricity you use. 

• Scope 3 refers to everything else, from the emissions of your suppliers to the emissions generated by your consumers using your product or service, and the emissions from your product end-of-life, when your consumers discard it. 

You might have guessed by now that many companies fail to mention that their net neutrality stops at scope 1 (or 2) emissions (I’m looking at you, Big Oils). Companies should transform their business models to be more sustainable (think of phone companies making their products last longer, giving up on programmed obsolescence, designing phones to be repaired, etc).

The timeline. The deadline to become net zero as a society is 2050, therefore anything short of scope 3 and/or later is not enough, too late. All projections show that to get to a global net zero we need to cut our emissions by half by 2030 (it’s in 9 years, we know). So companies should get to work, now.

The actions. Pledges need to become actions when they are made. They should include a roadmap on how they will reach their pledges one-by-one, starting now, with key metrics to track.

Analyzing these three aspects, we can see that most of the big companies pledging to become carbon neutral should step up their games to meet the real challenge, and finally fall on the right side of history. Let’s reappropriate the term “net neutrality” and hold companies accountable to become compatible with the future of our society.

As a consumer:

• Choose your brands, you have more power than you think. Consumers often forget how an emerging trend can transform a company. By showing the market that a shift towards truly net zero-compatible companies (Microsoft and Apple are already showing the way) is happening, consumers can accelerate a sustainable transformation.

As an investor:

• Hold your portfolio companies accountable. There are two ways you could think of impacting your industry. First you can choose to invest only in “net zero compatible” companies, but it might not be the most impactful approach as there will probably always be enough “bad” investors to keep on investing in the “bad” companies. However, if you make your portfolio companies align their strategy to this global net zero imperative, beyond the communication stunt, your impact could be significant and direct.

As an employee: 

• Challenge your employer. Ask what your company’s carbon footprint is. Tell them that offsetting emissions is not enough. Ask them how they are making sure that your children will have a future. Companies will do the right thing, if this right thing will attract talents, improve employee satisfaction and therefore retention and productivity.

As a citizen:

• Vote. Always. Use your voice to support policies and candidates that share your desire to provide a safe environment for your children by making sure that your city, county, state and country work together to fix mistakes of the past and build a brighter future.

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