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Four Steps to Transition to Net Zero

A game plan for tech companies to reduce their carbon emissions and align with global goals

Governments around the world agree: The global economy must reach net zero carbon dioxide emissions by 2050 to head off the worst effects of the climate crisis. But policymakers alone can’t achieve the ambitious goals of the Paris Climate Agreement. Organizations large and small have a responsibility to reduce or offset their carbon emissions by adopting new business models and investing in innovative technologies, says Lina Osman, Regional Head, Sustainable Finance for Europe and Americas at Standard Chartered Bank.

Despite this urgency, 70% of senior executives plan to defer action on climate change to 2030, according to Standard Chartered’s recent Zeronomics report. One industry that’s ahead of this trend is technology. “Tech companies are in a unique position when it comes to the net zero transition,” says Osman. “Many top companies have set ambitious goals and are already well on their way to achieving them.”

Facebook, for example, reached net zero emissions in 2020[i], and aims to reach net zero across its entire supply chain by 2030. Meanwhile, Apple has set a goal to become carbon neutral across its entire footprint by 2030. Microsoft is aiming even higher, committing to becoming carbon negative by the same year.

Still, not every tech company is at the scale of Apple or Microsoft, and many are in the early stages of setting net zero goals. For these companies, Osman recommends focusing on four steps to help start their own net zero transitions—and build momentum ahead of 2050.

Step 1. Measure current emissions and set reduction targets

Firms can’t set net zero transition goals without first establishing their own baseline carbon footprint. The Greenhouse Gas Protocol recommends measuring emissions from three sources: the firm itself, assets owned or controlled by the firm, and assets further down the value chain (such as investments).

Compared to other industries, tech companies tend to be low carbon emitters. But those emissions multiply exponentially when supply chains are taken into account. To measure supply chain emissions, companies can require suppliers to disclose that data in their supplier agreements, or by enlisting data from third-party vendors such as Sustainalytics.

The next step of setting reduction targets can be complicated due to the lack of global reduction standards. There are several initiatives underway to standardize emissions reduction targets for businesses, including the Taskforce on Scaling Voluntary Carbon Markets chaired by Bill Winters, Group Chief Executive of Standard Chartered.

Alternatively, tech companies have the advantage of looking to industry leaders that have already set net zero targets, such as Expedia and Autodesk. Their proposed cuts and timelines can provide benchmarks.

Step 2. Commit to ongoing measurement and disclosure

Consistently measuring and disclosing carbon emissions helps keep companies on track toward their goals. With this step, transparency is key—especially given increased pressure from consumers and investors who want to see progress. More than 80% of consumers believe companies must implement programs to improve the environment, according to a recent Nielsen survey[i].

Consistently measuring and disclosing carbon emissions helps keep companies on track toward their goals. With this step, transparency is key—especially given increased pressure from consumers and investors who want to see progress. More than 80% of consumers believe companies must implement programs to improve the environment, according to a recent Nielsen survey[i].

For tech companies, the expectations are even higher, explains Osman. “While the scale of emissions may be small compared to airlines or oil companies, the public expects tech companies to lead in this area. There’s a lot of scrutiny, particularly on supply chains. Those who walk the talk will differentiate themselves from their competitors.”

Responsible reporting is essential from both an environmental and a business perspective. The Task Force on Climate-related Financial Disclosures (TCFD) offers a framework to help companies more effectively disclose emissions levels. The TCFD recommends disclosing not only a company’s metrics but also information around its governance, strategy and risk management as those elements evolve.

Step 3. Develop a comprehensive approach that reduces, replaces and offsets carbon

Most net zero transitions begin with companies reducing their own emissions. Tech companies tend to have high energy consumption—such as the need to run power-intensive data centers—so transitioning from fossil fuels to renewable energy can strike at the root of the problem. Many of the world’s largest tech companies are already investing heavily in renewables. For example, Amazon recently announced plans to buy 1.5 gigawatts of production capacity from 14 new solar and wind plants around the world as part of its effort to convert completely to renewable energy by 2025[i].

However, Osman warns that energy needs for tech companies will likely increase in the coming years. “As companies grow and AI and machine learning become more widely used, the combined power needs of tech companies will increase, and they will have to invest more and more in green energy,” she says.

Besides reducing energy consumption, finding ways to recycle electronic waste is another key focus area for tech companies. That said, most companies reach a point where they can no longer reasonably reduce their own emissions. When that happens, companies must supplement carbon reduction with carbon offsetting.

Most offsetting efforts today involve investing in projects that remove carbon from the atmosphere, such as through reforestation. In the coming years, though, carbon capture and storage technology, alternative green fuels and hydrogen-powered facilities may also gain traction as viable carbon offsetting options.

Then there’s the supply chain issue. “When it comes to decarbonizing the supply chain, it’s a lot more complex and requires more innovative thinking,” Osman says. Some larger companies have already introduced fresh strategies in this regard. For example, in 2018 Apple invested nearly $300 million in the China Clean Energy Fund to connect its Chinese suppliers to alternative energy sources[i]. Meanwhile, HP has committed to screening suppliers using especially strict criteria, as well as helping them improve their emissions performance through partnerships with NGOs and governmental organizations.

4. Create interim milestones and measure progress

Once a company puts a net zero transition plan in place, it’s important to regularly measure progress and set deadlines to achieve shorter-term goals. “Many tech companies are on a more accelerated pace than companies in other industries. But even those companies need to set more concrete near-term targets that take into account the expanded energy use that comes with growth,” Osman says.

Likewise, clear and consistent communication to employees and stakeholders is crucial to generate momentum and ensure that everyone is on the same page. Employees across the board should be made aware of an organization’s net zero goals with regular progress updates provided to internal and external audiences.

Along the way, tech companies may discover that designing and implementing their own emission reduction strategies creates an important business opportunity. By diving into the challenges facing businesses of all kinds, the tech sector can apply its creativity to identifying the cutting-edge innovations and new solutions essential to developing a greener economy. ”What tech companies can do within their own companies and supply chains is important,” says Osman. “But just as important is what they can do to help other companies.”

[i] https://www.theguardian.com/technology/2021/apr/16/facebook-says-it-has-reached-net-zero-emissions

[i] https://www.nielsen.com/eu/en/insights/article/2018/global-consumers-seek-companies-that-care-about-environmental-issues/

[i] https://www.apple.com/newsroom/2018/07/apple-launches-new-clean-energy-fund-in-china/

[i] https://www.wsj.com/articles/amazon-and-other-tech-giants-race-to-buy-up-renewable-energy-11624438894?mod=hp_lead_pos1