The Paris Agreement put climate action center stage.

Global economies now aim to reduce climate warming to 1.5°C by 2050, and over 80 percent of financial institutions have realigned their investment priorities to focus more on environmental issues. According to a global United Nations survey, 53 percent of respondents want national transitions to renewable power.  

Corporate sustainability initiatives will be key to that transition. To stay competitive among consumers and investors, and drive actionable change that signals the urgency of climate action to industry peers, corporations need to identify clear targets to reduce greenhouse gas (GHG) emissions and choose renewable energy.

Before taking comprehensive climate action, though, enterprises should understand the corporate sustainability terminology. Here, we’ll explore common terms in sustainability discourse and define why it’s important to choose the right words. 

Being sustainable and shifting to 100 percent renewable energy 

At its core, sustainability is about using resources in a way that leaves the world better for future generations. When organizations adopt sustainable practices, they support ecological, economic, and social health – the UN introduced the 17 Sustainable Development Goals in 2015 as a blueprint for organizations looking to bring sustainability more actively into their philosophy and practices. 

For corporate entities, one way to practice sustainably is to identify whether your current energy usage puts a strain on the economy and environment, and find ways to reduce that impact via renewable energy. Globally, renewable sources like biomass, hydropower, geothermal, wind, and solar energy represented 29 percent of electricity generation in 2020, up from 26 percent in 2018. To keep pace with shrinking fossil fuel use and investment, 100 percent renewable energy usage should be the foundation of any climate initiative. 

As part of your commitment to do this, for example, your company can direct financing toward renewable sources by purchasing Renewable Energy Certificates (RECs) or Guarantees of Origin (GOs). These represent one MWh of renewable energy and back your company’s sustainability claims.  

Clean energy carries more weight than green energy

“Going green” has historically been a popular climate target for companies. But while the word “green” might imply a naturally-derived source, it doesn’t necessarily indicate that source’s specific environmental impact. 

In the United States, for instance, sourcing green energy can mean blending fossil and renewable sources. In states with competitive energy markets, a corporation can purchase green power products containing a specified percentage of renewable energy. If that percentage is not publicly disclosed, then a company can broadly claim to use “green power” without revealing to stakeholders that its remaining sources are non-renewable. 

Because green energy is often blended, it’s a cheaper alternative to 100 percent renewable energy. The pricing may also be deceptively attractive for many companies seeking to reduce their carbon footprint.  

“Clean energy,” on the other hand, clearly points to energy sources with negligible GHG emissions. The EU often uses “clean” and “renewable” interchangeably, while the US includes both renewable and non-renewable sources in defining clean energy. Neither definition includes fossil fuels. 

Understanding carbon neutrality and net zero

Although the UN Framework Convention on Climate views carbon neutrality and net-zero emissions as synonymous, the Science-Based Targets initiative (SBTi) notes that corporations have inconsistently interpretedcarbon neutrality. 

Carbon neutrality means reducing and avoiding emissions, while neutralizing unavoidable emissions with carbon credits, to balance your GHG output. Per the IPCC, reaching net-zero emissions requires balancing anthropogenic greenhouse gas emissions by anthropogenic removals over a specific period. Beyond removing emissions, achieving net zero also requires 100% renewable energy use. 

The Race to Zero further contextualizes this definition by requiring that an organization…

1. Follow “science-based pathways” to reduce emissions;

2. Balance remaining GHG emissions through “like-for-like removals exclusively claimed by that actor”; and

3. Remove GHGs “either within the value chain or through (purchasing) valid offset credits.” 

As achieving net-zero emissions tends to be a loftier goal than carbon neutrality, you can understand the latter - involving action by stakeholders to reduce and avoid emissions, with the remainder compensated through carbon credits – as a necessary step toward the former.  

What complicates matters is that these definitions constantly change. The Science-Based Targets initiative (SBTi) released a new Net-Zero Standard for companies aiming to hit this goal by 2050 in October of 2021

If your company commits specifically to net-zero emissions, it will help reduce the global risk of veering off the 1.5°C pathway. 

Back Up Your Most Ambitious Goals With Action

Some of the most ambitious climate targets require significant investment in carbon removal technology.

Take, for example, going “absolute zero.” According to the Race to Zero initiative, this happens when an actor emits zero GHGs “across all scopes” and without carbon removal credits.  

Going “climate positive” (also known as “carbon negative”) requires companies to remove more carbon from the atmosphere than they emit, making their impact “net negative.” 

Although carbon removal technology is currently cost-prohibitive for most organizations, it may be more accessible in the future. Cheaper options are actively in development, and in the US, the total cost of climate positivity may be only slightly higher than the cost of reaching net zero. 

To act on these climate targets, companies should break down GHG emissions reduction, avoidance, and carbon removal goals into chunks. Five- and ten-year goals will be easier to manage than fifty-year plans, and if there are roadblocks, course correction will be simpler. With each goal met, companies will pick up momentum in pursuit of their most ambitious targets.

Meet Your Corporate Sustainability Goals with ACT

In a transforming energy economy, your company needs to identify strong climate targets to remain attractive to investors and consumers. 

Once your company has articulated clear targets, ACT can help you identify the market-based products and services you need to meet your goals. Contact us today to learn more.