‘Net Zero’ is officially here. Over half of global GDP is now generated in countries that have net-zero mandates and almost half of all assets under management – US$50tn – is held by investors that have pledged to drive decarbonisation. Household-name brands have suddenly scrambled to announce net-zero targets. The change is also seen across SMEs with venture capital investment in climate tech growing 4200% between 2013 to 2018 to reach $16.3bn.
Are investors, governments, and businesses acting out of the goodness of their hearts? Unlikely.
Climate change and net zero targets are transforming the business landscape in terms of both risk management and opportunity. Consumer behaviour has experienced a seismic shift and governments are bringing in tight restrictions on pollution at unprecedented pace. It is no longer a question of if, but when. We have already seen sweeping measures for the car industry with 25 major countries already banning the sale of petrol and diesel vehicles – with some bans enforced as soon as 2025 – which industry is next?
In all this there is one inescapable fact that most business people miss – Net Zero makes sound business sense. I am going to show you why making your business Net Zero is a good investment now and how you can capitalise on the climate opportunity.
Let’s start with the basics:
What does ‘Net Zero’ mean?
Net Zero refers to the balance between the amount of greenhouse gas emissions (pollution) produced and the amount removed from the atmosphere.
You can think of it like a seesaw – on one side you have how much pollution is produced, on the other you have how much pollution is removed. Net Zero is when the seesaw is balanced – you remove at least as much pollution as you produce.
Generally, there are two ways of achieving Net Zero – reducing the amount of pollution you emit in the first place, and removing pollution from the atmosphere via carbon offsetting.
What is Carbon Offsetting?
Carbon offsetting is a climate solution activity that reduces or removes pollution to compensate for emissions made elsewhere. Common forms include tree planting and renewable energy projects.
For example; Metaphor Ltd is responsible for 670 tonnes of CO2 per year. Metaphor Ltd could plant 339,000 trees per year to remove their 670 tonnes. Alternatively, they could fund scientific climate projects, such as renewable energy wind farms, that help reduce global emissions by 670 tonnes. In either case, 670 tonnes of CO2 are reduced and/or removed from the atmosphere. Those tree planting activities or renewable energy wind farms are carbon offsetting.
Carbon offsetting is usually the cheapest and simplest method for achieving your business’ Net Zero target.
Where does my business pollution come from?
For the vast majority of businesses your business pollution comes from what is called ‘Scope 3’ emissions. Scope 3 are indirect emissions from activities outside an organisation’s own operations. These types of emissions often account for the most significant proportion of a company’s carbon footprint – sometimes up to 90%.
Examples of Scope 3 include business travel, employee commuting practices, the use of sold products, and upstream activities including raw material and agricultural production.
There are some relatively simple changes you can implement that reduce your emissions significantly across scopes 1-3. The most impactful easy changes include:
- Switching to a green energy provider
- Switching to an ethical bank
- Dropping beef from staff canteen/entertainment menus
- Prioritising sourcing from sustainable suppliers
- Reducing the need for business travel and commuting (such as via remote working policies).
How does being sustainable impact sales?
This is where it starts to get really interesting.
Consumers and businesses prioritise eco-friendly, sustainable goods and services (and are often willing to pay more).
- British consumers would each be willing to pay £3,654 more a year for eco-friendly household goods and services. – Independent
- Since the pandemic, 60% of people report making more environmentally friendly purchases. Accenture added that nine out of 10 of that percentage said they were likely to continue doing so – Accenture
- UK vegan sales tripled since lockdown, showing a rapidly growing trend of conscious eating habits that are strongly correlated with sustainable lifestyle changes – BBC
- B2B pay up to 20% higher prices for sustainable suppliers – Harvard Business Review
With more businesses committing to Net Zero targets we are starting to see compound and network effects affecting purchasing decisions across both B2B and B2C. Demand is up. Being sustainable is a competitive advantage.
In my own experience running ZeroSmart, a UK social enterprise that helps businesses achieve their Net Zero goals via carbon offsetting, we have seen our partner businesses achieve both higher prices and increased demand after working with us.
Talent acquisition and retention
People like to work with good people doing good things.
Three-quarters of the millennial workforce prioritizes sustainability over other factors when choosing a job. By 2025, Millennials (those born between ~1980 and 2000) are forecast to comprise 75 percent of the global workforce. Gen Z, the generation after millennials, feels even more strongly. A comprehensive sustainability strategy is critically important to attracting top talent.
Sustainability is not just a millennial concern, 83% of employees report that they would be more loyal to a company that helps them contribute to social and environmental issues. The performance of your current and future workforce will improve due to your sustainability strategy.
How much does it cost?
Offsetting your workforce – typically the largest source of pollution – can cost as little as £8 per employee per month with services like ZeroSmart. This is an effective solution open to businesses of all sizes, with no minimum or maximum headcount necessary to benefit.
And the best bit? These kinds of investments are usually tax deductible. While you should consult your accountant first, it is likely that any business undertaking this expenditure will obtain a business benefit in the promotion of the business, and therefore it is likely to be a tax deductible expense for most trading businesses.
Carbon offsetting should be a part of your sustainability strategy if you wish to achieve your Net Zero goals in the most efficient way and to remain competitive. Doing good is good for business – by being sustainable you can attract better talent, improve customer perception, and significantly increase your profits.
Organisations like ZeroSmart help you to reduce your business’s carbon footprint in a simple, cost-efficient manner through carbon offsetting. Finalists for ‘Sustainability Entrepreneur of the Year’ at this year’s Great British Entrepreneur Awards, ZeroSmart is a subscription service for your business that finds and funds tree planting and scientific climate solutions for you.