Navigating Corporate Responsibility in the Era of Net Zero

This journey towards net zero begins with a fundamental shift in mindset—one that prioritises environmental stewardship and recognises the interconnectedness between business operations and the health of the planet. Companies must establish corporate responsibility targets, integrating robust accountability frameworks to support them to decarbonise their value chains and reduce the impact of their businesses operations to net zero greenhouse gas (GHG) emissions.

But what should companies do? When considering net zero, best practice responsibility frameworks consist of two key mitigation components: Value Chain Abatement (VCA) and Beyond Value Chain Mitigation (BVCM).

Value Chain Abatement

Value chain abatement (VCA) focuses on identifying and reducing emissions throughout the value chain, from production to distribution. Value chain emissions refer to the emissions produced throughout the lifecycle of a product, service, or system, including both direct and indirect emissions. These emissions are categorised into a “Greenhouse Gas Inventory” made up of scopes 1,2 and 3.

At a simple level, these scopes are

• Scope 1 - controlled emissions (the emissions created by a company's day to day operations)
• Scope 2 - indirectly controlled emissions (this often means power and electricity)
• Scope 3 - indirect, uncontrolled emissions (the emissions of the full value chain that a company exists within). While they are the most difficult to measure, Scope 3 emissions can be around 75% of a company’s emissions.

Companies must reduce value chain emissions to minimise the environmental footprint of their operations, working towards the goal of net zero. This abatement can rarely be achieved simply by purchasing certificates or funding action.

There are no technology or activity level solutions that can alone or in combination make the businesses of today align with a net zero world. Companies will need a mindset shift and a fundamental review of business models and practices if we are to achieve this goal.

Beyond Value Chain Mitigation

Beyond Value Chain Mitigation (BVCM) supplements VCA by focusing on taking responsibility for all past, present, and future emissions.

Where VCA speaks to reducing the harm caused by a company's business operations over time, BVCM recognises that on that journey to net zero, harm is still being caused by emissions and therefore seeks to mitigate that impact whilst work continues to reduce value chain emissions. Companies should take responsibility for this ongoing harm as we progress towards global net zero.

This may involve setting an internal carbon fee and using it to fund mitigation projects, for example through carbon markets. It could also involve supporting innovative enabling and technology solutions, advocacy and more.

The purpose of BVCM is to ensure that companies are accountable for all their emissions and are actively working towards mitigating their impact on the environment. As it operates outside value chains, it can support activities that are difficult to regulate such as nature, community access to energy services, and the scaling of carbon removal technologies. Gold Standard has a how-to-guide demystifying the application of BVCM here.

Who is helping companies achieve these goals?

Numerous organisations play a role in supporting companies on our journey to global net zero:

• Global Reporting Initiative (GRI): Provides guidelines for sustainability reporting, helping companies measure and communicate their environmental, social, and governance (ESG) performance.
• United Nations Global Compact (UNGC): Encourages businesses to align their strategies and operations with ten universally accepted principles in the areas of human rights, labour, environment, and anti-corruption.
• The Greenhouse Gas Protocol: sets out methods of establishing value chain activities and accounting and reporting emissions associated with them, allowing for disclosure and reporting towards abatement targets.
• Carbon Disclosure Project (CDP): Collects data on corporate environmental impact, including carbon emissions, water usage, and climate-related risks, to help investors and businesses make informed decisions.
• Science-Based Targets Initiative (SBTI): Assists companies in setting emissions reduction targets aligned with the latest climate science to help limit global warming.
• Gold Standard: Framework for Organisational Climate Strategies and BVCM Guidance, bringing all key threads together to create an end-to-end responsibility construct that is maintained and updated annually to guide companies towards practices that align with net zero.
• Sectoral and mechanism-focused initiatives: there are many initiatives that focus on the integrity and interests of specific sectors or mechanisms and tools that can be used towards VCA and/or BVCM responsibilities, including: Value Change Initiative, Sustainable Aviation Buyers Alliance, and Landscape Finance lab.

Key Challenges

Achieving net zero poses a significant challenge for companies. Despite the wealth of commitments (5400 companies have approved Science Based Targets, under SBTI) and growing momentum in the private sector, there exist a host of difficult challenges that will need to be met for companies to achieve their goals. These include:

• Regulatory changes
• Knowing how to decarbonise dynamic supply chains (where the physical supply chain changes due to the number of complex actors in global supply chains),
• Investing in innovative solutions that may not count towards targets but without there would be no creation of the solutions we need
• Communicating complex impact to customers in a way that is accurate and understandable without either accidental or intentional greenwashing

Conclusions and the Start of a Blog Series

As we travel towards corporate responsibility and net zero emissions, it is essential to recognise the interconnectedness of our actions and their impact on the planet. A robust, simple, and regularly updated framework that helps companies to develop their responsibility strategy will be essential. This should guide companies towards practices that, if all companies undertook them, would lead the world to net zero.

We must also recognise that action needs to be taken while these practices are being established, and that ambitious aims will not always be achieved. This involves a mindset shift, from the isolated company looking only to put positive messages out to get ahead of its rivals, to one where companies embrace the challenge, recognise that mistakes and errors will occur and humbly and authentically put them right.

In the run up to London Climate Action Week, Gold Standard will delve deeper into these topics, exploring best practices, case studies, and actionable strategies for companies looking to lead the charge towards a more sustainable future.

Together, we can build a world where businesses thrive while preserving the health and integrity of our planet for future generations.