How and Why Companies are Going Net-Zero
The words ‘carbon neutral’ and ‘net-zero’ are terms many, if not all of us, have heard by now. This holds especially true over the last several years as more and more companies have made commitments to reshape their businesses with solutions that will result in a neutral or net positive impact on the planet. According to an assessment of net-zero targets made by businesses around the world, 21% of worlds 2,000 largest public companies (representing $14 trillion in annual sales) have made net-zero commitments.
To meet the needs of our planet, as well as the expectations of the rising number of consumers concerned about sustainability, companies are incorporating green energy practices into their business infrastructure, purchasing carbon credits to offset their emissions, or some combination of the two. But that begs the question, why are companies pushing to take these steps now? And what is the impact, if any, on their business?
Microsoft Commits to Net-Zero Impact
A way to start looking for answers to these and other related questions is by highlighting some of the companies taking green initiatives today. The first of these companies to highlight is Microsoft. As one of the leading tech companies aiming to shrink their carbon footprint, Microsoft’s leadership team has pledged to be carbon negative by 2030, and by 2050 they’ll remove from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975. Their ambitious and detailed plan outlines how this will be done.
They hope to accomplish their goal by first addressing their scope 1 and scope 2 emissions. Scope 1 emissions mean emissions that are caused directly from their business activities. Scope 2 emissions are indirect emissions from the production of the electricity or heat they use to power things like their buildings. To do so, Microsoft plans on shifting to 100% renewable energy by 2025 for things like their data centers, buildings, and campuses. Additionally, they’ll electrify their global campus operations vehicle fleet by 2030 and pursue International Living Future Institute Zero Carbon certification and LEED Platinum certifications for their campuses.
Type 3 emissions are the hardest to tackle, since they’re the indirect emissions from all other activities. This covers Microsoft’s entire supply chain including the materials in its buildings, the business travel of its employees, and the full life cycle of its products, including the electricity customers may consume when using the product. Their solution is to implement a system whereby business divisions will pay an internal carbon fee for all their scope 3 emissions, in addition to working with their suppliers to help them reduce their emissions.
What Is Driving the Change?
Needless to say, Microsoft is a great example of a company taking big steps to curb emissions. But why? The first and most obvious reason is that the increase in carbon emissions is one of the biggest drivers of rising temperatures posing risks to our planet’s atmospheric conditions, as seen in the chart below:
But, there is more to the story. For a publicly traded company like Microsoft, it is essential to avoid decisions that might upset their shareholders, like being a big polluter. A recent survey among European consumers shows that audiences support carbon labelling on products and are more likely to think positively about a brand that demonstrates it has lowered the carbon footprint of its products.
Cutting emissions could also save businesses billions. Studies show that emission reduction activities have helped save the worlds largest businesses $50 billion per year. Hewlett-Packard (HP), for example, invested in energy-saving solutions that ultimately saved more than $65 million through energy efficiency, while also helping suppliers avoid 800,000 tonnes of carbon emissions.
It’s good business for Microsoft, and all other companies, to align themselves with these preferences. Correlation is not necessarily causation, but besides the recent coronavirus-induced pullback on stocks in March of 2020, Microsoft has done well and is up 34% on the year. This can be attributed to a variety of factors, but their green initiatives have at least not measurably led to the company’s stock market value sinking.
Incentives for Going Net-Zero
Microsoft is obviously not alone in its endeavors to reduce their carbon footprint. Apple, Ikea, National Trust, Facebook, and BBC join Microsoft with a goal to hit net zero operations by 2030. Meanwhile, Dell, Nestle, British Airways, BP, Shell, American Airlines and more have set a target to reach net zero by 2050.
A leading cause for this change in tides is the drastically cheaper costs for renewable energy sources in recent years. Even 10 years ago, generating power from solar panels was more expensive than gas or even coal. But with recent technological strides and market pressure, the costs associated with this and other forms of renewable energy have plummeted. With that in mind, companies have more of a financial justification for installing solar panels or having their energy supplied from renewable sources.
It is clear that many companies are choosing to keep their carbon footprint in check and we can expect more to follow suit in the ensuing years. This is happening for a variety of factors, including as a way to protect their public image, benefit from the cheaper costs of renewable energy, and for some, out of a desire to truly help the planet heal and prevent potentially catastrophic warming. It is great when large successful companies like Microsoft set an example and it will be exciting to see what other companies incorporate green changes into their businesses in the future.