What is Net-Zero?

What is Net-Zero?

Net-zero refers to a state where the total greenhouse gas emissions produced by an entity are balanced by an equivalent amount of emissions permanently removed from the atmosphere. Unlike carbon neutrality, net-zero demands deep absolute reductions—typically 90% or more—across all greenhouse gases before any residual emissions are addressed through carbon removal. The Science Based Targets initiative (SBTi) Net-Zero Standard, published in 2021, provides the most widely adopted corporate framework.

Why It Matters

The scientific consensus is unambiguous: limiting global warming to 1.5°C above pre-industrial levels requires reaching net-zero CO₂ emissions by approximately 2050. The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report confirmed that every fraction of a degree of warming increases risks to ecosystems, food systems, and human health. Net-zero is not aspirational—it is a physical necessity.

Corporate net-zero commitments have surged. As of early 2026, more than 4,000 companies have set net-zero targets through the SBTi or equivalent frameworks. Institutional investors managing over $70 trillion in assets now expect portfolio companies to articulate credible decarbonization pathways. Companies without net-zero strategies face rising capital costs and potential exclusion from investment portfolios.

The credibility gap, however, remains significant. A 2024 analysis by the New Climate Institute found that only 4% of major corporate net-zero pledges included comprehensive plans covering all emissions scopes with science-aligned interim targets. Vague long-term commitments without near-term action plans erode trust and invite regulatory intervention.

Governments have reinforced the net-zero imperative through legislation. The EU Climate Law, UK Climate Change Act, and US Inflation Reduction Act all embed net-zero trajectories into policy. Companies operating across jurisdictions face a complex but converging regulatory landscape that makes net-zero planning a compliance issue, not merely a voluntary commitment.

How It Works / Key Components

Credible net-zero strategies begin with comprehensive emissions baselining across Scopes 1, 2, and 3. For most companies, Scope 3 (value chain) emissions represent 70-90% of the total footprint, making supply chain engagement essential. The GHG Protocol provides the accounting methodology, while sector-specific pathways from SBTi offer guidance on reduction rates.

Near-term targets—typically 5-10 year horizons—drive immediate action. SBTi requires companies to reduce Scope 1 and 2 emissions by at least 4.2% annually for 1.5°C alignment. Scope 3 reductions must follow sector-specific pathways. These interim milestones prevent the "long-term target, no current action" pattern that undermines credibility.

The reduction hierarchy prioritizes direct abatement: energy efficiency, electrification, renewable energy, process innovation, and circular economy strategies. Carbon removals—both nature-based (reforestation, soil sequestration) and technological (direct air capture, bioenergy with carbon capture)—address only the residual 5-10% of emissions that cannot be eliminated through operational changes.

Governance structures underpin delivery. Leading companies establish board-level climate committees, tie executive compensation to emissions reduction milestones, and integrate climate scenarios into strategic planning. Annual progress reporting against verified baselines—increasingly subject to third-party assurance—maintains accountability.

Council Fire's Approach

Council Fire structures net-zero programs around scientific credibility and operational feasibility. We help clients set SBTi-aligned targets, build Scope 3 engagement strategies, identify capital-efficient abatement opportunities, and establish governance frameworks that keep decarbonization on track through leadership transitions and market cycles.

Frequently Asked Questions

How long does it take to achieve net-zero?

Most corporate net-zero targets are set for 2040-2050, reflecting the deep structural changes required. However, near-term targets (2030) drive immediate action. The timeline depends on sector—technology companies can move faster than heavy industry, which requires capital-intensive process changes.

Is net-zero the same as zero emissions?

No. Net-zero acknowledges that some residual emissions may be technically unavoidable. These must be balanced by permanent carbon removals. Zero emissions (or gross zero) would mean eliminating all emissions entirely, which is currently infeasible for most sectors.

What happens if a company misses its net-zero target?

There is no single enforcement mechanism, but consequences are real: reputational damage, potential securities litigation for misleading investors, loss of access to sustainability-linked financing, and regulatory penalties under emerging climate disclosure laws.