175With the proposal of the dual carbon targets, more and more enterprises are beginning to set carbon neutrality goals. What dimensions should enterprises consider when setting these goals? How can enterprises measure the costs and benefits of emission reduction projects? How can enterprise carbon neutrality goals align with national and global goals?
In this issue, we exclusively interviewed Yeh Ruiqi, Climate and Energy Program Manager at Greenpeace East Asia, to hear the independent voice of NGOs on corporate carbon neutrality.Greenpeace is an internationally renowned global environmental organization that has long been committed to advancing environmental protection through practical actions.The article is presented in a Q&A format.
Carbonstop: Currently, more and more enterprises are announcing carbon neutrality goals. From the perspective of an NGO, what dimensions should enterprises consider when setting carbon neutrality goals? How can they align their carbon neutrality goals with national and global goals?
Yeh Ruiqi: As more and more enterprises set carbon neutrality goals, there is growing concern about the specific content of these goals. From the perspective of an NGO, we are particularly concerned about the ambition of corporate carbon neutrality goals and whether they align with the global 1.5°C temperature control target. Here are several dimensions to consider:
1. Scope of Carbon Neutrality Goals.
Corporate carbon neutrality goals must cover the entire value chain of greenhouse gas emissions. We understand that some enterprises may start with their own operations, focusing on Scope 1 and Scope 2 emissions, before moving on to the entire value chain and even beyond.
For example, Greenpeace has studied the environmental responsibility boundaries of internet platform ecosystems, where billions of merchants and users on e-commerce platforms do not fall under the traditional definitions of Scopes 1, 2, and 3. How e-commerce platforms leverage their influence to guide, promote, and assist merchants and users in taking emission reduction actions should also be considered.
2. Types of Greenhouse Gases.
When it comes to carbon neutrality, people often think of carbon dioxide first. We believe that when enterprises set carbon neutrality goals, they should ideally cover all types of greenhouse gases.
Notably, methane has received increasing attention in recent years. There is a joint declaration and related cooperation on methane reduction between China and the United States. During COP27, over 150 countries signed the Global Methane Pledge, committing to reduce methane emissions by one-third by 2030.
Additionally, China's Special Envoy for Climate Change, Xie Zhenhua, revealed during the conference that China's methane action plan has been completed and is undergoing approval. The plan covers three sectors: energy, agriculture, and waste management, with initial targets already set.
3. Timeframe.
Breaking down the 1.5°C temperature control target to corporate action, the international consensus is to reduce greenhouse gas emissions by at least half by 2030 and achieve carbon neutrality by 2050 or earlier. We believe this represents an average level that needs to be achieved globally, which means leading enterprises should exceed this average.
2030 is a crucial milestone, and leading enterprises should anchor their long-term carbon neutrality goals to 2030, while also setting mid-term and short-term goals, and reviewing and updating their goals and progress at least every five years.
4. Specific Methods and Roadmaps.
The international consensus is to prioritize direct emission reductions, particularly focusing on the concept of absolute emission reductions, emphasizing the reduction of total carbon emissions.
In choosing specific low-carbon pathways, we encourage enterprises to transition to 100% renewable energy as soon as possible, as reducing fossil fuel use is an urgent need to achieve the 1.5°C temperature control target.
Additionally, enterprises can consider factors such as return on investment, technological maturity, internal consensus, and senior management support to collectively support the realization of carbon neutrality goals.
5. Use of Carbon Offsets and Carbon Removals.
The Science-Based Targets initiative (SBTi) Net-Zero Standard allows enterprises to offset only 5-10% of their entire value chain emissions to achieve carbon neutrality. In other words, this means that enterprises must achieve deep reductions in their entire value chain emissions, reducing at least 90-95% of carbon emissions by 2050 or earlier.
Greenpeace expects leading enterprises to go further, surpassing this standard by directly addressing the challenge of emission reductions and avoiding reliance on carbon offsets and removals to achieve "neutrality."
6. Method of Goal Disclosure.
After setting carbon neutrality goals, enterprises should tell their green stories well.In addition to following the ESG disclosure requirements set by stock exchanges, disclosing richer quantitative and qualitative details of emission reductions is also encouraged, including the formulation of macro carbon neutrality goals, regular disclosure of goal completion rates, and specific carbon reduction actions taken by the company. This will help stakeholders better understand the company's specific emission reduction situation.
Carbonstop: Many enterprises are not only engaged in emission reduction practices themselves but are also involving their suppliers, consumers, and other value chain partners in these efforts. Based on your observations, what are the motivations behind these actions? How should the effects of supply chain emission reductions be evaluated?
Yeh Ruiqi:The most important motivation is the requirement for emission reductions from key stakeholders.Taking the automotive industry as an example, we understand that leading companies like BMW and Mercedes-Benz have set high emission reduction requirements for their supply chains, including the use of green power. These requirements directly impact orders, providing strong incentives for enterprises.
Another motivation is pressure from investors.Our observations show that the forms of this pressure vary across different industries. In the energy sector, investor pressure is very strong, such as reducing investments in coal-fired power plants. For other industries, investors generally engage in relatively gentle ESG communications and urging with the companies they invest in. Few cases reach the level of divestment if emission reductions are not achieved. In the future, we hope investors will play a greater role in guiding the companies they invest in to take emission reduction actions.
A third factor is policy pressure.Some export-oriented enterprises have expressed concerns to us about the impact of the EU CBAM and the EU Battery Regulation on their low-carbon transition. These enterprises have already formed internal working groups and formulated corresponding emission reduction strategies.
Finally, there is the demand for brand image management,including a "green and low-carbon" and "climate-friendly" brand image.
How should the effects of supply chain emission reductions be evaluated?One method is to measure the absolute emission reductions in Scope 3, which is quantifiable and measurable, allowing enterprises to set baselines for regular benchmarking; another is to assess the full lifecycle carbon footprint of the products produced by the enterprise. These are important indicators for evaluating the results of supply chain emission reductions.
Additionally, we pay attention to the sub-goals under the overall supply chain emission reduction goal. Recently, Greenpeace has been studying supply chain emission reductions in the global consumer electronics industry, focusing on whether brands require their supply chain companies (including Tier 1 and Tier 2 suppliers) to set 100% green power goals and science-based targets.
Carbonstop: Currently, when evaluating carbon neutrality projects, many enterprises focus on abstract values rather than economic values. How can enterprises better quantify and measure the costs and benefits of emission reduction projects?
Yeh Ruiqi: From our observations, for some ToC brands, their customer profiles consist of middle-class individuals with strong green awareness and a high regard for environmental and social responsibility. Market research can better assess the impact of the company's green image on expected sales growth.
For example, a clothing brand mentioned in its CDP report that the biggest risk lies in failing to actively address climate change, which could lead to reputational risks. Consequently, its market share could easily be overtaken by competitors.
Enterprises can also make investments in green projects, such as energy-saving and emission reduction technologies or green power projects, which can generate direct cost savings or economic benefits.Furthermore, active decarbonization actions and carbon disclosures by enterprises can help them gain more recognition in the capital markets, attract more investors, and contribute to higher long-term stock prices.
Some enterprises use internal carbon pricing mechanisms to assign a price to carbon, converting emission reductions into economically quantifiable values, and then incorporating these into project cost-benefit models to evaluate their return on investment.
For instance, DSM's internal carbon price was €100 per ton in 2021. Microsoft has implemented a carbon fee mechanism, including a $100 per ton carbon fee for Scope 3 business travel starting from July this year, with the funds raised being used for corporate emission reduction projects.
Carbonstop: Many enterprises achieve carbon neutrality by purchasing emission reductions. What issues should enterprises pay attention to when engaging in carbon offsets? How can they avoid the risk of greenwashing?
Ye Ruiqi: First, we should reiterate the priority of emission reduction. The consistent consensus at home and abroad is that companies should first consider emission reduction, and only for parts where reduction is truly impossible should they consider carbon offsetting or removal methods.
The country's current annual carbon dioxide emissions are around 10 billion tons, while forest carbon sinks increase by only about 400 million tons annually. It is highly unrealistic to solely rely on increasing ecosystem carbon sinks to achieve carbon neutrality.
During COP27, the High-Level Expert Group on Non-State Actor Net-Zero Emissions Commitments released guidelines for net-zero commitments. UN Secretary-General António Guterres specifically mentioned that "using false 'net-zero' emission commitments to cover up large-scale expansion of fossil fuels should be condemned." From Greenpeace’s perspective, when companies use carbon offsets to mask large emissions from fossil fuel usage, it undoubtedly exposes them to the risk of greenwashing.
For example, Shell launched a “Carbon Neutral Driving” campaign in the Netherlands, encouraging consumers to pay an additional fee when refueling to offset the carbon emissions from driving gasoline cars. These extra funds will be invested in forest conservation projects and used to purchase relevant carbon offsets.
In 2021, such practices were sued by local consumers, and the Dutch advertising regulatory body also ruled that the promotion was misleading, which is typical greenwashing behavior.
We believe that the permanence of carbon sequestration by forests is a questionable issue. Fossil fuel combustion releases carbon that has been stored long-term, and once released, it will remain in the atmosphere for a long time. Forests fix carbon with a lifespan limited by plant life.
Moreover, under climate change, wildfires have become more frequent, turning some forest carbon sinks back into carbon dioxide. Last year, a carbon offset forest in southern Oregon, USA, was destroyed by a wildfire. This forest had stored thousands of tons of carbon dioxide, including part purchased by Microsoft.
Of course, this does not mean opposing afforestation, but rather that if we think that without changing our own energy consumption habits, relying solely on ecosystems to achieve carbon neutrality is completely wrong.
At the same time, we recommend that companies clearly disclose their carbon offset usage criteria, the amount of greenhouse gas emissions involved in carbon offsets, the sources, and the reasons why further emission reductions cannot be achieved temporarily. Additionally, they should disclose the types of carbon offset or removal projects used, the accounting methods, and methodologies.
Carbonstop: In the context of slowing economic growth, do you think green consumption can become a new growth point for consumption? How can we promote consumer preference for low-carbon products?
Ye Ruiqi: We believe that the market for green consumption needs to be gradually cultivated, and we are optimistic about it in the long term.
As an NGO, Greenpeace has been exploring how to better and faster cultivate public awareness of climate and environmental protection. Recently, we have been tapping into vertical communities with potential as "environmental pioneers," co-creating, co-thinking, and experimenting with environmental protection content with these groups who are eager to explore environmental concepts.
Under this guiding principle, we have organized many offline activities. For instance, at the end of summer this year, we organized a “camping experiment” in Huairou, inviting 12 experienced campers to jointly explore: How can we better coexist with nature, and what can we do for “healthy forests”?
Through such activities, the public's environmental awareness and concepts can be combined with personal experiences, truly feeling the connection with nature, and thus thinking about specific actions.For example, when camping, how to minimize the impact on the ecological environment, such as avoiding brightly colored clothing to reduce disturbance to wildlife.
We are exploring experiential science popularization, cultivating seeds of environmental protection in niche groups, hoping that these seeds will grow strong and inspire broader public participation in the future.
Carbonstop: From the perspective of Greenpeace, how can companies better promote macro-level carbon neutrality progress?
Ye Ruiqi:Firstly, internally, companies need to lead by example in carbon reduction.We notice that amid the carbon neutrality trend, many companies focus their publicity on low-carbon technologies and products.
We believe that to genuinely advance the process of carbon neutrality, companies must focus on reducing their total carbon emissions, addressing Scope 1, 2, and 3 emissions, and implementing carbon reduction in practice. This is more convincing than selling low-carbon products and better demonstrates the company's commitment and sincerity towards carbon neutrality.
Externally, companies can leverage their social influence to contribute ideas for carbon neutrality.For example, during the Two Sessions in 2022, the chairman of CATL submitted four proposals related to the new energy industry, covering topics such as new energy storage, battery carbon footprint, lithium resource supply, and battery transportation, promoting the construction of electrochemical energy storage infrastructure.
Secondly, companies can participate in improving policy mechanisms and market mechanisms, exploring new business models.For instance, after China launched its pilot program for green electricity market-based trading in September 2021, many large corporate buyers entered the market, providing valuable practical experience for the implementation of the pilot. Tencent signed green electricity trading contracts totaling 504 million kilowatt-hours in 2022.
Additionally, in the first half of 2022, BASF China signed a 25-year renewable energy power purchase agreement (PPA) with Borealis, using levelized cost of electricity (LCOE) standards for the first time to price renewable energy projects under development, setting a precedent in China's green electricity long-term trading sector.
These examples demonstrate that companies have the capability, influence, and pathways to participate in the broader carbon neutrality process.
Carbonstop:Many companies have set carbon reduction/carbon neutrality goals, but fewer take carbon reduction measures, and their reduction progress is inconsistent with their target plans. How does an NGO view this phenomenon?
Ye Ruiqi: In the global effort to achieve the 1.5°C temperature control target and countries' transition towards carbon neutrality, NGOs play roles in urging, empowering, and witnessing. They also serve auxiliary and observational roles in government decision-making processes. As more and more companies set carbon neutrality targets, NGO attention naturally turns to how these targets will be achieved.
According to NetZero Tracker statistics, globally there are already 799 large listed companies that have proposed net-zero emission targets. According to the Greenpeace Carbon Neutrality Tracking Platform, in China, over 30 large enterprises have set carbon neutrality targets.
Carbon neutrality targets themselves are not markers of climate leadership; these targets only make sense accompanied by deep decarbonization actions.Without concrete emission reduction measures, these targets risk becoming empty promises, followed by the inevitable suspicion of greenwashing. Such suspicion can bring reputational risks and potential legal risks to companies.
In recent years, international society has increasingly focused on companies' greenwashing risks. For example, Oxford Net Zero tracks the quality and progress of net-zero emission commitments of large listed companies annually. Some third-party consulting firms also establish platforms for collecting and disclosing information on corporate carbon neutrality practices through data interfaces, assessing whether companies' carbon neutrality practices align with national targets and the global 1.5°C temperature control target.
From a corporate perspective, we recommend enhancing the disclosure levels of related carbon reduction practices.If new challenges arise due to changes in external conditions, leading to adjustments in emission reduction expectations or business structures, companies should communicate promptly with stakeholders.
We look forward to companies enhancing their climate action capabilities while strengthening the timeliness and transparency of ESG disclosures.
