Net zero is a booming business for consulting firms

Investments in forest conservation can help companies reach net zero emissions, but there are major limits to the use of offsets.
Investments in forest conservation can help companies reach net zero emissions, but there are major limits to the use of offsets.
Image: REUTERS/Baz Ratner
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When the Paris climate agreement was inked back in 2015, the bar for corporate and national climate action was fairly low—just about any plan to reduce carbon emissions was a major step forward. Things are different now. In 2018, scientists stated clearly that the only way for global warming to stay within the Paris target of 1.5 C above pre-industrial levels was for the global economy to reach net-zero emissions by 2050.

Today, net-zero is the new standard to beat. Any plan that doesn’t aim toward that target doesn’t go far enough. At least 965 companies and 63 countries have publicly committed to net-zero targets. Turning those plans into reality will be an unprecedented undertaking—and will generate huge profits for the consulting firms that have the know-how to make it happen.

What does “net zero” mean?

Ideally, the global economy could completely eliminate its reliance on greenhouse gas emissions (and remove those that are already in the atmosphere). But not all emissions are created equal, and some are more difficult or expensive to cut than others. A company might find it easy to replace cars it owns with electric vehicles, for example, or sign a contract for solar power. But scaling up decarbonization across a company’s storefronts, factories, offices, or other facilities (or a national economy) is a major challenge. It’s even more complex when accounting for a company’s suppliers: These often account for the majority of a company’s total carbon footprint, but the company doesn’t exert direct control over them. Energy companies must also account for emissions produced by customers when using their product (oil, for example).

“Net-zero” refers to the offsetting of those emissions that can’t be cut directly (or at least, haven’t been yet) through the purchase of credits derived from third-party decarbonization projects. A company, for example, may still use raw plastics that are made from fossil fuels, but offset those emissions by paying to support a reforestation project somewhere else.

There are two problems to consider. One is that offset markets are notoriously opaque and sell many offsets that don’t do as much for the climate as they claim. The second is about how much work the “net” in “net zero” needs to do—there simply aren’t enough offsets to reach global net-zero if companies don’t get most of the way there through direct reductions.

Setting standards for corporate net-zero goals

There’s no official standard for rating the credibility of corporate net-zero goals, and since most of these have a deadline decades away, it’s impossible to accurately assess how likely they are to be achieved.

But voluntary guidelines are coalescing around the gold standard for corporate climate action, particularly under the auspices of the Science-Based Targets Initiative (SBTI), a project of the World Resources Institute and others. SBTI published a new set of net-zero principles on Oct. 28, one of the most important of which is that any net-zero standard may not use offsets for more than 10% of residual emissions from supply chains and customers, and 5% of operational emissions. SBTI also announced the first cohort of companies to have a net-zero target validated under these principles, which includes AstraZeneca, CVS Health, Dentsu International, Holcim, JLL, Ørsted, and Wipro.

A growing role for private consultants

Meanwhile, energy and climate consulting companies are pitching themselves as net-zero navigators. One of the biggest is Paris-based multinational Schneider Electric, which has roots as a producer of steel and electric grid hardware but now mostly deals in energy efficiency. In an interview, Olivier Blum, Schneider’s chief strategy and sustainability officer, said the company is working on decarbonization plans for 30% of the Fortune 500 companies and is looking to grow its net-zero consulting business even more.

“There has been huge momentum among the biggest companies to have a strong focus on their climate commitments,” said Olivier Blum, chief strategy and sustainability officer at Schneider Electric. “Now there’s another set of medium-sized companies that are just starting their journeys. That will create a huge opportunity for us.”

Even when their motivations are genuine, most companies are still in the dark about what the net-zero transition actually entails, Blum said. Schneider frames it as a multistep process: First, companies state their ambition. Then they go through a tedious and technical process to digitize a huge volume of information related to their company’s carbon footprint, which Schneider combs through to look for emissions-curbing opportunities. As the company pursues those opportunities, Schneider encourages them to publicly report their progress. Finally, Blum says the most important step is to quickly move from a long-term target to a short-term implementation plan.

“Whatever you want to do for 2040 is well and good, but the most important thing is the next three years,” Blum said. “And the real question is whether a company is ready to put in that extra effort.”