A net-zero pledge is easy to announce and hard to keep. The announcement takes a press release; the keeping takes a decade of capital decisions, supplier conversations and measurement most companies have never done. The gap between the two is where reputations, and increasingly, regulators, go to work. This explainer is about closing that gap with something defensible.

The quick version

  • Net zero means cutting your greenhouse-gas emissions as close to zero as you can, then permanently removing what little genuinely cannot be eliminated, it is not "carbon neutral by buying offsets while emissions stay flat."
  • Emissions split into three scopes: scope 1 (what you burn directly), scope 2 (the energy you buy), and scope 3 (your whole value chain). For most companies scope 3 is the overwhelming majority, and the hardest part.
  • A credible plan sets a science-based target aligned with limiting warming to 1.5°C, cuts emissions first, and uses high-quality removals only for the genuine remainder.
  • The honest trap: long-dated 2050 pledges that distract from thin near-term action. The number that matters is what you cut by 2030, not what you promise for the year you retire.

The idea in depth: net zero is a balance, not a slogan

Start with the definition, because most arguments about net zero are really arguments about what the words mean. Net zero is a state in which the greenhouse gases a company puts into the atmosphere are balanced by an equivalent amount permanently removed from it. The Intergovernmental Panel on Climate Change frames it as global emissions reaching a balance with removals, the point at which we stop adding to the warming total. The corporate translation, set out in the Science Based Targets initiative's Corporate Net-Zero Standard, is stricter than most pledges imply: a company cannot claim net zero until it has cut emissions across all scopes in line with what the science requires, typically a reduction of around 90%, and only then neutralised the small, genuinely unavoidable residual.

So reorder the sentence most companies say. "We will be net zero by 2050" should read "we will cut our emissions roughly 90% and remove the rest." That ordering is not pedantry; it decides where the money goes. The Science Based Targets initiative exists precisely because, before it, corporate climate goals were vague enough to mean almost anything, and by early 2026 it counted around 10,000 companies and financial institutions with validated targets. Aligning to its standard is the cleanest way to make a pledge an investor, an auditor or a sceptical journalist cannot easily pull apart.

The three scopes: most of your footprint isn't yours to burn

You cannot manage what you have not measured, and the measurement framework everyone uses is the Greenhouse Gas Protocol Corporate Standard, developed by the World Resources Institute and the World Business Council for Sustainable Development. It sorts emissions by how close they sit to your control. Scope 1 is direct: the gas you burn in your own boilers, the fuel in vehicles you own. Scope 2 is the electricity, steam, heat and cooling you buy. Scope 3, defined in fifteen categories in the Protocol's 2011 value-chain standard, is everything else: the emissions of your suppliers making what you buy, and of your customers using what you sell.

flowchart LR
  S(["Suppliers
making your inputs"]) -->|"Scope 3 upstream"| C(["Your company
Scope 1: what you burn
Scope 2: energy you buy"])
  C -->|"Scope 3 downstream"| U(["Customers
using your products"])
The three scopes of the GHG Protocol, direct emissions are the small middle; the value chain on either side is usually the bulk. Leaders Loop

Here is the part leaders consistently underestimate: for most companies, scope 3 dwarfs scopes 1 and 2 combined. A retailer's own shops burn very little next to the factories that make its goods; a bank's offices are a rounding error beside the emissions of the projects it finances. So measure scope 3 early, even roughly, before you congratulate yourself on a green head office. A plan that decarbonises only what you directly burn is solving the easy 10% and declaring victory.

An honest limitation. Scope 3 data is genuinely hard, much of it comes from suppliers who do not measure their own emissions, so early figures lean on industry averages and spend-based estimates that can be off by a wide margin. Treat your first scope-3 number as a direction, not a fact, and improve it each year by getting real data from your largest suppliers rather than chasing false precision across thousands of small ones.

The order of operations: cut deep, then remove, don't offset your way out

Once you can see the footprint, the strategic question is sequencing: what do you tackle first, and what role do carbon credits play? The clearest answer comes from the Oxford Principles for Net Zero Aligned Carbon Offsetting (University of Oxford, 2020), which set a hierarchy: cut your own emissions first; use only verifiable, high-integrity credits for what remains; and shift the credits you do buy from cheap "avoidance" offsets toward durable carbon removal over time, so that by the global net-zero date your residual emissions are matched by permanent storage, not paper promises.

To decide which cuts to make first, the standard planning tool is the marginal abatement cost curve (MACC), popularised by McKinsey in the late 2000s. It ranks every available action by cost per tonne of CO₂ avoided against the volume it removes, so you can see, at a glance, which measures actually save money (efficiency, often) and which are expensive but unavoidable. Build even a rough version: list your biggest emission sources, the actions that would cut each, and what each costs per tonne, then start at the cheap, high-volume end.

flowchart TD
  A(["Measure all three scopes"]) --> B(["Set a science-based
1.5°C target"])
  B --> C(["Cut emissions first
cheap, high-volume actions first"])
  C --> D{"Residual that's
genuinely unavoidable?"}
  D -->|"No, keep cutting"| C
  D -->|"Yes"| E(["Neutralise with durable,
verified carbon removal"])
The credible sequence: measure, target, cut, and only then remove the genuine remainder, offsets are the last step, not the first. Leaders Loop

The companies in trouble aren't the ones with no pledge, they're the ones whose pledge outran their plan.

This sequencing is also your best defence against the charge that has sunk more than one corporate climate claim: greenwashing. The Corporate Climate Responsibility Monitor from NewClimate Institute and Carbon Market Watch examined a set of major global companies and found their headline net-zero pledges, taken together, amounted to far less than the 100% they imply, in the 2022 edition, the twenty-five companies assessed committed in aggregate to cut roughly 40% of emissions, not eliminate them, and most leaned heavily on offsets of questionable quality. The defensible posture is the inverse of what gets a brand sued: lead with the cut, disclose the method, and use removals only for what you have honestly proven you cannot yet eliminate. The writer's view: the reputational maths has flipped. A quiet, credible plan now beats a loud, leaky pledge, and the regulators are closing the gap between the two faster than most boards expect.

A worked example

Take a mid-sized consumer-goods maker, call it Harbour Foods. (Illustrative figures throughout; this is a teaching example, not a real company.) Its leadership announces "net zero by 2040" to applause, then asks the operations director what it will take. The first honest finding lands badly: the company's own factories and fleet (scopes 1 and 2) account for maybe 15% of its footprint. The other 85% is scope 3, the farms growing its ingredients and the refrigeration in the shops that sell its products.

Run through the hierarchy. First, measure: a rough scope-3 estimate, built from spend data and industry averages, says the largest single source is dairy in the supply chain. Second, a science-based target: a commitment to cut roughly 90% by 2040, with an interim 2030 milestone, validated against the 1.5°C pathway. Third, cut, and a quick marginal abatement curve shows the cheapest wins are unglamorous: switching the factories to a renewable electricity contract (saves money within three years) and a refrigerant change (modest cost, large effect), before the harder, slower work of helping dairy suppliers change practices. Only for the genuinely stubborn remainder, say the last slice of agricultural emissions, does Harbour budget for durable removals, and not a tonne sooner.

The lesson is a dull one: the first year of a serious net-zero strategy looks less like tree-planting and more like a spreadsheet, an energy contract and some awkward phone calls to suppliers. The firms that come unstuck are the ones that skipped straight to buying offsets because it was quicker than measuring.

Frequently asked questions

Is "net zero" the same as "carbon neutral"?

No, and the difference matters. "Carbon neutral" has often meant balancing today's emissions with offsets while making little change to the emissions themselves. Net zero, as defined by the Science Based Targets initiative and the IPCC, requires deep absolute cuts first, typically around 90%, with removals reserved for the small residual. A company can call itself "carbon neutral" this year by writing a cheque; net zero is a decade-long reduction programme.

Why is scope 3 such a big deal if it's not even our emissions?

Because for most companies it is the great majority of the footprint, and because you influence it through what you choose to buy and sell. Ignoring scope 3 means ignoring 70–90% of your impact and leaves your pledge open to the charge that you decarbonised the easy part. You do not control suppliers directly, but you control your purchasing, a lever most companies underuse.

Are carbon offsets just greenwashing, then?

Not inherently, but the market has earned its bad reputation. Peer-reviewed work has documented over-crediting, weak "additionality" (credits for reductions that would have happened anyway), and reversal risk in many offset projects. The defensible position, per the Oxford Principles, is to use offsets only after cutting your own emissions, to favour verified high-integrity credits, and to shift toward durable removals, never to treat cheap avoidance credits as a substitute for actually decarbonising.

We're a small company, does any of this apply to us?

The measurement and the order of operations scale down cleanly: know your three scopes, cut the cheap high-volume sources first, switch to clean energy where you can. You may not need a formally validated target, but if you sell to larger firms, expect them to ask for your emissions data, your scope 1 and 2 are their scope 3, and that pressure is moving down supply chains fast.

What's the single most common mistake?

Setting a distant date and no near-term plan. A 2050 pledge with nothing concrete before 2030 is the pattern NewClimate Institute's monitor repeatedly flags, it lets a company sound ambitious while deferring all the hard, expensive work past the tenure of everyone making the promise. Anchor the plan to an interim target you can be held to within a few years.

Related in the Toolkit

Climate strategy is one strand of a wider responsibility agenda, it sits inside how you report on ESG and rests on the same ethical reasoning as the rest of business ethics, where the test is whether the action survives scrutiny, not whether it sounds good.

Where to go next