Governments around the world, including Canada, have signed on to the Paris Agreement to limit global warming to 1.5⁰ and to achieve net-zero emissions by 2050 or earlier. Businesses have also set similar targets in order to contribute to the fight against climate change.
These commitments (and other environment, social, and governance (ESG) targets) are driven by the growing physical risks of climate change in the form of droughts, wildfires, and high temperatures as well as transitional risks as new regulations and expectations emerge from governments, investors, and consumers.
These types of pledges are rapidly becoming the norm and should be a wake-up call for businesses that are not yet on the path to fighting climate change or implementing ESG priorities.
Stakeholders are pressuring companies to move beyond setting targets and goals; they expect tangible progress toward those goals with transparent reporting and accountability from corporate leadership.
In this article, we look at how businesses are ‘going green' and the resulting accounting and financial reporting implications.
What does achieving net zero mean?
In a business context, reaching net zero means that the amount of carbon that goes into the environment, due to activities in the value chain, is equal to the amount being sequestered. This can be achieved by tree planting, employing carbon capture technologies, or even buying carbon credits, where applicable, through programs like cap-and-trade systems or voluntary markets.
How can businesses achieve net zero?
The net-zero concept represents many value-creation opportunities, while building a more sustainable economy. However, moving from goal setting to an actionable strategy can be difficult. Achieving net zero or other ESG-related goals can be a daunting task and there is no one-size-fits-all approach.