People are often unsure about how net zero and ESG initiatives relate to each other. Net zero and ESG are closely related, overlapping concepts, both aimed at improving sustainability outcomes. At the same time, there are some important differences in scope. While net zero is a specific goal related to climate change mitigation, ESG is a broader set of criteria used to evaluate a company’s overall sustainability and risk management.
Net zero specifically refers to a state where your organisation’s residual greenhouse gas emissions are balanced by GHG removals. Achieving net zero requires first reducing emissions through measures such as energy efficiency, electrification and renewable energy, reducing waste, and working with your suppliers to reduce your scope 3 emissions. Towards the end of your decarbonisation journey, when all feasible emission reduction measures have been implemented, net zero then requires offsetting any remaining emissions through activities like planting trees.
ESG stands for Environmental, Social, and Governance, and refers to the three main areas that investors and companies consider when evaluating the sustainability and ethical impact of your business. Environmental factors include your company’s impact on the environment, such as your carbon emissions, use of renewables, waste management, and water usage. Social factors include your company’s impact on your employees, customers, and communities, while governance factors refer to your company’s leadership, decision-making processes, and accountability. ESG investing involves evaluating companies based on these factors and investing in companies that are seen as sustainable and responsible.
Net zero is an important part of ESG because it is one of the key environmental factors that investors consider when evaluating a company’s sustainability. Many companies are setting net-zero targets as part of their broader ESG strategies, and investors are increasingly evaluating companies based on their progress towards these targets. Companies that are actively working to reduce their greenhouse gas emissions and achieve net zero are likely to be more attractive to ESG investors.
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100% Renewables are experts in helping organisations develop their net zero strategies and plans, and supporting the implementation and achievement of ambitious targets. If you need help to create your net zero transition strategy, please contact Barbara or Patrick.
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