Met Zero: What happens when Australia’s companies hit net zero emissions?

Met Zero

Net zero and 100% renewable targets have become the corporate wallpaper of Australian businesses: ubiquitous, but increasingly hollow.  

Once a badge of climate leadership, these commitments risk losing their meaning as the bar for ambition stagnates and companies settle for the path of least resistance.

Though well intended, the archaic carbon accounting practices many Australian businesses are using in pursuit of these targets risk creating annual 'net zero’ and ‘100% renewable’ tick box exercises.

This approach can result in companies paying yearly fees for offsets and certificates while actual decarbonisation is delayed or deferred.

Early solutions to this challenge have arrived in the form of scope 3 emissions reduction targets.

Given net zero targets tend to only cover businesses’ scope 1 and 2 emissions – those emissions directly within their operational control – some leading businesses have expanded their target to include scope 3 emissions, which fall outside of a business’ operational control.

Leaders like Unilever, Lendlease and IKEA are expanding their ambition to reduce the embodied carbon of new assets, engage and collaborate with suppliers to reduce supply chain emissions, while also investing in low carbon technologies.

Beyond scope 3 emissions, a new solution is emerging.

A solution that places the onus firmly back on operational emissions, taking a sophisticated and transparent approach to energy demand and matching it to the supply of renewable energy to correct broken incentive structures and highlight the true demand for renewable energy. Emerging technologies, changing consumer expectations, and tightening regulations are pushing companies beyond offset-dependent 'net zero' targets toward genuine decarbonisation

Instead, focusing on ‘true’ zero emissions strategies that align carbon and cost, businesses can lead in a world that has moved beyond ‘met zero’.

The Problem with Net Zero

To understand this new response, we must first understand the problem with net zero, and how its solution is creating a new standard of climate leadership.

Net zero and 100% renewable targets are premised on a methodological inadequacy.

This inadequacy comes from the Greenhouse Gas Protocol, the global carbon accounting standard for emissions accounting and reporting.

Specifically, the GHG Protocol’s Scope 2 Guidance, which regulates how companies measure and mitigate the emissions stemming from operational electricity use. These emissions are of growing importance, as the electrification of transport, buildings and equipment means that scope 2 emissions are forming an increasing proportion of businesses’ operational scope 1 and 2 carbon footprints. In the case of fully electric portfolios, scope 2 emissions account for all a business’ operational ’net zero’ emissions.

Currently, the Scope 2 Guidance allows companies to measure and then eliminate (i.e. net off at zero) their scope 2 emissions through annual “100% renewable” energy purchases from energy retailers.

While well intended, and certainly helpful in incentivising new renewable energy generation over the past decade, new technologies and consumer expectations are revealing the issues with a method that allows businesses to be ‘net zero’ and ‘100% renewable’ while still actively using fossil fuels to run their assets.

To understand how (and why!) this perverse incentive structure came to be, we must first briefly touch on how energy markets operate.

And what it means to buy "100% renewable" energy?

Energy Markets

Think of energy markets like big pools of water.

Once water enters the pool, it is impossible to know where it came from. And whilst water is constantly being poured into this pool, we are all – in one way or another – siphoning water out to run our households and businesses.

Once in the grid, it has been impossible to track where energy is coming from.

Purchasing "100% renewable" energy doesn’t mean electrons are being directed from wind farms to your power point, whereas previously they’d been coming from a coal fired power station.

Rather, renewable energy has instead historically been accounted for through the provision of Renewable Energy Certificates (RECs).

Under 2001’s Renewable Energy Target Act, the Federal Government incentivised renewable energy generation by assigning RECs for every MWh of renewable energy generated, thus creating a second revenue stream for renewable energy generators. These RECs can be voluntarily purchased by corporates who want to demonstrate renewable energy use.

Businesses can make "100% renewable" energy claims by purchasing an amount of RECs equivalent to their total energy use. For example, an asset that consumes 500MWh of electricity annually, can – by buying 500 RECs – claim "100% renewable" energy status.

But this buying of certificates has created some perverse outcomes.

For instance, an asset running predominantly of brown coal on a cold Victorian winter evening can claim zero scope 2 emissions by acquiring RECs generated at midday, in the middle of the South Australian summer, months previously.

This method means well intended actors are using fossil fuels to power their "100% renewable" assets.

The reality is that achieving true 100% renewable energy is really, really, hard.

As your climate sceptic uncle will tell you, the sun doesn’t always shine, and the wind doesn’t always blow. (He however, always blows).

Using certificates to promote 100% renewable energy can be misleading, and businesses big and small are beginning to explore new approaches to renewable energy use and quantification, moving beyond ‘“100% renewable’” targets. Rather than persisting on the empty calories of certificates, leading businesses are operating at this intersection of technology, carbon and regulation, making meaningful contributions to the energy transition and reaping the commercial rewards.

A New Paradigm of Leadership

Google has been pioneers on this journey since 2017, when their engineers begun questioning Google’s "100% renewable" energy credentials for the reasons outlined above

As a result, Google has adopted a more granular, data driven approach to renewable energy accounting, seeking to match their energy demand to renewable energy supply every 30 minutes.

This ‘time-matching’ of renewable energy has given Google visibility of when they are actually using renewable energy, by matching demand to temporal and location-specific supply every half hour.

By using new matching technologies and contracting instruments Google has begun reporting the true proportion of renewable energy usage across their data centre portfolio, targeting what they call 24/7 Carbon Free Energy use across their operations.

You learn more about their rationale, approach, and progress here, here, here and here.

You don’t need to be Google to seize the cost, reputational and carbon benefits of time matched renewable energy agreements.

Australian property fund EG’s time matched agreement allows them to access solar power at a discount relative to their peak rates, saving money for their investors and tenants. Similarly, the Port of Brisbane is using time matched tariffs to share excess solar power in real time with their broader portfolio of assets who otherwise wouldn’t have access to renewable energy. Woolworths are also reducing energy expenses through smarter use of clean energy at their Townsville distribution centre.

Tailwinds: Changing Voluntary and Mandatory Carbon Accounting Methodologies (and Tech Providers!)

In addition to corporate leadership, carbon accounting standards – both voluntary and mandatory – are rapidly evolving.

The decades old GHG Protocol is in the middle of a five-year review (yeesh!), with the new Scope 2 Guidance (to be released in 2027), to include a focus on time matched renewable energy use and more granular carbon foot-printing. You can read more about this mammoth review here (and go and follow the excellent Killian Daly while you're there).

Other voluntary global standards are moving too.

The Climate Group is encouraging members of their RE100 Coalition (the previous gold standard for corporate commitments to renewable energy) to adopt 24/7 Carbon Free Energy Principles, having acknowledged that the 100% renewable energy use – the RE100 standard – is no longer best practice.

Likewise, the Science Based Targets Initiative’s new Net Zero Standard asks companies to match their renewable energy purchases more closely to when and where they’re actually using electricity.

Beyond voluntary frameworks, legislated standards are also tightening.

Despite some attempts to extend it, Australia’s Renewable Energy Target legislation is expiring in 2030. The RECs created under the scheme face an uncertain future, with their replacement instrument – Renewable Energy Guarantees of Origin, legislated under the Future Made in Australia Act – to include a time matched element.

This local change will ensure Australia keeps pace with renewable energy accounting standards in Europe and even in Trump’s America, where quantification standards for ‘green hydrogen’ are driving this shift to time matched renewable energy.

So, What Does Leadership Look Like Beyond ‘Met Zero’?

At BWD, we're helping clients abandon certificate-based net zero claims for strategies that actually reduce emissions. We can help design time-matched renewable energy systems, eliminate operational carbon, and unlock the cost savings that come with genuine decarbonisation.

Leading corporates recognise that yesterday’s targets can’t lead in tomorrow’s world.

Do you?