Net zero: the risks and benefits for companies pledging to save the climate

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Martin Reeves, Senior Partner, Boston Consulting Group and Chairman, BCG Henderson Institute, Boston Consulting Group, David Young, Senior Partner and Managing Director, Boston Consulting Group (BCG), Julia Dhar, Partner and Managing Director and Fellow to BCG Henderson Institute, Boston Consulting Group (BCG), Annelies O’Dea, Project Leader and Ambassador to BCG Henderson Institute, Boston Consulting Group (BCG)


  • Corporate net-zero pledges are gaining momentum, but limitations in net-zero’s design and implementation reduce impact and jeopardize progress.
  • There are 15 limitations which are often manifest in many well intentioned net-zero initiatives.
  • Governments and businesses have the opportunity to leverage momentum while accelerating and strengthening net-zero commitments and progress towards climate sustainability.

A critical mass of the world’s largest companies and countries have now made net-zero pledges, creating a snowball effect that will encourage others to join. As net zero rapidly becomes the standard for government and corporate commitments, it’s appropriate to stop and ask: is net zero a sufficient tool to address climate change?

What does net zero offer

Ostensibly, net zero offers a goal of climate stability and an accounting system to measure progress towards that goal. It is also a platform that an expanding set of players can commit to over time.

Net zero offers the abatement of climate risk for shareholders without abrupt disruption to near-term returns, and reputational benefits for companies that serve customers or businesses that are climate-conscious.

Bur a deeper review reveals significant limitationsto the approach, which, if unaddressed, could easily misrepresent and undermine progress toward the ultimate goal of environmental sustainability. All of these can already be observed in practice.

15 limitations of net zero

Definitional consistency/completeness: Multiple accounting standards and varied implementations of net-zero accounting create room for manipulation, misrepresenting the pace of progress. For example, pledges that target only a subset of activities can make heavy-emitting industries appear to be net zero and delay more transformative change.

Verifiability: The verification of reported reductions and the execution of offset pledges represent an increasingly complex challenge, opening the scheme to manipulation.

Double counting: A single carbon offset can sit simultaneously on multiple entities’ balance sheets, inflating perceived impact.

Delayed impact: Nature-based offsets, such as afforestation schemes, take time to realise their impact. The short-term imbalances between when the offset is credited and when it yields its full benefit can lead to further climate deterioration.

Postponement of decarbonization: Carbon offsets create an “easy solution” that may distract or delay companies from the hard but more meaningful and permanent work of reducing their own carbon emissions.

Permanence: Carbon offsets must be maintained through proper stewardship long after they are “bought” to sustain impact. For example, an acre of forest sold this year as a carbon offset may be destroyed next year due to neglect, fire, or even willful action on the part of the seller.

Non-additivity: If buying a carbon offset leads to a reduction of greenhouse gas emissions that would have happened independently, then the offset is non-additive.

Leakage: Attempts to reduce emissions in one location may shift emissions to another where they are uncontrolled or uncounted. For example, a carbon offset programme that safeguards an area of rainforest in the Amazon from clear-cutting may result in the clear-cutting of an area of rainforest in the Congo Basin.

Economic viability (inflation of offset prices): Pledges made today for carbon neutrality at a future date are effectively commitments to buy offsets at an unspecified price. However, the price of carbon offsets will likely rise in the future due to constrained supply and increased demand. This may make planned offsets economically unrealistic and result in pledges not being fulfilled.

Voluntarism: Achieving a net-zero planet will require 100% of companies and countries to become net zero. However, the elective basis of the net zero will inevitably lead to partial participation. The biggest emitters are likely to have the most intractable challenges and the least incentive to commit.

Moral hazard: Most carbon offset solutions available today involve paying someone to not take an action (e.g. not to log a forest) which creates a financial incentive for offsetting entities to project anaction they had previously not intended to take and be paid for not taking it.

Inequity in economic development: Net zero may inadvertently restrain economic development in poorer nations by diverting a country’s resources for the provision of offsets beyond its borders, rather than economic development. This in turn may create political limits to scaling the net-zero mechanism.

Over-simplification of sustainability as carbon neutrality: Many pledges today are solely focused on the reduction of carbon dioxide, despite methane and nitrous oxide having 30 and 300 times the heat-trapping effect of carbon dioxide, respectively.

Over-simplification of sustainability as decarbonization: The growing focus on greenhouse gas (GHG) reduction goals could be self-defeating if other mechanisms of environmental degradation continue unchecked. For example, the depletion of species and destruction of natural habitats can reduce the natural buffering capacity of the planet, undermining climate sustainability.

A goal without a path: Net zero provides a goal, but not a path to achieve it. The complex, unprecedented, inter-dependent and transformative change required to reach net-zero planetary emissions may not be achievable without a coordinated transition plan and the research, investments, policies and regulations to support it.

What is the World Economic Forum doing on natural climate solutions?

The world faces converging environmental crises: the accelerating destruction of nature, and climate change.

Natural climate solutions (NCS) – investment in conservation and land management programmes that increase carbon storage and reduce carbon emissions – offer an important way of addressing both crises and generate additional environmental and social benefits.

Research conducted for the Forum’s Nature and Net Zero report confirms estimates that NCS can provide one-third of the climate mitigation to reach a 1.5° and 2° pathway by 2030—and at a lower cost than other forms of carbon dioxide removal. This report builds on the recommendations from the Taskforce for Scaling Voluntary Carbon Markets, and identifies six actions to accelerate the scale-up of high-quality NCS and unlock markets through the combined efforts of business leaders, policymakers and civil society.

To foster collaboration, in 2019 the Forum and the World Business Council for Sustainable Development came together to establish the Natural Climate Solutions Alliance to convene public and private stakeholders with the purpose of identifying opportunities and barriers to investment into NCS.

NCS Alliance member organizations provided expert input to develop the Natural Climate Solutions for Corporates, a high-level guide to the credible use of NCS credits by businesses.

Get in touch to join our mission to unleash the power of nature.

Elements of a better path forward

Given these limitations, how do we harness the momentum created by net zero while evolving a more robust set of solutions? Some elements of a better path forward could include the following. Some limitations of net-zero can be addressed through improved definitions and how these are applied in practice.

Establish consistent definitions/standards: Net-zero emission targets must account for all GHGs, covering the full scope of activities.

Distinguish carbon offsets from emission reduction in reporting: Carbon offsets cannot be allowed to substitute for or postpone addressing emissions. Companies should report separately their emissions reductions and their offsets.

Create robust mechanisms of verification: Audited inventories of carbon offset resources can support a marketplace for carbon offsets that can be verified and monitored over time.

Beyond net zero

We must pursue a more multi-dimensional view of sustainability and put in place the financial, operational, technological, behavioural, and cultural support to enable the transformative actions necessary.

Take a multidimensional view of sustainability: Consider sustainability beyond the single dimension of carbon emissions to include all relevant factors, including other GHG emissions, species diversity, air and water quality, and nature preservation.

Develop a behavioural strategy: Understand the behavioural economics of decarbonization and put in place the right nudges, sticks, and kicks to encourage the desired human behaviours.

Ensure sustainable economics for decarbonization and offsets. Expect carbon economics to shift over time as demand for offsets and sustainable inputs create new scarcities and price inflation and bake this into pledges and projections.

Develop transition paths: Identify the major economic, technological, and societal shifts we must make collectively to provide the foundation for individual agents to meet their net-zero targets. Coordinate and sequence these shifts to enable large scale change.

Accelerate innovation: Accelerate the pace of discovery, scaling, and adoption of innovative solutions through increased funding, private & public partnership, and international cooperation. Decarbonization requires better and more cost-effective solutions than we have now and is therefore as much an innovation as an execution challenge.

This article summarizes a longer report from the BCG Henderson Institute, available here.


Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe to get the latest posts sent to your email.

Interesting reads

© UNICEF Vanessa Frazier, Special Representative on Children and Armed Conflict, during a visit to frontline areas in Ukraine.

Growing up with sirens: UN child rights envoy on the toll of the Ukraine-Russia war

This article is published in association with United Nations. Children in Ukraine have been profoundly impacted by years of war, sheltering in underground schools – or forced to study online – and living with the psychological strain of constant air raid sirens that could spell death for them and their families. But children on both sides […]
OCHA/Charlotte Cans The El Niño-induced drought in Ziway Dugda, Oromia region of Ethiopia, is affecting every family and they don't have enough food at home to feed themselves. (file photo).

El Niño confirmed, set to fuel more extreme weather, says WMO

This article is published in association with United Nations. The UN urged all countries on Tuesday to bolster early warning systems after confirming the onset of El Niño, warning that the Pacific Ocean-warming phenomenon will bring above-average temperatures “nearly everywhere” and fuel more extreme weather. According to the World Meteorological Organization (WMO), there is an 80 […]
© UNICEF The aftermath of a Russian strike on a residential area in Kyiv, Ukraine’s capital.

UN deplores another wave of Russian attacks across Ukraine

This article is published in association with United Nations. Overnight attacks in three key cities in Ukraine have left several civilians dead, scores more injured, and homes, hospitals and shops destroyed or damaged, the UN Humanitarian Coordinator in the country said on Tuesday.  Matthias Schmale condemned the large-scale Russian assault on the capital Kyiv, as well as Dnipro and Kharkiv, […]
© WHO/Joël Lumbala A shipment of essential medical supplies for the Ebola response arrives at Bunia airport in Ituri province, DR Congo.

DR Congo Ebola outbreak: Nurses discharged after full recovery

This article is published in association with United Nations. Four nurses who fell ill with Ebola in the eastern Democratic Republic of the Congo (DRC) have been discharged from hospital after recovering from the often-fatal illness that sparked an international health alert.  “More recoveries are expected, especially when people are diagnosed early and able to access care, and […]
This article is published in association with United Nations.

Under fire, Kharkiv is already building for a peaceful tomorrow

This article is published in association with United Nations. Every day in Kharkiv begins with uncertainty: air raid sirens interrupt sleep; missiles strike residential neighbourhoods, industrial sites, and roads. Anxious citizens rush into metro stations during bombardments and children study underground. Yet amid the destruction, Ukraine’s second-largest city is doing something that may seem almost impossible […]
© UNOCHA A heavily damaged apartment building in Sloviansk, eastern Ukraine.

UN warns Ukraine war risks spiralling ‘out of control’

This article is published in association with United Nations. The United Nations on Thursday warned of a dangerous escalation in the war in Ukraine after a wave of large-scale Russian strikes and threats of further attacks, with Secretary-General António Guterres saying “the death spiral must stop.” Addressing the Security Council in New York, Mr. Guterres said […]
© WHO A frontline health worker in PPE (personal protective equipment) takes part in the Ebola response in eastern Democratic Republic of the Congo.

Ebola outbreak in DR Congo collides with conflict and hunger, WHO warns

This article is published in association with United Nations. The UN World Health Organization (WHO) on Wednesday warned that eastern Democratic Republic of the Congo faces a “catastrophic collision of disease and conflict” as a fast-spreading Ebola outbreak outpaces containment efforts in a region already battered by armed violence, mass displacement and acute hunger. WHO Director-General […]
© WFP/Michael Castofas WFP staff and responders handle boxes of supplies at a logistics site in DR Congo during the Ebola outbreak.

International airlines urged to stick to safety measures in wake of Ebola outbreak

This article is published in association with United Nations. As a deadly Ebola strain continues to spread in the Democratic Republic of the Congo (DRC), with cases confirmed in neighbouring Uganda, the UN aviation agency is urging governments and flight operators to closely follow guidelines put in place following the COVID-19 pandemic. The outbreak of the […]
© WHO Supplies to bolster the response against the Ebola outbreak in Ituri province arrive in the town of Bunia.

Ebola epidemic spreading rapidly and outpacing containment efforts

This article is published in association with United Nations. There are more than 900 suspected cases of the Bundibugyo strain of Ebola in the Democratic Republic of the Congo, and 220 suspected deaths, the head of the World Health Organization (WHO), Tedros Ghebreyesus, said on Monday. The latest outbreak of the deadly disease, which WHO has declared […]
This article is published in association with United Nations.

WHO chief calls for urgent Ebola action and pandemic preparedness

This article is published in association with United Nations. The recent Ebola and hantavirus outbreaks demonstrate that the world is still vulnerable to rapidly spreading infectious diseases, Tedros Ghebreyesus, the head of the World Health Organization (WHO), warned on Saturday at the close of the 79th World Health Assembly in Geneva. His call came as Ugandan […]
This article is published in association with United Nations.

UN agencies step up Ebola response in eastern DR Congo

This article is published in association with United Nations. United Nations agencies have moved swiftly to support efforts to contain the latest Ebola outbreak in eastern Democratic Republic of the Congo (DRC), delivering emergency medical supplies, protective equipment and logistics support. As health authorities in both the DRC and Uganda respond to the deadly resurgence, the […]
© UNICEF/Josue Mulala Emergency aid is prepared for delivery to Kasaï province in response to the recently declared Ebola virus disease outbreak in DR Congo.

Ebola risk is high inside DR Congo but it’s no pandemic emergency: WHO

This article is published in association with United Nations. The deadly Ebola outbreak in Democratic Republic of the Congo (DRC) and Uganda does not represent a global pandemic emergency, although the risk is high at a regional and national level, the UN health agency chief said on Wednesday. In an update on the fast-developing situation in […]
This article is published in association with United Nations.

How the Hormuz crisis keeps disrupting kitchens, ports and paychecks

This article is published in association with United Nations. The fragile ceasefire between the United States and Iran may have eased fears of a wider regional war, but persistent instability around the Strait of Hormuz continues to disrupt global trade, drive up energy costs and fuel a growing jobs and cost-of-living crisis. The fallout is being […]
© UNFPA Ukraine In March 2026, a maternity hospital in Odesa, Ukraine was attacked by Russian forces.

World News in Brief: More attacks in Ukraine, violence against children in Haiti, refugee IDs in Africa

This article is published in association with United Nations. Civilians, including humanitarians, continue to face great danger across war-torn Ukraine amid ongoing hostilities, according to the UN humanitarian relief coordination office there, OCHA. Over the past three days, frontline attacks killed at least 11 civilians and injured nearly 200 others, including five children, as reported by […]
UN Photo/Milton Grant Sculpture depicting St. George slaying the dragon. The dragon is created from fragments of Soviet SS-20 andUnited States Pershing nuclear missiles.

Nuclear terror threat ‘has never been so high’

This article is published in association with United Nations. The widespread availability of new technology, such as militarised drones and artificial intelligence, means that the current threat of nuclear terrorism is higher than it has ever been. The humanitarian, environmental, and economic consequences of a radiological or nuclear terrorist attack would be global, undermining international peace […]
© UNICEF/Nyan Zay Htet Recent disruptions to energy supplies and global supply chains have reverberated across development and humanitarian sectors, including relief efforts in Myanmar, where millions remain in need of assistance.

Global energy and trade disruption pushing millions towards poverty

This article is published in association with United Nations. Disruptions to global energy supplies and trade corridors are driving up the cost of food, transport and essential goods worldwide, slowing economic growth and increasing pressure on vulnerable households and debt-strapped developing countries. The warnings came during a special meeting of the UN Economic and Social Council […]
UN Photo/Eskinder Debebe UN Relief Chief Tom Fletcher (centre) along with Ambassador Mike Waltz (right) and Jeremy P. Lewin of the United States hold a joint press briefing on funding to the humanitarian system.

UN welcomes $1.8 billion US boost for humanitarian operations

This article is published in association with United Nations. An additional $1.8 billion in US humanitarian funding will allow the United Nations and its partners to expand emergency relief operations reaching millions of people worldwide, as rising global needs and funding shortfalls force aid agencies to scale back assistance. The funding announcement, made on Wednesday by […]
© WHO/Hanan Balkhy Displaced families are living in overcrowded tents and makeshift shelters, surrounded by waste and debris, with limited access to safe water and sanitation services.

World News in Brief: Mounting waste in Gaza, drone attacks in Sudan, aid truck struck in Ukraine

This article is published in association with United Nations. Mounting waste and limited access to sanitation sites are deepening health risks for families across Gaza, as humanitarian workers warn that overcrowded dumping areas and worsening living conditions threaten vulnerable communities. Ramiz Alakbarov, UN’s top aid official in Occupied Palestinian Territory visited a dumping site in Gaza […]
This article was exclusively written for The European Sting by Mr. Franco Miguel Nodado, a 4th-year medical student from the Philippines. He is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed in this piece belong strictly to the writer and do not necessarily reflect IFMSA’s view on the topic, nor The European Sting’s one.

Autism Spectrum Disorders in Global Health: Bridging the Gap in  Awareness, Early Diagnosis, and Inclusive Care 

This article was exclusively written for The European Sting by Ms. Georgia Maria Vardalachaki, a medical student from the Medical University of Crete, Greece. She is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed in this piece belong strictly to the writer and do not necessarily reflect IFMSA’s […]

Why don't you drop your comment here?

Go back up

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe now to keep reading and get access to the full archive.

Continue reading

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe now to keep reading and get access to the full archive.

Continue reading

The European Sting – Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology – europeansting.com