Net-Zero Emissions Primers

Net-Zero Challenge

Introduction

Background and context

Environment and Climate Change Canada’s (ECCC) Net-Zero Challenge, in collaboration with the Transition Accelerator, has created a series of industry specific Net-Zero primers. The purpose of this collaboration is to provide support to businesses and organizations and help them create a strategy to reduce emissions while improving their competitiveness and resilience in a net-zero economy.

Purpose of the primers

The purpose of the Net-Zero Emissions Primers is to help companies and organizations in Canada:

• improve their understanding of the importance of net-zero and what the transition to net-zero could look like, both for their subsector and globally
• develop a net-zero strategy and plan for their company or organization

How to use the primers

The primers are separated into two main sections:

• Section 2: The Shift to Net-Zero Emissions
• Section 3: Industry Specific Net-Zero Strategy and Planning

The purpose of Section 2 is to provide information on what net-zero is, why it is important, and what the shift to net-zero could look like both for the industry and globally. This section provides important background and context that companies should be aware of before developing their net-zero strategy and plan.

The purpose of Section 3 is to provide companies with guidance on how they can develop a net-zero strategy and a concrete plan for implementation. Note that the primers are based on the typical activities of a firm in that specific industry. While they provide a general guide to simplify and support the process of net-zero planning, the information in the primer should be applied to the specific circumstances of each company to develop a path forward.

The following steps in net-zero planning will be covered in Section 3:

• Step 1 - Create a base year GHG inventory
• Step 2 - Identify GHG mitigation actions
• Step 3 – Evaluate and prioritize GHG mitigation actions
• Step 4 - Establish targets and develop an implementation timeline
• Step 5 - Monitor implementation and periodically revise your plan

The shift to net-zero emissions

The purpose of this section is to provide relevant background and context on the shift to net-zero emissions. This section describes what net-zero is, why it is important, and what the shift to net-zero will look like globally.

Net-zero definition

Net-zero emissions are achieved when anthropogenic^{Footnote 1} GHG emissions to the atmosphere are balanced by anthropogenic removals over a specified period.

GHGs are gases emitted from both human and natural sources, that once in the atmosphere, absorb and release heat. Rising concentrations of GHGs in the atmosphere contribute to climate change.

GHGs include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gases. A commonly used unit of measurement for GHGs is CO2e, which stands for carbon dioxide equivalent, and takes into account the global warming potential (GWP) of all of the GHGs.

The importance of planning for net-zero emissions by 2050

The world is moving toward net-zero emissions because the science is clear: to avoid the worst impacts of climate change, we must ultimately eliminate all net addition of GHGs to the atmosphere. Achieving the Paris Agreement goal of limiting warming requires immediate action across all sectors of the economy. Not taking action will increase risks to health, ecosystems, and economic stability and make future transitions more difficult and costly. As the costs and impact of climate change continue to grow, the case for climate action is clearer than ever. That’s why governments, businesses, and communities are committing to actively cut emissions and build a climate-resilient future.

The global shift to net-zero

Globally, the main sources of GHG emissions come from the burning of fossil fuels (oil, natural gas, propane, and coal) for energy production, industry, transportation, and buildings. Other significant sources of GHGs come from agriculture, forestry, and land use changes.

Broadly speaking, the main actions required to reach net-zero emissions in Canada include:

• decarbonize and expand the electricity grid using technologies such as wind, solar, and nuclear, to electrify end-uses (such as light duty vehicles, building heating, and industry) that currently rely on fossil fuels
• increase the production and use of low-carbon fuels – such as hydrogen and advanced biofuels to address end-uses that are not easily electrified
  • For example, high temperature industrial processes and certain types of transportation
• promote energy efficiency to reduce costs and minimize the scale of the new clean energy infrastructure that must be built over the coming years
• address non-energy related emissions from industrial processes (such as the production of cement or steel), waste management practices, and agriculture
• deploy carbon removal approaches – including nature-based solutions (such as tree planting) and direct air capture (DAC) to trap GHG emissions that cannot be eliminated and permanently remove them from the atmosphere

Getting to net-zero will require efforts from every economic sector. Economic sectors are intertwined: products from one firm are used by others; goods and services flow across borders and production chains link many disparate activities. Change on this scale will be spread over decades, with some countries and sectors able to move more quickly than others. Canada has committed to achieving net-zero emissions by 2050 through the Canadian Net-Zero Emissions Accountability Act, which became law in June 2021.

Measuring Greenhouse Gas (GHG) emissions

Accurately determining a company or organization’s emissions profile is critical to identifying where to direct mitigation actions. Several widely accepted international resources can be used to calculate a company’s GHG emissions. The two most prominent resources are the GHG Protocol, and the ISO 14064 standards.

The GHG Protocol

The GHG Protocol is the most widely used framework for GHG accounting and identifies, explains, and provides options for GHG emissions inventory best practices. It is used widely across many voluntary GHG initiatives, including the Government of Canada’s Net-Zero Challenge and the Science Based Targets initiative (SBTi).

The GHG Protocol adopts standard accounting categories companies can use to effectively communicate their emissions data with stakeholders, investors, and regulatory bodies. The GHG Protocol’s categorization provides a holistic view of a company or organization’s entire value chain, offering deeper insights into emissions sources and potential areas for cost and carbon reductions. These emissions categories will be referred to throughout this primer, and are as follows:

• scope 1 emissions: Direct emissions from owned or controlled sources, such as company-owned facilities and vehicles
• scope 2 emissions: Indirect emissions from purchased electricity, steam, heating, and cooling
• scope 3 emissions: All other indirect emissions that occur throughout the supply chain, from raw material extraction to transportation, product use, distribution and disposal

Scope 3 emissions

In the GHG Protocol there are fifteen categories for Scope 3 emissions:

• category 1: Purchased goods and services
• category 2: Capital goods
• category 3: Fuel- and energy-related activities
• category 4: Upstream transportation and distribution
• category 5: Waste generated in operations
• category 6: Business travel
• category 7: Employee commuting
• category 8: Upstream leased assets
• category 9: Downstream transportation and distribution
• category 10: Processing of sold products
• category 11: Use of sold products
• category 12: End-of-life treatment of sold products
• category 13: Downstream leased assets
• category 14: Franchises
• category 15: Investments

International Organization for Standardization

The International Organization for Standardization (ISO) 14064 standards can be used to quantify, monitor, report, and verify GHG emissions. Relevant standards include:

• ISO 14064-1 (GHG emissions and removals for organizations – corporate level)
• ISO 14064-3 (validation and verification of GHG statements)

The ISO 14064 series is complementary to the GHG Protocol and companies could benefit from using both sets of guidance. Specifically, if a company wishes to have their GHG emissions inventory verified by an accredited third-party, it is recommended that they use the ISO 14064-1 standard to ensure that their GHG emissions inventory is developed in a way that can be easily verified and compared to the inventories of other organizations.

Net-zero strategy and planning

Once you have an understanding of what the net-zero transition could look like globally and for your sector, and you have considered your company’s strategy in a net-zero world, you are ready to create a net-zero plan that will outline the tangible actions you can take.

This section goes over the steps your company will need to complete a credible and achievable net-zero plan, which includes:

• Step 1: Create a base year GHG inventory
• Step 2: Identify GHG mitigation actions
• Step 3: Evaluate and prioritize GHG mitigation actions
• Step 4: Establish targets and develop an implementation timeline
• Step 5: Monitor implementation and periodically revise your plan

Details on how to complete each of these steps are given in the sections below.

For some companies, doing a simple net-zero plan in house is possible. However, some companies may have more complex situations or lack the internal resources to create a credible net-zero plan. In these cases, companies may wish to seek external expertise in clean technology, the energy transition, energy and climate policy, and finance. For larger companies, developing and implementing a robust net-zero plan typically requires engagement from multiple departments. Planning is greatly facilitated by strong commitment and clear tone from senior management to ensure cross-functional collaboration and alignment on sustainability goals.

Step 1 – Create a base year GHG inventory

The first step in creating a net-zero plan is creating an inventory of your GHG emissions for a one-year period, which will be your base year^{Footnote 2} . To create the base year inventory, you will need to set inventory boundaries for your organization, identify your sources of emissions, and quantify your emissions over 12 consecutive months.

Set inventory boundaries for your organization

Setting the inventory boundary allows you to determine what sources of emissions result from your activities and, accordingly, what emissions will need to be addressed in order to reach net-zero emissions.

Generally, inventory boundaries can be set through three criteria: equity share, financial control, and operational control. Please refer to ECCC Net-Zero Challenge Technical Guide 2.0 and the GHG Protocol Corporate Standard for details on how to set inventory boundaries for your organization.

Identify sources of emissions

Section 2.1 of your industry specific primer webpage identified sources of emissions for your industry. Identify which of those sources apply to your organization.

Once you have identified the sources of emissions, you will need to identify which category each emissions source falls into (in other words Scope 1, 2 or 3), as described in the GHG Protocol.

Each sector-specific Net-Zero Primer linked below identifies the most common sources of emissions for companies in that sector. You should also review the full list of Scope 3 emissions to determine whether there are any other sources that could be relevant to your business.

Quantify your emissions

Once emissions sources have been identified, you must quantify your emissions. This is done by gathering activity data and emissions factors that quantify the GHG emissions associated with each type of activity.

Activity data are quantitative measures of activities that result in GHG emissions. Examples of activity data could include:

• cubic meters of natural gas used for facility heating or steam processes
• liters of gasoline and diesel used by vehicles
• kilowatt hours of electricity consumed
• kilometers travelled by airplane

Emissions factors are calculated ratios that specify the amount of GHGs that are emitted per unit of activity. Multiplying the activity data by the correct emissions factor will produce an estimate of total emissions associated with this activity.

There are several reputable organizations that provide publicly available emissions factors. ECCC provides the following resources to find emissions factors:

• for electricity: National Inventory Report, Part 3, Annex 13
• for other activities: National Inventory Report, Part 2, Annexes 3 and 6

Other helpful resources to create your GHG inventory include:

• ECCC’s Net-Zero Challenge Technical Guide 2.0
• ECCC’s Net-Zero Challenge Emissions Calculator^{Footnote 3}
• GHG Protocol Corporate Standard

Step 2 – Identify GHG mitigation actions 

Once the base year GHG inventory is complete, the second step is to identify possible actions your company could take to mitigate those emissions. Possible mitigation actions for each category of emissions are given in Section 3.2 of your industry specific primer. 

If none of these mitigation actions are feasible for your company, you can consider purchasing Carbon Offset Credits.

Step 3 – Evaluate and prioritize GHG mitigation actions 

Now that several possible mitigation actions have been identified, companies will need to evaluate and prioritize them. Each company will have a different evaluation framework depending on various factors, including their level of ambition, financial position, resourcing and management support.

Prioritizing mitigation actions comes down to three principles, applied in order.

1. Start with emissions impact.
   • Rank actions by how much of your inventory they address, and favour those that eliminate a source over those that make it more efficient.
2. Then ask what works in your business.
   • For each high-impact action, weigh lifetime cost rather than upfront cost, the timing of your replacement and retrofit cycles, and what your crews, suppliers, and subcontractors can realistically support.
   • Companies should also consider supporting Canadian businesses when selecting mitigation strategies.
3. Where an action is viable but not yet deployable, pilot or prepare it rather than drop it.
   • Your business context will keep changing, and so will the technology and the infrastructure around it.

Applying these principles gives you a mix rather than a shortlist:

• deploy what is proven and available at your scale
• pilot what is promising but unproven in your conditions: one machine, one site, one season, with a date to decide
• prepare what is held back by training, charging, grid capacity, or supply, so it is ready at your next decision point
• revisit what is genuinely not available yet and note what would have to change

One caution while you wait: a lot of equipment bought today will still be running close to 2050. Avoid locking in a fossil-fueled replacement for an asset you expect to electrify.

Step 4 – Establish targets and develop an implementation timeline

Now that you have identified your main emissions sources and potential actions to decarbonize your activities, it is time to bring it all together, to assess what is possible within specific time horizons, and to formulate or adjust targets.

Targets provide crucial grounding for decarbonization efforts. They communicate a company’s ambition, allow the organization to coordinate its response, and provide a benchmark against which progress can be measured. Many voluntary initiatives, including the Government of Canada’s Net-Zero Challenge, require member companies to plan their path towards net-zero by 2050 or earlier. This aligns with Canada’s legislative commitments to net-zero and the recommendation of the Science Based Targets initiative.

Task 1: Draft an implementation timeline

The mitigation actions should be placed on a timeline to establish and/or confirm interim targets and to form the basis for a phased decarbonization plan.

In Step 3, you assessed several possible emissions mitigation actions, and this can help you determine a realistic implementation timeline.

Factors that influence the implementation timeline will include:

• availability of equipment and enabling infrastructure (for example low carbon grid, electric vehicle (EV) charging infrastructure)
• technology life cycle (for example end of life of Heating, ventilation and air conditioning (HVAC) equipment, average vehicle lifetime).
• upfront cost and financing options

Task 2: Sum your emissions reductions over time

Each of the actions you have decided to take can be included in your plan together with the anticipated reductions over time. Summing up the proposed reductions at key interim dates (for example 2030, 2035, etc.) can then allow you to validate (or establish) appropriate interim targets.

It is important to remember that net-zero can only be achieved if other organizations up and down your value chain are also decarbonizing their activities at the same time. Therefore, in consideration of this, the pathway to full decarbonization may be unclear. However, over time, as manufacturing, transport, and energy production are increasingly decarbonized, the carbon intensity of the goods and services needed by your business will in turn decrease and net-zero will become more achievable. Accordingly, fostering collaboration and maintaining open communication with your value chain partners will be essential to accelerating the transition and providing greater clarity around your own net-zero plan.

Task 3: Consider interim targets to reach net-zero by 2050

Interim targets are important to focus attention on what can be done in the short-term and to ensure progress. Some companies have adopted shorter term targets based on an aspiration to be a leader in their sector and/or to harmonize with Canada’s national goal of a 40-45% reduction in emissions by 2030. Nevertheless, interim targets are more likely to be achieved when they align with your strategic objectives and are grounded in a solid analysis of the costs, timing, and effectiveness of proposed mitigation measures.

Step 5 – Monitor implementation and periodically revise your plan

Full decarbonization of the economy will take time. It is hard to anticipate developments five years from now, let alone in 30 years. Net-zero planning will necessarily be an iterative process, with plans adjusted periodically to reflect changing circumstances – including technological, economic, social and geopolitical – and as the whole economy moves towards net-zero.

You should establish a regular process for monitoring the implementation of your plan, such as:

• at least once a year, formally review progress, assessing whether the assumptions on which the plan was based have shifted, whether the proposed actions have been taken, and the extent to which they are attaining the desired objectives
• every five years, a new plan can be developed that draws on the lessons learned and charts the remainder of the journey towards net-zero

Next steps

If you are ready to take the next step, please contact the Net-Zero Challenge at defizeronet-netzerochallenge@ec.gc.ca for more details.

Moving forward

Reaching net-zero emissions is a long-term journey, but every business has a role to play—and every step matters. Whether your company or organization is just starting to think about climate action or already exploring or implementing emissions reductions measures, the most important thing is to begin with what you can control and to put a plan in place.

The primers lay out how to:

• reflect on how your firm fits into a net-zero economy
• understand where your emissions come from
• identify practical actions across your operations and value chain
• set short- and long-term targets and goals
• adapt your plan as the world changes

Remember: this is not about perfection. Your first plan does not need to solve everything all at once. Focus on taking meaningful action in the next 1–3 years. Talk to your employees, clients, and suppliers. Learn as you go. Use this plan to guide decision-making, communicate your direction, and build momentum.

As markets, technologies, and other factors evolve, so will your opportunities to reduce emissions. Revisit your plan regularly and update it as new solutions become available. As you reduce your own footprint, look for ways to amplify your impact.

Net-zero is a collective effort. Businesses like yours are critical to shaping the path forward—for your clients, your sector, and your community. Start where you are, aim high, and keep going.

Net-zero emissions primer resources

The following Net-Zero Emissions Primers are currently available for:

• professional services companies
• textile manufacturing firms
• pharmaceutical manufacturing companies

Glossary

Base Year: A year in history against which a company’s emissions are tracked over time to compare it with future emissions. It must be a consecutive twelve months, either as a full calendar year or consecutive over two calendar years.

Decarbonization: The process of reducing carbon dioxide emissions from a product, process, facility, or sector.

Direct emissions: Emissions from sources that are owned or controlled by a company or organization (GHG Protocol 2004: 97).

Downstream emissions: Emissions from downstream activities associated with the operations of a company, including processing of sold products, use of sold products, investments, franchises, downstream transportation and distribution, end-of-life treatment of sold products, and downstream leased assets.

Embodied Carbon: Emissions released from the full lifecycle of building materials, including extraction, manufacturing, transportation, installation, and decommissioning.

Emissions: The release of greenhouse gases (or other substances) into the atmosphere.

Emissions inventory: A quantified list of emissions and emission sources for a company, organization, municipality, region, province/territory, or country.

Greenhouse gas (GHG): A gas that absorbs and re-emits radiation, resulting in the greenhouse effect, which contributes to a warming climate. For the purposes of this guidance and for the Net-Zero Challenge, GHGs include all of those that are subject to reporting for the Greenhouse Gas Reporting Program. This includes carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur hexafluoride (SF6), 13 different hydrofluorocarbons (HFCs), and 7 different perfluorocarbons (PFCs).

Indirect emissions: Emissions that are a consequence of the activities of a company but occur at sources owned or controlled by another company (GHG Protocol 2004: 99).

Inventory boundary: Allows a participant to determine what sources of emissions are the result of their activities and accordingly, what emissions will need to be addressed in order to reach net-zero by 2050. Generally, the inventory boundary includes geographical boundaries and organizational boundaries.

Mitigation strategy: A practice, process, or technology that contributes to mitigation, for example enhancing energy efficiency and adopting renewable energy sources.

Net-Zero Challenge: A voluntary Government of Canada program that encourages businesses to develop and implement credible and effective plans to transition their facilities and operations to net-zero emissions by 2050.

Net-zero emissions: Achieving net-zero means that anthropogenic emissions of greenhouse gases into the atmosphere are balanced by anthropogenic removals of greenhouse gases from the atmosphere over a specified period. For organizations, net zero GHG emissions is commonly considered as the condition in which emissions have been reduced such that only residual emissions remain, and offsetting is restricted to removal credits (ISO 14068).

Net-zero plan: A net-zero plan includes an emissions inventory and base year, interim targets, descriptions of the considered scenarios, pathways and mitigation strategies, and an outline of how net-zero planning will be incorporated into a company’s governance and disclosures.

Offset credits: Represent GHG emissions reductions or removals generated from activities that are additional to what would have occurred in the absence of the offset project. These credits are generated from activities that go beyond legal requirements and a business-as-usual standard. Each offset credit generated by an offset project represents one tonne of carbon dioxide equivalent (CO2 eq) reduced or removed from the atmosphere.

Organizational boundaries: The boundaries that determine the operations owned or controlled by a company, depending on the consolidation approach taken (equity share, operational control, or financial control).

Scope: Defines the operational boundaries in relation to direct and indirect emissions (GHG Protocol 2004: 101).

Scope 1 emissions: A company’s direct emissions, principally the generation of electricity, heat, or steam, physical or chemical processing, transportation, and fugitive emissions (GHG Protocol 2004: 101).

Scope 2 emissions: A company’s indirect emissions associated with the purchase of electricity, heating/cooling, and steam for own consumption (GHG Protocol 2004: 101).

Scope 3 emissions: A company’s indirect emissions excluding those covered in scope 2. Also known as value chain emissions (GHG Protocol 2004: 101).

Upstream emissions: Emissions from upstream activities associated with the operations of a company, including purchased goods and services, capital goods, fuel- and energy-related activities, upstream transportation and distribution, waste generated in operations, business travel, and employee commuting.

Value chain: All business processes or activities involved in the production of a good or service for market, from conception to end use and beyond. A simplified value chain would include corporate services (for example marketing, logistics), research and development, inputs, assembly, distribution, sales, and after-sales service.

Value chain emissions: These are indirect emissions that may exist upstream or downstream of a company’s operations. “Value chain emissions” are also known as scope 3 emissions.

Abbreviations

ECCC: Environment and Climate Change Canada

GHG(s): Greenhouse gas(es)

HVAC: Heating, ventilation and air conditioning

SBTi: Science Based Targets Initiative