What you need to know about the Net-Zero Challenge
Joining with an existing net-zero plan
Some companies will already have targets and/or net-zero plans developed when they join the Net-Zero Challenge. Multi-national companies may wish to join using a parent company level net-zero target and plan. Companies are welcome to use these targets and plans, so long as they meet the minimum requirements and can complete the preliminary and comprehensive net-zero plan Participation Checklists.
If a Stream 2 participant (financial institution) has committed to or is a signatory of one of the initiatives under the Glasgow Financial Alliance for Net-Zero (GFANZ), then that participant can choose to join the Challenge via an accelerated process. The initiatives include the Net-Zero Banking Alliance, the Net Zero Asset Managers Initiative, the Net-Zero Asset Owner Alliance, the Paris Aligned Investment Initiative, the Net-Zero Insurance Alliance, the Net Zero Financial Service Providers Alliance, and the Net Zero Investment Consultants.
Joining as a small- and medium-sized enterprise
Small- and medium-sized enterprises (SMEs) are defined as companies with fewer than 500 employees. SMEs can join the Challenge as Stream 3 participants.
SMEs are exempt from some of the Stream 3 requirements. They are not obligated to include scope 3 emissions in their net-zero targets, although they are encouraged to do so. SMEs are also not obligated to provide information on climate-related financial disclosures.
Submitting net-zero plan information for verification
The Government of Canada requires the submission of the Participation Checklists to the Net-Zero Challenge, answering a series of questions related to the requirements of the program and providing evidence of their net-zero plans. The evidence may be provided as a written statement, or preferentially, a link/reference to a public-facing document, such as an annual report, or a sustainability report.
Companies may be signatories or provide disclosure under other similar initiatives, such as the Glasgow Financial Alliance for Net Zero, the Science Based Targets initiative, the Carbon Disclosure Project, and partner initiatives under the Race to Zero Campaign. Links and documents provided to these initiatives for net-zero plans, GHG emissions inventories, and targets can be used as evidence to satisfy many of the requirements of the Challenge.
Environment and Climate Change Canada will acknowledge receipt of the Participation Checklists and will review the Participation Checklists for compliance with the minimum requirements of the Net-Zero Challenge and to assign Participation Tiers.
Following submission and review of the Comprehensive Net-Zero Plan Participation Checklist, Environment and Climate Change Canada will notify participants of their placement in the participation tiers.
Participation Checklists are used to provide the Net-Zero Challenge with high-level information on participants' net-zero plans and track progress. Each Participation Checklist corresponds with a milestone set by the Challenge. Each of these milestones has a timeline dependent on the completion of previous milestones.
There are three Participation Checklists that participants must complete as part of the Challenge:
- Preliminary Net-Zero Plan Participation Checklist (within 12 months of submitting the Commitment Letter)
- Comprehensive Net-Zero Plan Participation Checklist (within 24 months of submitting the Commitment Letter))
- Annual Progress Participation Checklist (annually following the submission of the Comprehensive Net-Zero Plan Participation Checklist)
An Accelerated Participation Checklist is available to participants that have committed to or that are signatories of one of the initiatives under the Glasgow Financial Alliance for Net-Zero (GFANZ). This checklist requires participants to provide evidence that they are active members of one of the GFANZ initiatives.
Participants are also required to update their comprehensive net-zero plans at least once every five years.
Participants will be provided with the Participation Checklists once they sign and submit the Commitment Letter. To view the Participation Checklists beforehand please contact the Net-Zero Challenge team directly at firstname.lastname@example.org.
Participation tiers are a measure of a participant's ambition and implementation of net-zero plans in the Net-Zero Challenge. Participation tiers reward ambition in net-zero planning through five levels: Bronze, Silver, Gold, Platinum, and Diamond. As participants implement their net-zero plans and meet successive Net-Zero Challenge stages, they will progress through the Participation Stages: Planner, Implementer, and Achiever.
Upon joining the Challenge, participants' names will be published on the Net-Zero Challenge website. After submission and review of the Comprehensive Net-Zero Plan Participation Checklist, participants will receive a participation tier, which will also be added to the website.
Failing to meet the requirements
If a participant does not meet the minimum requirements or timelines, their participation in the Challenge will be re-considered. In such cases, the participant will be informed that they have failed to meet minimum requirements or that they have missed a deadline (e.g. for submitting the preliminary plan). The participant will have six months, beginning from the date the notification is sent to rectify the situation that led to the participation reconsideration status.
Scope 1, 2, and 3 emissions
This terminology is used by the Greenhouse Gas Protocol (GHG Protocol) and it is a way of categorizing and defining the direct and indirect emissions that an organization produces.
- Scope 1 emissions are direct emissions principally resulting from activities undertaken by the company.
- Scope 2 emissions are indirect emissions from electricity, heating, cooling or steam that a company purchases for its own use.
- Scope 3 emissions are upstream and downstream indirect emissions that are not included in scope 1 or 2, also known as value chain emissions.
Public disclosure of participant commitments and net-zero plans
Participants are required to provide evidence to Environment and Climate Change Canada in the Participation Checklists to demonstrate their concrete plans to reduce emissions. The evidence can be a link or reference to a public-facing document, such as an annual report, a sustainability report, an Environmental Social and Governance report, or a written statement submitted within the Participation Checklist.
The Net-Zero Challenge requires participants to have publicly announced targets. The Net-Zero Challenge also encourages participants to disclose climate-related information regarding:
- Baseline and annual GHG emissions inventories
- Interim targets and Net-Zero target
- Scenario analysis and mitigation strategies
- Offset credits
- Corporate governance
- Climate-related financial disclosure
In order to promote transparency and credibility of net-zero plans and targets, participants are strongly encouraged to publicly disclose as much of their net-zero planning as possible on their websites, and to report on their progress annually.
Completed Participation Checklists can be made available to the public upon request.
Use of offset credits to achieve net-zero emissions
Participants may use offset credits as a strategy to achieve net-zero emissions in their net-zero plans. Participants should first seek to avoid and reduce as much of their own scope 1, 2, and 3 emissions as possible, and then use offset credits as a last resort to compensate for any remaining emissions. All participants must report whether or not they plan to use offset credits in their net-zero plans and for which scope of emissions they anticipate using those offset credits.
Offsets can be purchased by the participant from compliance-based offset systems or voluntary programs. For Canadian operations, it is strongly recommended that participants only use offset credits that are issued by Canadian federal and provincial government offset systems. Participants are allowed to use international offset credits but it is strongly recommended that these credits be used only for a participant's international operations.
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