How do we translate a global carbon budget into a company's carbon budget - fairly?

Article 3 in the series: Building a Net Zero Transition Governance Architecture

A global carbon budget is finite. But companies operate in countries, sectors and assets with very different responsibilities, capabilities and transition conditions. Translating that global constraint into a fair organisational pathway is therefore not simply a technical exercise; it is a governance problem. We show how using the cement sector as an example.

The world has a finite carbon budget if warming is to be limited in line with the Paris Agreement. Yet companies do not operate at the level of the world. They operate in countries, sectors, facilities and value chains.

So how does a global carbon constraint become a credible carbon budget for an individual organisation - and how should that translation reflect justice?

This question sits at the intersection of climate science, equity, sector pathways, corporate boundaries, industrial policy and implementation. It is also one of the most difficult issues raised by ISO/DIS 14060 on Net Zero Aligned Organizations.

Start with the global constraint, not the company

The starting point is the global environmental constraint: the cumulative greenhouse-gas emissions compatible with the temperature goals of the Paris Agreement. That constraint is finite. Differentiation should therefore determine how responsibility, capability and remaining carbon space are allocated within that constraint; it should not make the constraint disappear.

UNEP's September 2026 Limiting Overshoot report sharpens this point. It concludes that an exceedance of 1.5°C is now widely assessed as unavoidable under current policies and alternative near-term trajectories. The priority is therefore to keep peak warming and the duration of overshoot as low and short as possible, while retaining a pathway back below 1.5°C. In that context, every additional increment of emissions matters: differentiation has to operate within a disciplined global carbon constraint rather than becoming a rationale for relaxing it.

CBDR-RC - Common but Differentiated Responsibilities and Respective Capabilities - is a foundational principle of the UN climate regime. For organisational transition planning, the difficult question is not whether differentiation should exist, but how it should be translated from the international and national levels into sectoral and organisational pathways while preserving environmental integrity.

What does "fairly" mean?

Justice is not one-dimensional. At least four dimensions matter when a finite carbon budget is translated into national, sectoral and organisational pathways.

Distributive justice asks how the remaining carbon space, the costs of transition and the benefits of a low-carbon economy should be shared.

Procedural justice asks who participates in determining pathways, budgets and transition measures.

Recognitional justice asks whether different histories, capabilities, development needs and affected groups are properly recognised.

Restorative justice asks how historical harm and unequal contributions to climate change should influence responsibility and support.

A technically elegant allocation can therefore still be unjust if it distributes burdens unfairly, excludes affected people from decision-making, ignores different circumstances or fails to account for historical harm. Justice belongs inside the allocation mechanism, not in an appendix added after the pathway has been calculated.

A useful translation chain

GLOBAL ENVIRONMENTAL CONSTRAINT	How much can the world emit?
JUSTICE-INFORMED NATIONAL ALLOCATION	How should finite carbon space be shared, informed by CBDR-RC and the dimensions of justice?
SECTOR PATHWAYS	What does the national allocation mean for cement, steel, power, transport and other activities?
ORGANISATIONAL CARBON BUDGET	What pathway follows for a particular company and its assets?
BOTTOM-UP TRANSITION PLAN	What can the organisation actually deliver through technology, capital expenditure, infrastructure, finance and operational change?
IMPLEMENTATION AND ACTUAL EMISSIONS	Are real emissions falling in line with the pathway?

Why does cement expose the problem so clearly?

Cement is a useful example because it is emissions-intensive, difficult to decarbonise and essential to infrastructure and development. It also has relatively well-developed sector transition benchmarks, including work by the Transition Pathway Initiative (TPI) and the Science Based Targets initiative (SBTi).

Image credit: By Ossewa - Own work, CC BY 4.0, Wikimedia Commons. Cropped version used for this article.

Consider a cement producer operating only in South Africa. Which trajectory should inform its corporate carbon budget: the pathway implied by South Africa's stated long-term objective, a legislated or policy carbon budget, a cement-sector pathway, or the emissions trajectory implied by policies currently in force? These are not necessarily the same thing.

This distinction matters when countries are not yet on track to achieve their headline net-zero objectives. A company that follows the current-policy trajectory may be aligned with the economy as it exists, but not with the transition the country says it intends to achieve. A company that follows the pathway required by the stated objective may need to invest ahead of domestic infrastructure, regulation or market conditions. That gap is not only a corporate problem; it can reveal a wider governance failure.

What happens when a company operates in several countries?

Now consider companies with operations in several jurisdictions. PPC, for example, is headquartered in South Africa and operates cement businesses in more than one Southern African market. Dangote Cement is headquartered in Nigeria and operates across multiple African countries. Huaxin Building Materials Group (formerly Huaxin Cement) adds a particularly useful multinational comparison: headquartered in China, it has expanded across Africa, including through the acquisition of Natal Portland Cement in South Africa and Lafarge Africa in Nigeria. Multijurisdictional operations make the allocation question unavoidable.

Suppose a cement group has assets in South Africa and Nigeria. South Africa has a 2050 long-term net-zero objective for CO2, while Nigeria has a 2060 net-zero objective for greenhouse gases. Should the assets follow one consolidated corporate pathway, or should each operation follow a pathway derived from the country and sector in which the emissions physically occur?

Huaxin makes the issue concrete. If the same Chinese-headquartered group owns cement assets in South Africa and Nigeria, should its South African operations follow a South African cement-sector pathway and its Nigerian operations a Nigerian one, with those location-specific pathways then aggregated into a single group transition plan? Or should one corporate pathway override the differentiated national circumstances of the places where the emissions actually occur?

The reverse case is equally revealing. Imagine two otherwise similar cement plants operating in South Africa: one owned by a South African-headquartered company and the other by a multinational headquartered in an advanced economy. Should the second plant receive a different physical emissions pathway merely because its parent company is headquartered elsewhere? There is a strong governance argument that emissions from both South African plants should be assessed against the same South African cement-sector pathway. Ownership should not, by itself, change the carbon space associated with producing cement in the same jurisdiction.

At group level, however, the multinational still needs one credible corporate transition plan. This creates an aggregation problem: location- and sector-specific pathways may need to be combined into one organisation-level budget while preserving the integrity of the global constraint.

What do net zero standards such as ISO, SBTi and TPI add?

ISO/DIS 14060. The draft standard is explicitly trying to connect net-zero strategy, targets and delivery to credible and verifiable progress in line with the Paris Agreement. A notable strength is that its approach attempts to connect country, sector and organisational boundaries - which is closer to the real problem faced by a multinational than assigning every facility the pathway of the company's headquarters.

But ISO also raises a budget-conservation question. Annex E's differentiated 2050/2060/2070 pathways are intended to reflect equity and different national circumstances. However, the draft's own illustrative calculation produces an aggregate pathway associated with warming above 1.5°C. That raises a critical question: is differentiation reallocating a fixed global carbon budget fairly, or partly enlarging the budget? CBDR-RC requires differentiation in responsibility and capability, but the global environmental constraint still has to add up.

SBTi. The SBTi Corporate Net-Zero Standard adds another perspective. It differentiates strongly by sector and increasingly recognises geography, legacy capital stock, company levers and real-world implementation constraints. This is valuable because a top-down carbon allocation is not yet a transition plan: organisations still need to translate targets into changes in assets, procurement, energy, logistics, capital expenditure and business models.

TPI. The Transition Pathway Initiative provides a further lens through sectoral decarbonisation pathways. For cement, TPI translates global climate scenarios and sector production assumptions into emissions-intensity benchmarks against which company trajectories can be assessed. This helps answer what a credible global cement-sector pathway looks like, but does not by itself decide how the finite global cement budget should be distributed between South Africa, Nigeria, China or other jurisdictions.

Sector differentiation and geographic differentiation solve different problems

Sector differentiation recognises that cement cannot decarbonise in the same way or at the same pace as electricity generation. Geographic differentiation recognises that countries have different responsibilities, capabilities, development circumstances and starting points. A credible architecture needs both.

A South African cement pathway may therefore legitimately differ from a French cement pathway, while both remain nested within a global cement pathway that is itself consistent with the global carbon budget. The governance challenge is to reconcile sector science with CBDR-RC rather than choosing one and ignoring the other.

The top-down and bottom-up pathways have to meet

TOP DOWN: What carbon budget is required by climate science, justice, national circumstance and the relevant sector?

BOTTOM UP: What can the organisation actually deliver through its assets, technologies, infrastructure dependencies, finance and investment cycles?

A credible transition plan has to reconcile both. A bottom-up pathway may be feasible but still incompatible with the relevant carbon budget. A top-down allocation may be scientifically and normatively defensible but impossible to implement without changes in infrastructure, policy or finance. The gap between the two is where transition governance becomes visible.

How should we judge alignment?

No single benchmark needs to answer every question. A cement company could be assessed simultaneously through several lenses:

National alignment: Is the operation consistent with the country's carbon budget and sector pathway?

Global sector alignment: How does its emissions intensity compare with a TPI-style 1.5°C cement benchmark?

Corporate target credibility: Does its target meet SBTi requirements?

Organisational net-zero alignment: Does its strategy and delivery meet ISO/DIS 14060 requirements?

Disagreement among these lenses can be informative. A company could be aligned with a national cement pathway yet fail a global 1.5°C sector benchmark. That may reveal a governance gap between national allocation and global environmental integrity rather than something that should be hidden by averaging the two.

The key test: does it all add up?

Do the differentiated national, sector and organisational pathways, when aggregated, remain within the global carbon budget?

That question should sit at the centre of any methodology. The global constraint determines the total carbon space available. Justice informs how that space - and the associated transition costs and benefits - is allocated. Sector pathways translate the allocation into economic activities. Corporate transition plans then turn those pathways into implementation.

For a company operating in several countries, the most defensible architecture may be to develop location- and sector-specific operating pathways, aggregate them transparently into a group-level transition plan, test them against global sector benchmarks, and disclose where implementation depends on policy, infrastructure or finance outside the company's control.

Why does this matter for a Net Zero Transition Governance Architecture?

The carbon-budget translation problem shows why organisational transition planning cannot be designed in isolation. Science establishes the global environmental constraint. Normative principles - including justice, equity and CBDR-RC - shape how responsibility and capability are understood. Governments set national policy and carbon constraints. Sector pathways translate those constraints into activities. Standards help define credible organisational responses. Quality infrastructure supports measurement, verification and trust. Finance enables investment. Companies implement. Workers, communities, consumers and citizens experience the consequences. Accountability and learning tell us whether the system is delivering the intended outcomes.

All of these pieces need to connect. That is what a Net Zero Transition Governance Architecture is for.

The central policy question is therefore: how should ISO/DIS 14060 translate a fixed global carbon constraint, CBDR-RC, multidimensional justice and sector-specific pathways into credible organisational carbon budgets - especially for companies operating across several jurisdictions?

And when a country's stated net-zero objective, sector pathway and current-policy trajectory do not align, what should a company use as the basis of its transition plan?

These questions matter for more than standards experts. They affect industrial competitiveness, corporate capital allocation, transition finance, public policy and whether individual company plans collectively deliver the emissions reductions required at global level.

Next in the series

Who should set the rules for a company's transition to net zero? 

The next article will use South Africa's planned mitigation-plan regulations and ISO/DIS 14060 to explore how legally binding national regulation should interact with voluntary international standards - and what happens when one sets a higher bar than the other.

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