Beyond Buzzwords: Carbon Neutrality vs. Net Zero Explained

In recent years, terms like “carbon neutrality” and “net zero emissions” have become common in corporate sustainability reports. These terms are often used interchangeably, but they have distinct meanings. Understanding the difference is crucial to avoid misunderstanding or falling into the trap of greenwashing.

“Carbon Neutrality” or “Carbon Neutral”

Carbon Neutrality refers to balancing the amount of carbon dioxide (CO2) released into the atmosphere with an equivalent amount sequestered or offset. This can be achieved through initiatives such as planting trees, investing in renewable energy projects, or purchasing carbon credits. These credits are certified climate projects, with one carbon credit equivalent to one ton of CO2 avoided or removed from the atmosphere.

Essentially, carbon neutrality is about balancing out emissions by taking equivalent measures elsewhere. Due to its relative simplicity, carbon neutrality can be communicated as a short-term goal since it can be achieved immediately by measuring existing emissions and purchasing the equivalent carbon credits. Thus, carbon neutrality doesn’t necessarily mean a company is reducing its carbon emissions, as it can offset them by purchasing equivalent carbon credits. However, it remains a positive first step in demonstrating commitment to sustainability goals.

Net Zero Emissions

Net Zero Emissions, on the other hand, means reducing greenhouse gas (GHG) emissions to the lowest possible amount and offsetting only the residual emissions that are unavoidable. For the private sector, net zero is defined by the Science Based Targets initiative (SBTi) as the achievement of at least 90% elimination of a business’s value chain emissions.

Achieving net zero necessitates transformative changes across entire operations and supply chains to minimize emissions as much as possible before offsetting the remaining. It encompasses a broader spectrum of GHGs beyond just CO2, including methane, nitrous oxide, and others. Net zero emissions is generally a long-term goal, often aligned with the Paris Agreement’s target of net zero by 2050. While this is an aspirational target, it provides direction and motivation for companies to take significant action toward sustainability.

To put it simply

Carbon Neutrality = Total emissions offset by equivalent carbon removal or avoidance.
Net Zero Emissions = Maximum reduction of all GHGs with only the unavoidable/residual emissions being offset.

Case Study : Schneider Electric

For instance, Schneider Electric has set ambitious targets for both carbon neutrality and net zero CO2 emissions (focusing on CO2 rather than all GHGs). This dual approach underscores the importance of combining short-term actions with long-term strategies to comprehensively address climate change.

However, it’s important to note that 99% of Schneider Electric’s GHG emissions are scope 3 emissions, mainly from the energy consumption of products during their lifecycle.There is an area for debate on their timeline’s goal of lowering this “big elephant in the room” by 2050.

Challenges of the Current Corporate Carbon Neutrality Concept

Carbone 4, a leading consultancy in climate strategy, critiques the current corporate ‘carbon neutrality’ concept for several reasons:

Invisibility of Real Emissions: Achieving “carbon neutrality” annually can obscure the true trend of GHG over time, discouraging genuine reduction efforts.
Limited Offsets: The global availability of offsets is insufficient to cover all emissions, making this approach unsustainable on a large scale.
False Security: Relying on offsets can create a false sense of security, treating climate risk as an absolute accounting issue rather than encouraging innovative solutions for emission reduction.

The Necessary Shift Toward Global Neutrality

To address these shortcomings, Carbone 4, along with pioneer companies and a high-level Scientific Committee, proposes reconnecting “corporate neutrality” with the broader objectives of global neutrality. This involves two key paradigm shifts:

From Static Neutrality to Dynamic Contribution
- Companies should move away from seeking immediate, one-off neutrality and instead focus on dynamically managing their climate performance. This means continuously improving and maximizing their contribution to global carbon neutrality.
- The focus should shift from individual achievements to collective impact, recognizing that a company’s actions are part of a larger system. This approach encourages assessing activities through multiple indicators that reflect the complex reality of global emissions.
From Offsetting to Contributing
- Instead of offsetting emissions to achieve neutrality, companies should finance low-carbon projects to support global mitigation efforts. This funding should be seen as a contribution rather than a way to cancel out their own emissions, aligning with conventional carbon reporting rules.
- The emphasis is on increasing financial flows necessary for the Paris Agreement without misleading claims of individual carbon neutrality.

Visit this link to learn more about the Net Zero Initiative.

Final thoughts

Understanding the difference between carbon neutrality and net zero emissions is crucial in recognizing genuine sustainability efforts. Although reaching carbon neutrality can be a good starting point, it’s crucial to search for more substantial, long-term commitments to reach net zero emissions.

Some companies exploit the carbon neutrality concept to buy themselves time by merely purchasing carbon credits. This allows them to continue making more money and exploiting resources without making significant changes to reduce emissions at the source.

Through diligence and awareness, we can avoid falling into the trap of “greenwashing” and provide our support to companies who genuinely aim to improve the environment.