From carbon neutral to net zero: an overview of climate claims
A question that’s heating up more and more in voluntary carbon markets (VCMs) is the issue of ‘claims’ - what credit buyers say as a result of their purchase and retirement of carbon credits. From clothes to fuel, Ikea to Google, products and businesses are claiming to be carbon neutral, net zero, climate positive, carbon negative, and more.
In this second blog in our series all about claims, we look into some of the most popular claims being made today: what they mean, who’s saying what and what to expect in the future.
Why climate claims matter
Climate claims matter to different groups for different reasons.
Many consumers are influenced by claims about the environmental impact of what they are purchasing. Research suggests as many as 87% of Americans will pay more for products labeled ‘carbon neutral’.
However, there is low public understanding of what different terms mean. The opaque and fast-changing nature of green claims makes it hard for consumers to make informed choices and easy for them to be misled.
Companies are keen to capitalize on this demand and improve their reputation by adding green labels to their products. However, this must be balanced against the risk of being accused of ‘greenwashing’ if those claims are not well justified.
And for VCM participants, claims matter because they drive much of the demand for credits in the market. If corporates are scared away from making green claims - so-called ‘green hushing’ - or if new rules are introduced limiting what claims can be made based on the use of carbon credits, there is concern that VCM growth would stall.
Glossary of terms
An overview of different climate claims
The majority of these claims have no legal or universal definition, which means that there are no standard criteria that must be meant in order to make a claim.
Some terms, like net zero, have more strictly defined meanings validated by recognized accreditation bodies.
Here we take a look at who’s claiming what, and what they say they’re doing to earn that label.
What? Net zero is defined in the Paris Agreement as a state where any GHG emissions into the atmosphere are balanced by equivalent removals of GHGs from the atmosphere. We need to reach global net zero by mid-century to meet the Paris Agreement goals.
So what does this mean for companies? Organizations such as the UN and the Science-based Targets Initiative (SBTi) have outlined the requirements of ‘science-based’ net zero pledges, aligned with the Paris goals:
- Emissions reductions aligned with global net zero pathways (at least a ~45% reduction by 2030 and 90% reduction by 2050). This covers all scopes 1, 2 and 3.
- Once the emissions reduction target has been achieved, all residual emissions must be neutralized by removing an equivalent amount of GHGs from the atmosphere, for example using removals credits.
Some net zero standards also ask companies to compensate for their emissions by contributing to global-scale net zero, while they work on reducing their own emissions. SBTi calls this beyond value chain mitigation. This can include purchasing carbon credits.
Who? Over 11,000 companies have pledged to be net zero through the UN Race to Zero and over 2,000 through SBTi. Countries, states and cities across the world have also set net zero targets.
What? - Carbon neutral generally means that every tonne of CO2e emissions are offset by a carbon credit.
Some organizations certify carbon neutral claims and give details about the qualifying criteria. The Carbon Trust’s carbon neutral certification and the CarbonNeutral Protocol require emissions to be measured according to strict methodologies and defined by clear boundaries, and then high-quality carbon credits should be purchased. They also require a carbon management plan to be developed, committing to reduce emissions in the future.
Carbon neutral is a well-recognized label that is commonly used. However, it is falling out of popularity with some as they see it as low ambition or poor integrity for a number of reasons:
- Some companies have historically compensated for their emissions with poor quality credits, invalidating any claims of carbon neutrality.
- Gross emission reduction targets are not always required (i.e. actions that reduce emissions and do not rely on carbon credits). Even when they are, they are not required to be ambitious and aligned with the Paris Agreement goals.
- It is rare that sufficient credits are purchased to compensate for all emissions. So for example, companies might consider only the scope 1 and 2 emissions associated with their operations, ignoring scope 3. Carbon neutral products only compensate for emissions from that product’s life cycle, and not the emissions associated with the wider business needed to develop and deliver that product.
Who? - Google has claimed its operations are carbon neutral since 2007. Apple’s corporate operations have been carbon neutral since 2020. Many companies advertise carbon neutral products: Nespresso coffee, Budweiser beer, and Shell fuel shipments.
Recently, a court case in Germany banned Total Energies from claiming its heating oil was carbon neutral, due to a ‘lack of sufficient credibility’ of the claim. The case was brought by environmental organization Deutsche Umwelthilfe, which have filed a number of similar suits.
Other organizations such as Client Earth are successfully bringing similar action in other countries. This is also discouraging some companies from making carbon neutral claims.
What? Climate neutral is a very similar term to carbon neutral but with a definite requirement to reduce emissions as well as to offset them. According to Climate Neutral Certified, the 3 steps to climate neutrality are:
- Measure emissions (including all of scope 1 and 2, but only some scope 3 emissions)
- Reduce emissions in the next 12-24 months
- Compensate for emissions using approved carbon credits. To meet the criteria credits must be issued by an approved standard and be from a recent vintage (depending on project type). They also suggest a portfolio of certain credit types.
The UN’s Climate Neutral Now pledge has very similar requirements with an additional focus on transparent reporting.
Who? Over 350 brands are already climate neutral certified and almost 800 have signed up to Carbon Neutral Now. Other big names have climate neutral targets: Adidas is aiming to be climate neutral by 2025.
Carbon free and zero carbon
What? There is no one definition of carbon free. Strictly, it means a product, service or organization does not generate any carbon emissions across its entire value chain or supply chain, from manufacturing to operations. To date, there is no company that meets this requirement.
Who? Google is aiming to be carbon free by 2030. By their definition, this means 24/7 they are using 100% energy generated with no GHG emissions. However, this does not include GHG emissions from other aspects of their value chain.
What? Carbon negative theoretically means removing more carbon from the atmosphere than is emitted.
The way this is applied at the level of individual organizations, and exact accounting, varies between organizations. Some organizations use only removals credits to offset their annual emissions and a margin more. Some offset their emissions using avoidance credits and then purchase some additional removals credits.
Who? Brewdog has been carbon negative since 2021, using a combination of avoidance and removals nature-based credits. Microsoft aims to be carbon negative by 2030, using solely removals credits.
What? Climate positive is sometimes used to mean the same as carbon negative. Other times it is used to refer to additional benefits, or ‘positives’, of carbon projects, such as protecting and enhancing biodiversity.
Who? Ikea aims to be climate positive by 2030, which to them means ‘reducing the absolute greenhouse gas emissions from the IKEA value chain by at least 15%’, and ‘removing and storing carbon in land, plants and products’ (there is no quantitative target for this).
Henkel is also aiming for climate positive operations by 2030 (which to them covers only scopes 1 and 2) through using CO2-free fuels to generate energy and supplying excess energy to third parties.
What? Some companies are moving away from using any of these specific claims or phrases, towards bespoke climate action. Companies like ClimatePartner and myclimate offer certification that a company has measured its GHG emissions, has a target to reduce emissions, and made some kind of contribution or donation to supporting climate projects.
The aim of these types of bespoke claims or targets is to improve transparency and move away from misleading headlines. However, there is a risk that the proliferation of different approaches further limits public understanding of the impact of green claims.
Who? A number of high profile companies are making bespoke claims. Aldi’s targets also include efforts to limit its wider environmental impact, for example on water. Canon aims to improve sustainability throughout the life cycles of its products and sign its practices with the UN SDGs, rather than having a specific emissions reduction target.
Regulators aim to address claims confusion
The problem with this proliferation of claims and lack of standardization is that it is difficult to identify which companies are taking ambitious, high-integrity action and which are not taking their fair share of responsibility.
Even if companies do publish what they mean by their claims somewhere on their websites, consumers only see and are influenced by the headline claim, which can hide or confuse important context.
A number of regulators are starting to take action on green claims:
- In the EU, the draft Green Claims Directive does not legally define acceptable claims, but requires companies to substantiate and verify any environmental claim or label.
- In the UK, the Advertising Standards Authority has issued a range of guidance on green claims and recently gave specific guidance on net zero and carbon neutral claims. They recognized the lack of consumer understanding of these terms and therefore required companies to explain the basis of the claims and the details of a strategy to achieve them.
- In the US the Federal Trade Commission has been producing Green Guides since 1992. Having last been updated in 2012, the comment window just closed for the next round of updates. They aim to guide companies on principles for fair environmental marketing and how to substantiate and qualify claims.
- In addition to the German cases discussed above, it is becoming increasingly common for courts and regulators to ban climate claims that are seen as misleading. This includes claims made by Etihad, Lufthansa, and Shell.
These examples are helping to ensure transparency, but will not solve the issue of complexity. One option is for regulators to develop and enforce legal definitions for these claims.
Turning risk into an opportunity
Until this problem is solved, VCMs are at risk of being inextricably linked to greenwashing and low-integrity claims. In order to build trust in the VCMs, we need to develop consensus and self-regulation on these complex topics.
Voluntary initiatives such as SBTi and VCMI are providing guidance, but these will not be effective unless they are aligned and well-supported.
To learn more about the opportunity for sector alignment on this question, read our recent blog on the topic and get in touch with your thoughts by emailing email@example.com.
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