Net zero vs carbon neutral

In previous blogs we’ve explored the definition of carbon neutral and net zero. At first glance they can appear to mean very similar things, so here we dig into the difference between these terms – and other common ones you might come across – for organizations making climate commitments.

It’s important to note that, at the moment, there are no universally agreed definitions for these terms. Currently, climate commitments are totally voluntary and there is no standardized, legally binding regulatory framework, although there are voluntary initiatives that independently monitor climate commitments. We’ve used definitions that reflect common usage, but not everyone will use these terms in exactly the same way,

What is carbon neutral?

Carbon neutral organizations compensate for, or offset, their emissions each year by purchasing and then canceling carbon credits. 

There are varied interpretations of this. Organizations with ambitious commitments will accurately measure all their emissions, not just from their own activities (scope 1 and 2) but also from their wider value chain (scope 3), and purchase high quality credits. At the other end of the spectrum, some organizations only measure and offset a small portion of their emissions and do not conduct appropriate due diligence on their carbon credit purchases. 

What is net zero?

For organizations, setting a net zero target means committing to reduce GHG emissions as much as possible (usually by at least 90%) by a target date (generally no later than 2050, to align with global climate goals) and “neutralizing” any remaining emissions with removals credits. Only at this point can the organization be considered to be net zero. Until this point is reached, organizations can choose to compensate for, or offset, their emissions using carbon credits. This is the approach set out by the leading industry target-setting body, the Science-Based Targets Initiative (SBTi). 

GHG emissions reduction requirements reflect technological and economical feasibility for the organization’s sector. These activities might include improving energy efficiency, switching to renewable energy sources, and using more sustainable supply chains. 

What’s the difference between carbon neutral and net zero?

There are three key differences between carbon neutral and net zero claims:

1. Net zero requires that GHG emissions must be significantly reduced. Carbon neutral does not.
2. Because of this requirement, net zero is usually a target set for the future, as emissions reductions take time. Organizations with a net zero target should be actively reducing their emissions, but the obligation to neutralize residual emissions only applies once they reach their emissions reduction target. Carbon neutrality can be achieved very quickly, and so organizations claiming to be carbon neutral should be currently offsetting all their emissions. 
3. Net zero requires that removals credits must be used to neutralize residual GHG emissions, whereas carbon neutral allows for GHG both removals and emissions avoidance credits.

Other definitions to know

It’s not just carbon neutral vs net zero you need to understand; organizations are making climate claims using a wide range of terms. EY is carbon negative, IKEA wants to be climate positive by 2030, and Google wants to become carbon free next decade. So what do these terms mean?

• Carbon negative is a higher ambition option than carbon neutral. Beyond compensating for GHG emissions with offsetting, additional GHGs must also be removed from the atmosphere. This would cause a net reduction in GHGs in the atmosphere - hence negative.
• The terms climate positive and carbon positive are often used interchangeably with carbon negative. In some cases the term “positive” has the definition of “being greater than zero”- referring to not just having zero impact on the atmosphere but actually net reducing GHGs. In other cases the term “positive” has the definition of “having a good effect” and is used to refer to the co-benefits that net negative emissions can have, for example benefiting biodiversity and food security. 
• Carbon-free is a very high ambition target. A carbon-free product, service or organization is one that doesn’t generate any carbon emissions across its entire value chain or supply chain, from manufacturing to operations. There are no known carbon-free products yet due to this high level of ambition.

In general these claims are made on the basis of emissions within a calendar year, but in some cases these claims refer to all of a companies’ historical emissions, such as when Google announced in 2020 that it had compensated for all of the GHGs it has ever emitted since the company was founded.

Clarity is key

With the range of terms used along with the lack of universal definitions, it’s not surprising that this topic can be confusing. It’s therefore key that when organizations make climate commitments, they outline exactly what they mean by that commitment. Organizations should disclose what they are doing now, what they are aiming for and when, and publicly report their progress towards these goals. 

In the future it is likely that governments will start to require and regulate climate commitments, to help reach global climate goals. Now is a great time to get ahead of these requirements and start setting high-quality climate commitments.

How can you incorporate carbon credits into your climate strategy? Sylvera’s carbon credits ratings can help you select high quality credits, find out more here 

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