Carbon Neutral vs Net Zero: What’s the Difference?

In recent years, an increasing number of large companies have committed to ambitious environmental targets. In 2019, British Airways committed to net zero emissions by 2050. The same year, Innocent announced its ambition to become carbon neutral by 2025. Last year, IKEA stated its aims to cut emissions by 50% by 2030, continuing on its journey towards net zero by 2050. These commitments from prominent organisations reinforce the urgency of addressing climate change, but also highlight a growing challenge: understanding the terminology. 

So, what’s the difference between carbon neutral and net zero? These terms are often used interchangeably, confusing even seasoned business leaders. In reality they refer to vastly different strategies with different implications for businesses and the environment. In this blog, we’ll simplify the terminology and explore what these mean for your business. 

Breaking Down the Jargon

Sustainability comes with its own lexicon, full of terms like carbon offsets, carbon negative, net zero, carbon neutral… the list goes on. It’s no wonder business leaders struggle to keep up. Imagine a CEO trying to navigate these terms while juggling financial targets and operational demands. The confusion can lead to slowed growth, missed opportunities, or perhaps worse, accusations of greenwashing. Let’s start with a breakdown of some of the most commonly used terms: net zero and carbon neutral. For a more comprehensive guide, see our glossary of sustainability terms. 

What is Net Zero?

Net zero refers to achieving a balance between the greenhouse gases (GHG) emitted into the atmosphere and those removed from it. Unlike carbon neutrality, which often relies heavily on offsets, net zero prioritises reducing emissions as much as possible across all scopes: direct, indirect, and supply chain-related emissions (Scopes 1, 2, and 3). Only after these emissions are minimised can the remaining emissions be offset through carbon removal projects like reforestation or advanced technologies such as direct air capture. 

The term gained formal definition in 2021 with the release of the Net Zero Standard Criteria by the Science Based Targets initiative (SBTi). According to this framework, companies must cut emissions by at least 90-95% across all scopes before relying on offsets. Any offsets used must focus on removing carbon from the atmosphere, not just reducing future emissions. The timeframe for achieving net zero must align with the Paris Agreement, targeting 50% reductions by 2030 and near-total decarbonisation by 2050. These targets are designed to help keep global warming below 1.5°C, in line with pre-industrial levels. 

Take Microsoft as an example. In 2020, the tech giant shared its plan to be carbon negative by 2030. The highly ambitious goal involves not only reducing emissions, but also removing more carbon than the company emits. They took it a step further by pledging to remove all the carbon the company has emitted, both directly and through electricity consumption since its founding in 1975, by 2050. Their commitment includes investments in renewable energy, carbon capture technologies, and overhauling its supply chain – an ideal template for what net zero leadership could look like. 

What is Carbon Neutrality? 

The concept of carbon neutrality dates back decades, and gained prominence in 2006 when the term was named the New Oxford American Dictionary’s word of the year. At its core, carbon neutrality refers to balancing the amount of carbon dioxide a company emits by purchasing an equivalent amount of offsets or carbon credits. These typically fund initiatives like reforestation or renewable energy projects. 

To achieve carbon neutrality, a company measures its emissions, typically covering direct emissions (Scope 1), and indirect emissions (Scope 2) from energy use. It then offsets these emissions by investing in projects that reduce or remove carbon from the atmosphere. Many companies also obtain certifications, such as PAS 2060, to validate their claims. While this approach is better than taking no action, it has its limitations. Carbon neutrality often focuses more on offsets than on reducing emissions at the source. For instance, a company could continue emitting at their current levels, purchase offsets, and still call itself carbon neutral. This risks being seen as a carbon accounting trick rather than a solution. Without extensive changes, it fails to tackle the underlying causes of climate change. 

Offsetting: The Double-Edged Sword  

Offsets play a central role in achieving carbon neutrality, but come with some risks. Many organisations achieve carbon neutrality by purchasing carbon offsets without making significant efforts to reduce their own emissions. These often lack oversight and transparency, leading to questions about their effectiveness. Some projects, such as reforestation, take decades to deliver measurable benefits, while others, like renewable energy credits, may not directly remove existing carbon from the atmosphere. 

The carbon offset market is largely unregulated, leading to varying quality and efficacy. Critics argue that offsets allow companies to continue polluting while claiming environmental responsibility, rather than investing in decarbonisation. Additionally, carbon neutrality rarely addresses emissions across the entire value chain.

Financially, relying on offsets can be costly. As demand for high-quality carbon credits increases, so do their costs.  A comprehensive report by the Taskforce on Scaling Voluntary Carbon Markets highlights the need for greater transparency and standardisation in the offset market to ensure their integrity and effectiveness. Until then, offsets should be seen as a complement to, not a substitute for, genuine decarbonisation efforts. 

Key Differences Between Net Zero and Carbon Neutrality

Scope

Net zero covers all greenhouse gas (GHG) emissions across Scopes 1, 2, and 3, requiring extensive reductions. Carbon neutrality, in contrast, often focuses on Scopes 1 and 2, neglecting the significant impact of Scope 3 emissions.

‍Certifications

Net zero aligns with the standards set by the SBTi, which requires measurable and science-based targets. Carbon neutrality can be certified through PAS 2060, but its less strict requirements often result in weaker commitments. 

‍Offsets

Net zero requires carbon removal offsets that actively extract CO2 from the atmosphere. Carbon neutrality allows for reduction offsets, which prevent future emissions but do not address existing ones. These often involve carbon projects that reduce emissions rather than actively remove carbon already in the atmosphere. 

Overall, net zero aligns with global climate targets by minimising emissions to help limit global warming to 1.5°C. Carbon neutrality, while beneficial, doesn’t guarantee the fundamental changes needed to achieve these goals. 

Why These Differences Matter

The differences between net zero and carbon neutrality are highly important; they have substantial implications for businesses, the environment, and society. Consider a business, for example, deciding between the two approaches. If it opts for carbon neutrality and relies heavily on offsets, it risks being accused of greenwashing, which can weaken trust among stakeholders. On the other hand, a net zero commitment signals a stronger, science-based commitment to tackling climate change, potentially positioning the organisation as a market leader in sustainability.

Regulatory pressures are another issue. Governments worldwide are establishing stricter regulations to align with global climate goals. Organisations with a net zero strategy are better positioned to comply with these regulations, avoiding potential penalties or restrictions. 

Financially, the difference can also be significant. The rising costs of offsets, driven by increased demand, make direct emissions reductions a more economically sustainable strategy in the long run. 

To summarise, net zero addresses the main cause of climate change by prioritising the reduction of emissions across all scopes. This approach aligns with the scientific agreement that decarbonisation is essential in order to limit global warming to 1.5°C. Carbon neutrality, while a step in the right direction, often fails to meet this potential. Businesses that understand these differences are actively contributing to a healthier planet. 

Should Your Business Aim for Carbon Neutrality or Net Zero? 

For many companies, carbon neutrality is an attainable first step. It allows for immediate action and demonstrates commitment to environmental change. However, net zero represents the standard for climate leadership. It requires extensive reductions and offers greater environmental benefits. Businesses should assess their resources, long-term goals, and stakeholder expectations to determine the most appropriate approach. It’s important to remember that carbon neutrality can serve as a stepping stone towards net zero, but prioritising meaningful emission reductions should always remain the end goal. 

How Zevero Can Help 

If you are interested in reducing your emissions, we are here to help. At Zevero, we provide businesses with the tools and the sustainability guidance to measure, reduce and report their carbon emissions. Our platform simplifies the process, making it easier for you to achieve your goals of carbon neutrality or net zero. 

Contact us today to see how our platform can help you save time, and focus on what truly matters to your business and the planet.