At the recent COP26 UN climate change conference in Glasgow, world leaders and representatives from some of the largest organisations in the world came together to mobilise climate action to protect communities and the environment from the worst effects of climate change. The goal is to secure country and company commitments for the world to reach net-zero emissions by mid-century. This is expected to keep the 1.5°C warming threshold within reach. According to Schneider Electric, the need to achieve this goal of zero emissions is urgent. But among many organisations, the exact meaning of a net-zero commitment in a corporate context is still unclear.
Often used interchangeably, the terms carbon neutral and net-zero represent very different approaches to decarbonisation and combating climate change. With more companies and governments announcing various forms of decarbonisation goals, you may be thinking, which one is better? And how do I choose the right decarbonisation path for my company?
Carbon neutral
Companies that commit to carbon neutrality ensure balancing emissions produced by their activities with by an equal volume of emissions removed from the atmosphere through an array of market mechanisms, such as carbon offsets.
Carbon neutral goals overlook the level of decarbonisation to achieve before verifying the offsets for a company as carbon neutral. It is possible for companies to do a little reduction of emissions and buy carbon offsets to claim carbon neutrality. Furthermore, there are minimal criteria of what types of carbon offsets should apply.
Some carbon neutrality certification is emerging, but no single definition of carbon neutrality or a standardised approach to achieve it. A carbon neutrality pledge is a positive step for companies progressing toward low-carbon or net-zero operations. Yet, it’s a vague term and is generally not regarded as the best practice for addressing the climate crisis.
What are carbon offsets?
Carbon offsetting is a way of paying others to permanently remove greenhouse gas emissions from the atmosphere. Often this is through tree planting and restoring habitats to absorb emissions e.g. buy a flight and plant some trees. Whilst offsetting is helpful, it is difficult to manage on the global scale needed, making its true effectiveness questionable. It needs reform to the ways in which we use and generate energy that reduces CO2. However, most organisations will be unable to achieve net-zero without some off-setting.
Net-zero: the gold standard for corporate climate action
The official definition of net-zero emissions is when global greenhouse gas emissions from anthropogenic (i.e. human-caused) activities balance anthropogenic removals. Net-zero goals are from climate science and are recommended by leading frameworks like the Science-based Targets Initiative (SBTi).
Although the definitions of carbon-neutral and net-zero sound similar, the environmental outcomes and climate action leadership are quite different. What does the distinction mean for corporate goal setting? And why do organisations like the SBTi and COP26 recommend zero over carbon neutrality?
In short, corporate zero is more robust in both its definition and its guidance about how to decarbonise. Companies committing to net-zero abate greenhouse gas emissions to as close to zero as possible and neutralise unavoidable residual emissions.
Net-zero is a roadmap to avoiding emissions associated with 1.5°C or greater temperature increases. It should outline how fast companies should decarbonise, the scope of emissions and acceptable market mechanisms to address unavoidable emissions.
The roadmap
– Rate of decarbonisation and temperature scenarios
To reach zero emissions, companies must set a goal to reduce their emissions in line with the SBTi’s 1.5°C-aligned decarbonisation pathways. According to the SBTi, most companies will ultimately make long-term emissions reductions of at least 90-95% to reach net-zero.
– Scope of reductions
Emission reductions in line with a net-zero future must account for a company’s entire value chain, or at a minimum, the value chain sources that account for the majority of carbon impact. An important distinction for net-zero as opposed to carbon neutrality is that it includes assets they do not directly control
– Specific guidance on offsetting
The bulk of net-zero emission reductions must result from actions without using carbon offsets to neutralise residual unabated emissions. Some use of carbon offsets and removal through nature-based solutions is allowable in the official SBTi Corporate Net-zero Standard. Their main use should be an entry point into longer-term emissions reductions or when it is impossible to abate emissions otherwise
High-quality, verified carbon offsets are useful and necessary tools in a company’s climate action toolbox to reach near-term net-zero goals. They are also important for addressing impossible-to-abate residual emissions, and for financing further climate mitigation targets. But they should not form the basis for long-term decarbonisation goals or in place of other abatement or transformational strategies.
