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Net zero vs. carbon neutral: what's the difference?
What is the difference between carbon neutral and net zero?
Intuitively, it might seem like the terms ‘net zero’ and ‘carbon neutral’ mean the same thing. They are often (mistakenly) used interchangeably, when in reality they refer to different concepts.
Both net zero and carbon neutrality refer to a state where carbon emissions have been neutralised, and rely on the use of high-quality to varying degrees.
However, it is important to note that carbon neutrality does not put any limits on GHG emission outputs and requires a far higher capacity for offsetting, whereas net zero typically refers to more rigorous emissions reduction efforts, with the aim of achieving a future where few residual emissions exist. But, both rely on solid efforts to measure, understand, and take action on organisational GHG emissions.
What does it mean?
- Net zero: Net zero refers to reducing all GHG emissions as much as possible – up to 90% – and tackling the remaining emissions with durable carbon removal.
- Carbon neutral: Achieving carbon neutrality involves offsetting GHG emissions, focusing mainly on carbon dioxide emissions. More achievable in the short-term compared to net zero.
What kinds of emissions does it cover?
- Net zero: Involves eliminating then offsetting all GHG emissions, including Scopes 1, 2, and 3 (the entire value chain).
- Carbon neutral: Focuses on compensating for CO2 emissions through reduction or removal initiatives, typically covering Scopes 1 and 2 emissions.
How does it work?
- Net zero: Requires a fundamental reduction in emissions through changes in technology, energy efficiency, and processes across all sectors and actively removing carbon from the atmosphere using technologies such as carbon capture and storage, or enhancing natural processes like afforestation and reforestation.
- Carbon Neutral: Focuses on reducing carbon emissions and compensating for the remaining emissions through offsets.
What are the relevant standards and certifications?
- Net zero: Science Based Targets Initiative's Net Zero Standard, Oxford Offsetting Principles for Net Zero Aligned Offsetting
- Carbon neutral: PAS 2060
Carbon neutral vs net zero – which approach is better?
Net zero and carbon neutrality both have their strengths and weaknesses, and which approach is more appropriate depends on the circumstances of the individual case.
Below, we will take a closer look at the advantages and limitations of each approach.
Net zero: advantages and limitations
Advantages:
- Comprehensive approach: Net zero encompasses all GHG emissions – not just carbon dioxide emissions. This makes it a more holistic approach to climate change mitigation.
- Encourages innovation: Because it requires significant changes and innovations in technology, business practices, and lifestyle, net zero is a driving force for long-term sustainability.
- Aligns with climate goals: Net zero aligns closely with global climate goals – e.g. the Paris Agreement, which aims to limit global warming to well below 2°C.
Limitations:
- Complexity and cost: Due to the need for systemic changes and potentially new technologies, achieving net zero is more complex and potentially more expensive than achieving carbon neutrality.
- Longer time frame: Net zero often requires a longer timeline to achieve, as it involves significant reductions in emissions across all operations.
Carbon neutrality: advantages and limitations
Advantages:
- Feasibility: Carbon neutrality is often easier to achieve in the short term because it allows for offsetting emissions rather than requiring immediate and deep cuts in emissions.
- Flexibility: Carbon neutrality provides flexibility for organisations that are unable to make drastic changes to their processes immediately.
Limitations:
- Lacks guidance for reductions: Carbon neutrality does not give parameters for deep emission cuts. Thus, companies may rely heavily on low-quality offsets, which can sometimes be seen as a way to ‘buy’ environmental responsibility without making significant internal changes.
- Potential for greenwashing: Due to its lack of a robust methodology, companies may be accused of greenwashing for relying on the cheapest, fastest way to neutrality without ‘doing the work.’
Which approach is better?
As mentioned above, the choice between net zero and carbon neutrality depends on the specific circumstances and objectives of the entity considering them.
Net Zero:
Net zero is the preferred long-term commitment to sustainability that aligns with global climate targets, emphasising transparency and scientifically backed methodologies. It is best suited for organisations with the resources and capability to invest in innovative technologies and processes. Achieving net zero often carries a stronger public commitment, reflecting leadership in sustainability and enhancing brand reputation.
Carbon Neutral:
Carbon neutrality is a practical starting point for organisations, offering immediate, short-term reductions and valuable experience as long as genuine efforts are made. It is particularly suited for smaller entities or those with limited resources. While carbon neutrality still demonstrates responsibility and can positively impact public perception, it is increasingly seen as a stepping stone rather than a final goal.
However, carbon neutrality has fallen out of use as a claim due to anti-greenwashing regulations in the Nordics and EU. These policies such as the Green Claims Directive point to the weaknesses of carbon neutrality, including having no requirement for deep emission cuts or potentially incentivising the cheapest, quickest way to neutrality. This undermines integrity in offsetting and makes it more confusing for consumers to know what is a green product. Yet, aiming for neutrality is a great way to get started, gain experience alongside genuine efforts and pushes for transparency.
Why is reaching net zero so important?
Reaching net zero is crucial for several reasons. If global emissions continue unabated at current rates, we are set to exceed 2°C of global warming, with severe consequences for society and the environment.
The primary goal of reaching net zero is to limit global warming to well below 2°C, with efforts to limit the increase to 1.5°C. Achieving this goal is essential to prevent the most severe impacts of climate change, such as extreme weather events, rising sea levels, and loss of biodiversity.
Tackling this crisis requires a multi-pronged approach, beginning with emissions reductions across Scopes 1, 2, and 3 where relevant, followed by carbon removal via thoroughly vetted credits.
Carbon removal: A vital step on the road to net zero
Carbon removal technologies play a crucial role in achieving net zero emissions by actively removing carbon dioxide from the atmosphere. From afforestation to direct air capture, these technologies offer diverse pathways to sequester carbon and offset emissions.
Among other things, carbon removal:
- Addresses residual emissions by capturing and storing an equivalent amount of carbon dioxide from the atmosphere
- Compensates for historical emissions that have accumulated over time
- Enhances natural carbon sinks through practices like reforestation, afforestation, and improved land management
- Bridges the transition to low-carbon economies by allowing time to develop and implement more sustainable technologies and practices
And much, much more.
Net zero targets have the potential to increase global carbon removal capacity, alongside reduction efforts. Multiple frameworks and certifications exist to guide and validate companies’ net zero claims. However, it’s crucial that companies do not overlook the need for high-integrity carbon removals alongside emission reduction.
What is a life-cycle assessment (LCA)?
What is a life-cycle assessment?
A life-cycle assessment (LCA) – sometimes called a cradle-to-grave analysis – is a systematic review of all the environmental impacts associated with a product throughout its lifespan.
From raw material extraction through production, use, and disposal, an LCA covers every stage of a product’s life. This assessment helps to understand the overall environmental footprint and identify opportunities for improvement.
Some of the benefits of an LCA are:
- Improved environmental awareness
- Better decision making, driven by informed product design, policy making, and strategy development
- Optimised sustainability efforts
- Compliance with environmental regulations and standards
Knowing more about your environmental impact can benefit your company across the board. This is particularly the case for departments that are able to take immediate action based on an LCA, including marketing and sales, product development, supply chain management, and executive management.
Cradle-to-grave: the 5 stages of a product life cycle
There are five stages of a product life cycle in LCA:
- Raw material extraction
- Manufacturing and processing of raw materials
- Distribution and transportation of products
- Use and maintenance of products by consumers
- End-of-life (disposal or recycling of the product or its components)
The 4 phases of a life-cycle assessment
As defined in the ISO standard 14044, a life-cycle assessment consists of four key phases:
1. Definition of goal and scope
The first phase of an LCA is about defining the purpose of the study and its boundaries – in other words, what you want to analyse and how deep you want to go with your analysis.
This involves answering the following questions:
- What are you assessing? Define your functional unit (e.g. 1 kg of product) to standardise comparisons.
- What is the purpose of the assessment? Are you looking to design greener products, do you want to have environmental information available, or is it about following regulations?
- How extensive will your assessment be? Decide how much primary data you want to collect, and from which point on you will use secondary data.
- Which guidelines and methods will you follow? For example, if you are looking to obtain certain environmental labels, you may need to follow industry-specific LCA standards.
2. Inventory analysis
Phase two, the inventory analysis, is the data collection phase of the life-cycle assessment. This phase involves quantifying the environmental inputs (raw materials, energy) and outputs (emissions, waste) of your product.
For each stage of the product’s life cycle, data must be collected on:
- Raw materials
- Energy
- Water
- Emissions to air, water, or land
3. Impact assessment
Phase three involves evaluating potential environmental impacts using data from phase two. An impact assessment, or life-cycle impact assessment (LCIA), typically includes:
- Selection of Impact Categories: Identify relevant environmental issues like global warming, ozone depletion, acidification, eutrophication, human toxicity, and eco-toxicity.
- Classification: Assign LCI data (inputs and outputs) to the selected categories, e.g., CO2 emissions to global warming and NOₓ emissions to acidification.
- Characterisation: Quantify contributions to each category, converting different emissions into a common unit, like CO2 equivalents for global warming.
- Evaluation and Interpretation: Analyse results to identify significant impacts and prioritise improvements, considering assessment limitations and reliability.
4. Interpretation
In the final phase of an LCA, results must be interpreted to ensure they're clear and actionable. This process involves reviewing findings, making sure data is complete and consistent, and drawing meaningful conclusions. While you can interpret results as you go, the most reliable insights come from thoroughly analysed data.
Reaching Net Zero: beyond emission reduction
A life-cycle assessment offers a detailed view of a product’s environmental impact, guiding companies in making informed decisions to reduce these impacts. While reducing emissions is crucial for achieving net-zero goals, it's becoming clear that reduction alone may not suffice to meet the targets set by the Paris Agreement.
To truly reach net zero, companies must offset any remaining greenhouse gas emissions through effective carbon removal. Although this can be challenging, understanding and accessing reliable carbon removal options is key to meeting these climate commitments.
What is carbon accounting, and how does it work?
What is carbon accounting?
Carbon accounting is an important subcategory of greenhouse gas (GHG) accounting. Specifically focusing on measuring and tracking carbon dioxide emissions, carbon accounting allows companies to quantify their emissions, understand their environmental impact, and set goals for reducing their carbon footprint.
The most commonly used approach to calculate carbon emissions – and all GHG emissions – is the Greenhouse Gas Protocol, which classifies emissions into three categories known as ‘Scopes’:
- Scope 1: All emissions produced as a direct result of the company’s operations.
- Scope 2: Indirect emissions resulting from the generation of electricity, heating, cool, etc. purchased and consumed by the company.
- Scope 3: Indirect emissions that occur in the company’s supply chain as a consequence of the company’s activities, but from sources that are not owned or controlled by the company.
The goal of carbon accounting is to quantify the total carbon emissions that a company is responsible for – including emissions that are not produced directly in the company’s daily operations. Accounting for Scope 3 emissions can be particularly challenging, as companies must rely on getting accurate data from their suppliers.
Read more: What are Scope 1, 2, and 3 emissions?
What is a carbon accountant?
A carbon accountant is a professional who specialises in measuring, tracking, and reporting a company’s carbon emissions. A carbon accountant typically has a background in environmental science, engineering, sustainability, or a related field.
In their work, carbon accountants support environmental sustainability efforts, strategic planning, and regulatory compliance. This makes them a crucial asset for companies looking to achieve net-zero emissions.
Find a carbon accounting partner here.
How does carbon accounting work?
Carbon accounting: two different approaches
Like GHG accounting, carbon accounting is done using two methods: the spend-based method and the activity-based method. As both methods have their advantages and disadvantages, the Greenhouse Protocol recommends a hybrid approach.
The spend-based method
The spend-based method uses emission factors that are expressed as emissions per unit of currency spent. The method takes the financial value of a given company purchase and multiplies it by the amount of carbon dioxide it emits. This approach is less accurate than the activity-based method, but also less time-consuming and easier to implement.
Advantages and disadvantages of this method include:
➕ Easy to implement if financial data is available
➕ Covers a wide range of activities with one set of financial data
➖ Less accurate due to the use of average emission factors rather than specific data
➖ Emission factors might not reflect the specific suppliers or products purchased by the organisation
The activity-based method
The activity-based method uses data to retrieve information on how many units of specific materials a company has purchased. The method accounts for all the steps in the process that may have created a carbon footprint, including material sourcing, production, marketing, and much more.
Advantages and disadvantages of this method include:
➕ Provides a more precise and accurate measurement of emissions for specific activities
➕ Enables companies to make targeted emission reduction strategies
➖ Requires more detailed data on activities and processes
➖ Can be complex and time consuming to implement, particularly for large companies with many different sources of emissions
Most companies follow the hybrid model, using all of the activity-based data possible and supplementing with spend-based methods to estimate the rest. This allows them to gain a more comprehensive understanding of emissions and simultaneously support more effective decision making.
Why is carbon accounting important?
By enabling companies to account for all emissions – including their indirect emissions – carbon accounting provides companies with a clearer understanding of their emission levels and a better foundation for setting realistic and achievable targets.
From carbon accounting to carbon removal
Carbon accounting is essential to the foundation of any corporate sustainability strategy. When it comes to achieving net zero, reducing your emissions is an important and necessary step in the right direction. However, there is growing consensus that reduction is no longer enough to stay within the goals set forward in the Paris Agreement. In order to stay on track for global climate targets, companies need to be neutralising their residual CO2 emissions with an equivalent amount of verified carbon removal.