The world is rapidly moving towards a more sustainable future, and in order to achieve this, businesses and organisations are taking steps to reduce their carbon footprint. Two terms that are commonly used in this space are “carbon neutrality” and “net zero”. While the terms may sound like they are referring to something very similar, in fact, the differences may be greater than you’d think.
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Carbon neutrality is achieved when the amount of greenhouse gases produced by your organisation is balanced by the number of carbon offsets you purchase. To achieve carbon neutrality, there is no requirement to reduce your emissions, as long as you purchase enough carbon offsets to compensate for your emissions. Having said that, most carbon neutral standards such as Climate Active, Toitu, PAS2060, or the new ISO Carbon Neutrality Standard ISO14068 strongly encourage emissions reduction for a credible carbon neutral claim.
You can buy offsets from a wide range of projects, including “emissions reduction” projects, such as energy efficiency upgrades, as well as “removal based” projects that pull carbon dioxide out of the air, such as tree planting and soil carbon sequestration.
Net zero, on the other hand, is a commitment to a long-term decarbonisation pathway that first requires taking direct actions to reduce emissions in your organisation and value chain to a minimum, and only then resorting to purchasing offsets to balance out the small amount of residual emissions.
Under the International Standards Organisation’s Net Zero Guidelines that were released at the end of 2022, residual emissions can only be offset by purchasing removal-based carbon offsets, as these types of offsets are seen as a surer path to achieving additional emissions reductions and therefore considered to be of higher quality.
To better understand the difference between the two, let’s look at the scale below to demonstrate the idea. With carbon neutrality, all your emissions are on one side of the scale, and the carbon offsets are added to the other side to balance it out. It doesn’t matter how large your emissions are as long as the offsets are equal.
With net zero, your focus will be on reducing emissions to a minimum until only a small amount remains. Then, you will use removal-based offsets to balance out this residual amount.
While carbon neutrality can be achieved by any organisation, at any stage, and is relatively easy, it can also come at a considerable ongoing financial cost, especially where an organisation’s emissions remain high or even increase over time.
Net zero, on the other hand, while requiring a much greater commitment to reducing emissions through direct actions and investments, is ultimately a more sustainable emissions reduction pathway with multiple organisational benefits such as improved efficiency, productivity and energy security.
It’s also important to note that these two targets are not mutually exclusive and that you can pursue both. You can be carbon neutral now while working towards your net zero target. The benefit of this approach is that the price you pay for offsets acts like an internal price on carbon which can make it easier to get business cases for emissions reduction over the line.
Many of our clients follow this dual approach of reaching carbon neutrality while decarbonising their business on their path to net zero. We feature many of these organisations in our Driving Net Profit With Zero Emissions podcast.
As the world moves towards a more sustainable future, it’s important for your organisation to come to grips with concepts, such as carbon neutrality and net zero and take steps towards reducing your carbon footprint in a way best suited to your long-term interests, the interest of your stakeholders and the planet.
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