Often the two terms are used interchangeably even though the difference in approaches to tackling carbon reduction are significant. As the UK and global community ramp up ambition towards net zero – key to achieving our goal of limiting global warming to less than 1.5°C above pre-industrial levels – it’s critical to understand the terminology and what your business should be striving for.
Scope 1, 2 and 3 emissions
To identify the differences between carbon neutral and net zero, you must begin with understanding how the Greenhouse Gas Protocol, the international greenhouse gas (GHG) accounting standard, divides emissions into three categories. These categories are referred to as Scope 1, 2 and 3, and they categorise the different kinds of carbon emissions a company creates in its own operations and in its value chain.
Scope 1: The emissions a company makes directly, for example company facilities and company vehicles.
Scope 2: The emissions a company makes indirectly, for example electricity, steam, and heating and cooling.
Scope 3: These are all the emissions that a company is associated with by its upstream and downstream activities. For example, purchased goods and services, leased assets, or investments.
Scope 1 and 2 emissions are mostly within a company’s control and there are many solutions that exist to help companies reduce these emissions to zero, for example switching to renewable energy or transitioning to electric vehicles.
Scope 3, however, is where the most impact is made, as typically these emissions account for around 70% of a business’ carbon footprint. Therefore, any commitment to net zero involves a business tackling all three scopes of emissions.
Carbon neutrality relates to the balance between emitting GHG and absorbing GHG from the atmosphere in carbon sinks.
To achieve carbon neutral status an organisation must work to a carbon reduction plan, measuring and reducing carbon (minimum Scope 1 and 2) and purchasing accredited offsets equivalent to their total carbon footprint. There are several voluntary carbon offset programmes, but Gold Standard is recognised internationally and was established by WWF and other international NGOs.
PAS 2060 is the internationally recognised specification setting out the requirements for carbon neutrality.
Carbon neutral can often be seen as a pathway to net zero; however, in order to reach our 1.5° C goal companies must also focus their efforts on Scope 3 emissions.
Net zero carbon emissions is the balance between the total GHG emissions released into the atmosphere and the total amount of GHG emissions removed from the atmosphere annually.
A business must set near and long-term reduction targets covering all three emission Scopes. The near-term target is a minimum 50% reduction by 2030 against its baseline year, and the long-term target is a 90-95% reduction by 2050 against its baseline year. Residual emissions, which cannot exceed 10%, are to be balanced by accredited carbon removal schemes.
It’s important to recognise that the residual emissions can only be balanced by carbon removal offset schemes. These schemes work to remove carbon from the atmosphere such as afforestation, seagrass restoration, reforestation and soil carbon sequestration. These differ from carbon avoidance schemes which reduce emissions by preventing them being released into the atmosphere, for example wind farms.
The Science Based Targets initiative’s Corporate Net-Zero Standard is the world’s first framework for net zero target setting in line with the latest climate science. In accordance with the standard, businesses should be setting both near and long-term reduction targets.
The main differences
Measurement: While both carbon neutral and net zero requires a company to measure Scope 1 and 2 emissions, when Scope 3 emissions account for more than 40% of a company’s footprint, net zero requires these emissions to be incorporated within targets. Scope 3 measurement is encouraged when a business becomes carbon neutral but it is not mandatory.
Reduction: To be carbon neutral, a reduction plan is required for Scope 1 and 2 but not required for Scope 3. For net zero, companies must make a minimum 90% reduction across all three scopes in comparison to the baseline.
Offsetting: Carbon neutral requires buying offsets equivalent to total carbon footprint, while net zero involves carbon removal offsets only to balance a maximum of 10% residual emissions.
Keeping 1.5°C alive
The 2015 Paris Agreement set out the urgency of limiting global warming to 1.5°C above pre-industrial levels. This is the level at which the most severe impacts of global warming are avoided. The United Nations Intergovernmental Panel on Climate Change signifies that honouring the 1.5°C commitment will mean that countries and organisations should reach net zero by 2050.
One the main successes from COP26 was the announcement by the UK Treasury that it would become mandatory for all large businesses and public enterprises to develop net zero transition plans by the end of 2024. Following this the Treasury announced a taskforce to oversee the development of a “gold standard” framework for these transition plans.
It is imperative that all companies must be supported today to set net zero targets and adapt their operations so they can be part of tomorrow’s net zero economy. Through committing to net zero, measuring emissions and engaging employees, suppliers, and customers in the process. They will not only cut their own emissions but will create the products and services that we all need to meet genuine net zero goals. This is the way the business world can be at the centre of part of the hugely necessary solutions to the problems.
Only once net zero is achieved can the next steps towards regeneration be taken by reducing global warming and removing more GHG emissions from the atmosphere than are being released.