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More companies want to be carbon neutral – What does that mean?

Carbon Neutral


For scientists and environmentalists terms such as net-zero and carbon neutrality have been around for long, but it was only recently that companies have started using them too. According to Jodi Monning, director of marketing at Cool Effect (a non-profit that sells carbon offsets), in late 2019 “there was over a 700 percent increase in businesses, organisations, and individuals using (our) travel offset tool”.

Companies such as Amazon, Microsoft, Starbucks, and Unilever have all made different commitments to decrease their carbon emissions, from pledging carbon neutrality to aiming to be “resource positive” or purchasing “carbon offsets” (more on this later). On the other side, consumers have been increasingly wary of “greenwashing” or “buzzy marketing terms”.

Why all this talk about carbon? Simple: following a wave of global youth protests, the failure of governments to deliver on their environmental promises (evident from the disappointing results from COP26) and a wave of devastating climate-related natural disasters all around the world, people are becoming increasingly more concerned that climate change is getting closer and closer to being irreversible (something that is generally accepted).

Scientists have determined that we must stop the carbon emissions in our atmosphere from going over 430ppm if we want to avoid the planet warming by more than an average of 1.5 degrees (the temperature that the Intergovernmental Panel on Climate Change or IPCC has warned will be the point of no return). Currently, we are at 415pmm adding 2.4 ppmm to the toll every year.

If we continue the way we are going, we will reach 430ppm in only 7 years! In order to avoid the planet warming by more than 1.5 degrees we need to rapidly decrease the amount of carbon dioxide we release into our atmosphere, ideally, the world needs to reach net zero by 2050 although with major economies (and emitters) such as China only committing to reaching that target in 2060, it doesn’t seem likely.

For these reasons among others (including public pressure) decreasing environmental impact has become a goal for many organisations and is now even considered a responsible business practice. However, with new “buzzwords” developing, commitments by both businesses and governments being thrown around constantly as well as regulations and laws multiplying, it can be difficult – both for the general public and for businesses – to keep up with what certain terms and commitments actually mean.

Let’s clarify the terms

Carbon Neutral: any CO2 released into the atmosphere from a company’s activities is balanced by an equivalent amount being removed.

Carbon offsetting: the action or process of compensating for carbon dioxide emissions arising from a company’s activity, by participating in schemes designed to make equivalent reductions of carbon dioxide in the atmosphere. This is most commonly achieved by a payment for the purchase and planting of trees.

Carbon Negative: activity that goes beyond achieving net-zero carbon emissions to create an environmental benefit by removing additional carbon dioxide from the atmosphere.

Carbon Positive: this is mainly a marketing term organisation sometimes used to describe climate positive and carbon negative but is probably best avoided.

Climate Neutral: refers to reducing greenhouse gas emissions to the point of zero while eliminating all other negative environmental impacts that an organisation may cause.

Net Zero: a state in which the greenhouse gases going into the atmosphere are balanced by reduction and removal of GHG out of the atmosphere. Net Zero is achieved when the amount of GHG we add to the atmosphere is no more than the amount taken away (by offsetting). Net Zero is a similar concept to Carbon Neutral, however, while carbon neutrality means balancing GHG emissions by offsetting (removing from the atmosphere) an equivalent amount of carbon for the amount produced, net-zero means reducing and offsetting GHG with the goal of balancing the emissions produced and emissions removed from the earth’s atmosphere.

For example, in the case of air travel: if people within a given business take 10 flights per year, the organisation could: (1) achieve carbon neutrality for those 10 flights by buying enough credit offsets to balance their activities or (2) achieve net-zero by reducing the number of flight per year as much as possible (i.e. to five) and also invest in carbon offsets that remove from the atmosphere the carbon dioxide produced by emissions from the other five flights.

(NOTE: Net-zero carbon emissions mean that carbon emissions and removal are balanced. Net-zero emissions mean all GHG emissions and removal are balanced).

Climate Positive: means the same thing as carbon negative.

Two of these terms, in particular, are often used interchangeably – carbon neutral and carbon negative (aka climate positive), which is wrong. When a company says they are “carbon neutral”, it means they have reduced the amount of carbon dioxide they are responsible for releasing into the Earth’s atmosphere as much as they can, and for the part that is left, they have used “carbon offsetting” that way removing the same amount of carbon from the atmosphere as it released. On the other hand, a carbon-negative company removes more carbon from the atmosphere than it releases. This requires going beyond carbon neutrality.

Now that we have covered the different terms and what they actually mean it is important to go deeper and look at how one can achieve carbon neutrality, carbon negativity, or net-zero. 

How to achieve Carbon Neutrality/Carbon Negativity/Net Zero

In order to reach carbon neutrality or carbon negativity companies must understand exactly what their carbon footprint is. Hence, the first step to take to achieve carbon neutrality or carbon negativity is to measure your carbon footprint based on all aspects of your business. This can be done through a number of agencies. Once this step is complete, a company must offset its carbon footprint. The extent to which a company does this is what will determine whether they are carbon neutral or carbon negative.


Usually, the first step companies will take to achieve carbon neutrality is to decide on a baseline year and for that year then calculate their carbon footprint. This is usually done by breaking them down into scope 1, 2, and 3 emissions (Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain).

Following, companies will then begin to offset their emissions. As noted above, offsetting means, in simple terms, removing from the atmosphere an equivalent amount of carbon for the amount produced. This can be achieved by buying “carbon credits” (carbon credits are generated by projects that are cleaning up our atmosphere). While this sounds like a good idea and some carbon offsetting projects do make a real impact there is some scepticism around the quality of some of those projects, mainly because of a lack of transparency and clear results. Because of this among other reasons, businesses shouldn’t be able to just say they are carbon neutral – this would make it too easy for companies to “greenwash” their social image or brand, more generally – they should be able to document and show exactly how they reached carbon neutrality.

A clear widely accepted framework establishing guidelines for businesses to reach climate neutrality is yet to be established, however, there are a couple of standards companies can ascribe to. For example, the environmental consultant Agency Natural Capital Partners established one of the first carbon-neutral frameworks in 2002. Furthermore, the British Standards Institution (BSI Group) has a carbon-neutral program called PAS 2060 that verifies a company’s carbon neutrality claims. The Nonprofit Climate Neutral also works with multiple brands to help them offset and reduce emissions.

In essence, a company that is carbon neutral is removing the same amount of carbon from the atmosphere as it is emitting.


As established earlier, carbon negativity goes beyond climate neutrality – not only does it remove the same amount of carbon from the atmosphere as it is emitting, it removes additional carbon from the atmosphere, that way creating an environmental benefit. The methods to achieve this are the same as the ones mentioned above – a company must measure their carbon footprint and based on that purchase enough carbon credits to offset more carbon than its total carbon footprint.

In order to determine whether a company is carbon-neutral or carbon-negative, we need to establish two things: (1) the total carbon a company produces in a certain period and (2) the carbon credits it acquires from offsetting initiatives that can absorb existing emissions. We subtract the emissions the company offsets from the ones it produces. If the result is zero, the company is carbon-neutral. If the result is anything less than zero, the company is carbon-negative.


The road to achieving Net-Zero starts similarly to the one needed to achieve carbon neutrality/negativity. A company must first determine the scope of their net-zero strategy (i.e. what end target you want to achieve and by when). Next, companies must understand their GHG footprint by breaking emissions into tier 1,2, and 3 emissions. However, following, instead of simply offsetting their emissions, companies will first prioritise reducing their own emissions as much as possible, that way minimising the need for offsets.

For all organisations, achieving net-zero will involve some combination of emissions reduction and offsets. While reducing emissions should be top priority, some emissions will remain after a company implements its reduction plan, which is why one must explore offsets to meet their net-zero goals. As mentioned earlier, in order to reach net-zero, a company must add no more GHG to the atmosphere than it is taking away.

Once a company has divided their emissions into tier 1,2, and 3 emissions they can assess what are the easiest and most productive ways of reducing GHG emissions within their operations, and reduce those emissions as much as possible (ideally reducing emissions by half or more). Once that is done, companies should start thinking about offsetting the remaining of their emissions.

  • What types of offsets can be used to achieve net-zero?
    • According to the Carbon Trust, not all carbon offsets are the same. Oxford University has published the “Oxford Principles for Net Zero Aligned Carbon Offsetting” which provides a classification categorising offsets into “avoided emissions”, “emissions reduction” and “greenhouse gas removal offsets”. 
    • Avoided emissions offsets come from projects that avoid emissions that would have taken place if not for that project. For example, by replacing kerosene cook stoves with solar stoves, we are avoiding emissions that would have taken place if the cook stoves had not been replaced.
    • Emissions reduced offsets come from projects that stop emissions being released into the atmosphere. For example, avoiding deforestation and carbon capture and storage on industrial processes.
    • Greenhouse gas removal offsets are projects that physically remove emissions from the atmosphere, such as afforestation (where new trees are planted in an area where there were no trees before) and direct air carbon capture and storage.

Regardless of whether a company is trying to achieve net-zero, carbon negativity or carbon neutrality, they should always communicate their targets and achievements. Now that more and more companies are announcing net-zero targets, companies will be under increasing scrutiny and should be as transparent as possible.

  • The Science Based Targets initiative (SBTi) has published requirements for how net-zero targets should be communicated, which include the following:
    • “The net zero target should be publicly announced disclosing baseline year, boundary and target year. The announcement should also include the magnitude of emissions abatement and neutralisation.
    • Companies should disclose the carbon removals used to achieve net zero in the target year.
    • Progress against targets should be reported on an annual basis, and include the following:
      • Fully disaggregated emissions and removals in the GHG Inventory, broken down by Scope 1, 2 and 3
      • Identifying documentation for all contractual instruments used for carbon removal targets
      • Project information regarding all purchased and issued certificates and the approaches used to conduct carbon removal
      • Details regarding the liability and impermanence risk of carbon storage

Publishing information about the target on your website will help support announcements in the media. We recommend keeping communications colleagues informed and ensuring they understand the work you are doing to mitigate any brand risk or greenwashing concerns”.

  • Points worth mentioning
    • Smaller companies can pursue carbon-neutrality just like any other firm – the process is the same: understand your carbon footprint, set out an ambition (being carbon-neutral, net zero or carbon negative) and take action by reducing and/or offsetting those emissions.
    • As becoming carbon neutral or negative is gaining traction among big firms, some firms are going even further and promising to erase the totality of their historical GHG footprint – Microsoft was one of the first companies to announce this, followed by Google.
    • As well as being the right thing to do for the planet as a whole, going carbon neutral or negative has business benefits too: consumers and investors have shown to prefer carbon-neutral/negative companies.
    • It was mentioned above that offsetting is a mechanism to balance one’s GHG emissions. It is worth highlighting that there are two categories of offsets: voluntary and compliance. Voluntary offsets are the ones referred above: where companies buy at their own discretion. Compliance offsets are used to meet legally binding caps on carbon in schemes like the EU’s Emissions Trading System.


A personal reflection by Maya Sainani

Maya is a Law and Media graduate from Sussex University who aspires to specialize in environmental law and get involved with ESG criteria. She worked as the memberships officer for Brighton Peace and Environment Centre for almost two years.

Do you want to know more about becoming carbon neutral by 2050, we have just the right module for you.