What is Carbon Neutral Vs. Net Zero in Business? 

The world is moving toward carbon neutral and net zero goals, transforming sustainability into a global priority. The terms "carbon neutral" and "net zero" are often used interchangeably, but they represent different levels of commitment to reducing GHG emissions.  Did you know?  By November 2023, approximately 145 countries had announced or were considering net zero targets, accounting for nearly 90% of global emissions.  As businesses and governments align their strategies with these global commitments, understanding the nuances between these two terms is essential for crafting effective sustainability plans.   This blog will delve into the definitions, key differences, and the role each plays in tackling the climate crisis. It will also examine how businesses, responsible for a significant portion of emissions, can shape their climate strategies to meet these evolving expectations.   Whether you're looking to refine your sustainability approach or gain a clearer understanding of these vital concepts, this blog is your guide.  Let's delve in! 

Carbon Neutral Vs. Net Zero- What's the Difference?  

Being carbon neutral refers to balancing emitted carbon dioxide (CO2) emissions using compensation, by removing or offsetting an equivalent amount from the atmosphere. For businesses, achieving carbon neutrality typically involves: 

• Measuring and tracking carbon emissions using carbon accounting software. 
• Implementing emission reductions in areas like energy use and supply chains. 
• Purchasing offsets like renewable energy credits or reforestation and conservation projects. 

The focus is often on residual emissions—those that cannot be eliminated—paired with immediate actions to compensate their environmental impact.  Net zero represents the adequate approach to climate action. It involves reducing absolute emissions to as close to zero GHG as possible across the entire value chain, including Scope 3 emissions. Unlike carbon neutral, net zero must include all types of GHG, not only carbon dioxide, and prioritises systemic transformation, requiring: 

• Comprehensive GHG reporting across direct and indirect emissions. 
• Absolute emission reductions across operations, production, and supply chains. 
• The use of technology alongside nature-based solutions to eliminate fossil fuel reliance and further drive a positive regenerative impact in the environment.  

The compensation is focused on residual emissions—those that cannot be eliminated with feasible technical and economic solutions. 

Why It Matters for Businesses? 

Adopting the right approach for carbon neutral vs. net zero in business depends on your organisation's goals and capacity for transformation. With pressure from stakeholders and regulatory bodies, aligning with initiatives like the Science Based Targets Initiative (SBTi) and committing to a net zero target can enhance credibility and future-proof operations.  Businesses that integrate carbon accounting software can more effectively understand their emission sources, develop a structured action plan, and demonstrate their contributions to tackling climate change. 

Benefits of Being Climate Positive or Carbon Negative  

In a world increasingly prioritising sustainability, organisations that go beyond carbon neutrality to reach net zero by latest 2050 are reaping transformative benefits, from enhanced brand loyalty to operational efficiency, all while leading the charge in environmental responsibility.  Did you know? In 2020, Apple reached carbon neutrality for its global corporate operations. The company has set an ambitious goal to achieve carbon neutrality across its entire supply chain and product life cycle by 2030.  Going carbon neutral net zero can benefit organisations by: 

1. Operational Efficiency and Cost Savings 

Reducing reliance on fossil fuels and embracing renewable energy solutions can significantly lower operational costs while driving more efficient energy consumption. 

2. Regulatory Compliance and Future Readiness 

Going beyond carbon neutrality helps organisations stay ahead of evolving regulations, ensuring alignment the Paris Agreement, readiness to carbon prcing regulations, and compliance with regional sustainability reporting regulations.  

3. Competitive Edge in Supply Chains 

A climate-positive stance can make your organisation a preferred partner in global supply chains focused on sustainable procurement and reducing environmental impacts.  

4. Access to Green Incentives 

Governments and organisations offer financial incentives, grants, and tax benefits to businesses prioritising emission reductions and climate-positive strategies. 

5. Enhanced Brand Reputation 

Demonstrating a commitment to exceeding net zero targets sets your organisation apart, showcasing leadership in sustainability and appealing to eco-conscious consumers and stakeholders. 

5 Key Characteristics of Net Zero in Businesses 

1. Reduction-First Approach 

Businesses prioritise reducing emissions across operations, supply chains, and products before relying on offsets, ensuring a tangible impact on their carbon footprint. 

2. Tackle Scope 3 Emissions  

Net zero strategies encompass not just direct emissions (Scope 1 and 2) but also the often-overlooked Scope 3 emissions, such as those from suppliers and product use, addressing the full value chain. At Mavarick, we provide advanced solutions to help businesses measure, manage, and mitigate emissions across all scopes, enabling a truly comprehensive approach to achieve net zero.

3. Science-Based Target Alignment 

Companies align their goals with global frameworks like the Science Based Targets initiative (SBTi) to ensure their efforts contribute to limiting global warming to 1.5°C. 

4. Transparent Reporting and Accountability 

Businesses leverage carbon accounting software to monitor, report, and verify emissions data, maintaining transparency with stakeholders and ensuring progress toward net zero. 

5. Innovation and Collaboration 

Achieving net zero requires adopting cutting-edge technologies, renewable energy solutions, and fostering partnerships across industries to drive collective climate action. 

Challenges Faced While Becoming a Net Zero Business 

Transitioning to a net zero business model is a transformative journey, but it comes with its share of complexities. From operational changes to external dependencies, organisations must navigate several hurdles to achieve their sustainability goals. 

High Initial Costs 

Implementing energy-efficient systems, renewable energy sources, and advanced technologies often requires significant upfront investment, which can strain budgets. 

Complex Supply Chain Emissions 

Tracking and reducing Scope 3 emissions, which involve indirect emissions across the supply chain, is challenging due to fragmented data and lack of standardised reporting. 

Technological Gaps 

Access to or affordability of cutting-edge solutions like carbon capture or energy-efficient systems can delay progress toward achieving net zero targets. 

Regulatory Uncertainty 

Evolving regulations across regions create compliance challenges, requiring businesses to adapt quickly to stay aligned with local and international standards. 

Balancing Business Growth and Emissions 

Expanding operations while reducing emissions demands innovative strategies to ensure sustainable growth without compromising on climate action goals. 

Net Zero Trade Laws in the EU 

The European Union (EU) has implemented several key legislative measures to achieve its ambitious climate goals, aiming for net-zero greenhouse gas GHG emissions. These laws provide a comprehensive framework to guide member states and industries toward a sustainable, low-carbon future.  Before we proceed further,   Did you know?  As the European Union (EU) strives to become the first continent to achieve carbon neutrality by 2050, it has set ambitious targets to drastically reduce greenhouse gas emissions.  This goal requires companies and individuals alike to take urgent and significant steps to minimise their carbon footprint by adopting sustainable practices, transitioning to renewable energy, and embracing innovative technologies. Let's glimpse at a few more laws regarding this; European Climate Law  Enacted in 2021, the European Climate Law legally binds the EU to its climate-neutrality objective by 2050. It sets an intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. This law ensures that all EU policies contribute to these goals and mandates regular progress assessments.  

Corporate Sustainability Reporting Directive (CSRD) 

The Corporate Sustainability Reporting Directive (CSRD) is a key part of the EU's strategy to achieve carbonlimate neutrality by 2050 under the European Green Deal, focusing on enhancing transparency and accountability in corporate sustainability practices. While it does not directly mandate carbonlimate neutrality or net zero targets, the CSRD requires companies to disclose detailed information on their carbon emissions across Scopes 1, 2, and 3, along with their plans for emission reductions and climate resilience. To know more read our blog on The Role of Carbon Accounting Software in CSRD Compliance.  

Fit for 55 Package 

Introduced in 2021, the Fit for 55 Package comprises a set of proposals to revise and update EU legislation to align with the 55% emission reduction target by 2030. It includes reforms in areas such as emissions trading, renewable energy, energy efficiency, and land use. The package aims to balance environmental, economic, and social considerations in the transition to a low-carbon economy. 

Net-Zero Industry Act 

Proposed in March 2023, the Net-Zero Industry Act sets a target for the EU to produce at least 40% of its net-zero technologies domestically by 2030. The act focuses on simplifying the regulatory framework, enhancing investment conditions, and fostering innovation to strengthen the competitiveness of the EU's net-zero technology industry.  

Renewable Energy Directive (RED II) 

The Renewable Energy Directive, revised in 2018, sets binding targets for renewable energy consumption within the EU. It aims for at least 32% of the EU's energy to come from renewable sources by 2030, promoting the use of renewables across various sectors, including electricity, heating, cooling, and transport. 

How Can Carbon Reporting Software Help Businesses Become Net Zero? 

Carbon reporting software is a game-changer for businesses aiming to achieve carbon neutralitynet zero, offering an all-in-one solution for managing emissions effectively. By automating emission measurements, this software;

• Ensures accuracy and efficiency in tracking Scope 1, 2, and 3 emissions 
• Helps organisations identify hotspots and opportunities for meaningful emission reductions.  
• Monitors energy consumption and highlights inefficiencies across the supply chain 
• Enables companies to make informed decisions that align with their net zero targets. 

With advanced platforms like Mavarick, businesses can seamlessly integrate carbon accounting into their operations. Its robust tools not only simplify the complexities of carbon reporting but also provide actionable insights to reduce your carbon footprint.   The platform's ability to generate detailed, audit-ready reports ensures compliance with global standards like the GHG Protocol and builds trust with stakeholders. By leveraging the power of software, businesses can confidently work toward their net zero target, balancing emissions with innovative solutions and measurable progress. 

Wrapping Up! 

Achieving carbon neutralitynet zero is no longer just a goal—it’s a necessity for businesses looking to thrive in a sustainable future. Carbon reporting software simplifies this complex journey by providing accurate insights, identifying reduction opportunities, and ensuring compliance with global standards. By leveraging these tools, organisations can confidently measure, manage, and mitigate their emissions, paving the way for impactful climate action and a competitive edge in the marketplace.  Contact Mavarick to explore how our carbon reporting software can help your business achieve its net zero goals while driving efficiency and innovation.   Get in touch with us today! 

Frequently Asked Questions (FAQs) 

1. What is the difference between carbon neutral and net zero?

Carbon neutral means balancing emitted CO₂ by offsetting it through credits or reduction initiatives, while net zero refers to reducing all greenhouse gas (GHG) emissions to as close to zero as possible, with any remaining emissions offset.

2. Can a business be carbon neutral without being net zero?

Yes, a business can achieve carbon neutrality by purchasing offsets without drastically reducing its emissions. Achieving net zero, however, requires deep emission reductions across all operations and supply chains.

3. Why is net zero more challenging than carbon neutrality?

Net zero requires addressing Scope 1, 2, and 3 emissions, which involves comprehensive changes across production, energy consumption, and the supply chain, whereas carbon neutrality can rely more heavily on offsets.

4. What are residual emissions in the context of net zero?

Residual emissions are the small amount of emissions that remain after all feasible reduction measures have been implemented. These are typically neutralised using methods like carbon removal technologies.

5. How do businesses decide between carbon neutral and net zero goals?

Businesses usually assess their emission reduction capabilities, stakeholder expectations, and long-term sustainability objectives. While carbon neutrality might be a short-term goal, net zero is a more ambitious and comprehensive target aligned with global climate action initiatives.