What Does Carbon Neutral Mean?

Carbon neutrality, also known as net-zero emissions, is a state where an organization balances its greenhouse gas (GHG) emissions with an equivalent amount of GHGs being removed from the atmosphere or offset. To achieve this, a business must first reduce its own emissions as much as possible across Scopes 1, 2, and 3, and then compensate for any remaining, unavoidable emissions by investing in certified carbon offset projects.

With the race on to hit the Paris Agreement target of net zero by 2050, organizations and governments are under increasing pressure to make the move to carbon neutral practices quickly. But what does carbon neutral mean for businesses, and how can they start the journey to a more sustainable future?

What is Carbon Neutrality in Practice for Businesses?

To achieve “carbon neutral” status a company has to have demonstrably taken steps to reduce its greenhouse gas emissions to as close to zero as possible, and any remaining emissions are balanced by investments in emissions reduction projects or the purchase of carbon offsets.

Examples of Emission Reductions

Energy Efficiency
Implementing energy-efficient technologies and practices within offices, such as LED lighting, energy-efficient HVAC systems, and smart thermostats, to reduce electricity and heating/cooling emissions. These are categorized as Scope 1 emissions.

Renewable Energy
Sourcing electricity from renewable energy providers, such as wind or solar power, to reduce emissions associated with electricity consumption. These are categorized as Scope 2 emissions.

Reduced Commuting Emissions
The company encourages employees to use public transportation, carpool, bike, or work remotely to reduce emissions associated with daily commutes. These are categorized as Scope 3 emissions.

What is the Difference Between Carbon Neutral and Net Zero?

Carbon neutral and net zero are related environmental goals, but they differ in their scope. Carbon neutrality focuses primarily on balancing carbon dioxide emissions, meaning that an organization reduces its carbon emissions as much as possible and then compensates for any remaining emissions through activities like carbon offsets or tree planting.

On the other hand, net zero goes beyond just carbon emissions and encompasses all greenhouse gasses. Achieving net zero means that a company or organization aims to eliminate or offset all its emissions, including carbon dioxide, methane, and other gasses, so that the net impact on the environment is zero.

How Can a Business Become Carbon Neutral? A 4-Step Process

Step 1: Reduce Your Direct Emissions

The first and most critical step is to reduce greenhouse gas (GHG) emissions. This can be done through energy efficiency improvements, transitioning to renewable energy sources, optimizing transportation, and adopting sustainable practices.

Organizations are already under increasing pressure to reduce their emissions whether they’re aiming for carbon neutrality or not. Rules around reporting on carbon output are slowly becoming more stringent, for example with Streamlined Energy and Carbon Reporting (SECR) in the UK and the Securities and Exchange Commission (SEC) Climate Disclosure in the US.

Step 2: Conduct Accurate Carbon Accounting

To achieve carbon neutrality, it's essential to accurately measure and account for emissions. Carbon accounting involves quantifying, reporting, and verifying greenhouse gas emissions by identifying sources, measuring emissions, and applying appropriate calculation methods, ensuring transparency and accountability in managing carbon footprints.

Novisto Carbon can help organizations to understand their existing carbon output, and create plans to mitigate climate related risks in the future. Our Emissions Data Platform seamlessly collects and processes emissions data from every corner of your organization and supply chain.

Step 3: Invest in Carbon Offsetting

After reducing emissions as much as possible, an organization can invest in offset activities to compensate for any remaining emissions.

These activities may include reforestation, afforestation, carbon capture and storage, or investing in projects that reduce emissions elsewhere - for example, renewable energy projects. It may also include the purchase of carbon credits.

Step 4: Purchase Certified Carbon Credits

Organizations can purchase carbon credits, which represent emissions reductions or removals achieved by projects in other locations or sectors. These credits are used to offset a portion of their emissions.

As an example, a wind farm developer may earn carbon credits for the clean energy it generates, which can be sold to companies seeking to offset their own carbon emissions footprint. Another example would be a company that invests in a project that captures and converts methane emissions from a landfill into electricity. The reduction in methane emissions, a potent greenhouse gas, generates carbon credits that could then be used by that company to offset the company's own emissions or sold to other organizations.

It’s important to note that carbon neutrality is an ongoing commitment - it’s not a box-ticking exercise to achieve a neutral status, after which a business must continually monitor and update their emissions reduction efforts and offset activities to maintain a carbon-neutral status.