Increasingly, companies are setting climate objectives to achieve carbon neutrality or net zero. What do these targets mean in practice, how can they be achieved, and are they sufficient? We examine international carbon neutrality and net zero guidelines, their differences, and points of convergence in our blog.
Bloggers: Noora Harju, Esko Salo from VTT and Olli Helppi from the LUT University
A carbon-neutral company typically means that the company's operations do not increase the concentration of greenhouse gases in the atmosphere. Carbon neutrality can be achieved by reducing one's own emissions, for example, by switching to renewable energy and/or by purchasing emission compensation units, meaning paying for someone else to reduce emissions elsewhere.
Merely claiming carbon neutrality does not indicate the level and extent of a company's climate work, as a company can influence which part of its total emissions is covered by the carbon neutrality target. The target may include only direct emissions, although indirect emissions often account for a significant portion, even over 95% of total emissions. The extent to which indirect emissions are included in climate objectives varies significantly between companies. The European Commission's Green Claims Directive introduces much-needed order to the current wild west of climate claims by setting criteria for environmental claims.
The term net zero is relatively new, and its use has expanded, especially in the last few years. The net zero target is more strongly linked to climate science and international climate policy, such as the goals of the Paris Agreement. In aiming for net zero, a company commits to broad and significant emission reductions across all its emission categories. Remaining so-called residual emissions are those that cannot technically be reduced. Permanent carbon removal should be used to offset residual emissions.
Several different guidelines have been made for climate targets, which companies utilize. Although the goals of the guidelines are the same, there are differences and ambiguities in their contents. Guidelines for achieving carbon neutrality and net zero are not mutually exclusive; they can be used simultaneously. In addition to a short-term carbon neutrality target, a company can set a separate net zero target, typically for the years 2040–2050. Carbon neutrality can be seen as a step towards net zero.
The current focus of climate target guidelines is on reducing a company's own carbon footprint and compensating for emissions. The guidelines do not currently consider that companies can produce positive climate impacts for other companies through the carbon handprint. The carbon handprint is formed for products and services that are lower in emissions compared to the conventional alternative. The handprint does not replace other climate work, but it can shift climate work into higher gear. Ideally, companies would identify their potentials for both minimizing emissions and maximizing the handprint, and implement them side by side.
Considered guidelines
- International Organization for Standardization (ISO): 14068 Carbon neutrality
- Science Based Targets initiative (SBTi): Corporate Net Zero Standard
- International Workshop Agreement (IWA) 42: Net Zero Guidelines
- Climate Impact Partners: CarbonNeutral Protocol
- Carbone 4: Net Zero Initiative
- British Standard Institute: Publicly Available Specifications (PAS) 2060 – Carbon neutrality
- Voluntary Carbon Markets Integrity Initiative (VCMI): Claims Code of Practice
