Understanding Carbon Neutrality
In its simplest terms, carbon neutrality means achieving a balance between the carbon dioxide (CO2) emissions released into the atmosphere and the amount of CO2 removed from it. When companies claim to be carbon-neutral, they have balanced their carbon emissions with equivalent carbon offsets or other compensating methods, resulting in no net increase in atmospheric CO2 levels from their business.
What are carbon offsets?
Companies can support projects that avoid or remove CO2 from the atmosphere, such as reforestation, renewable energy, waste disposal or carbon capture technologies. Many companies have used this technique to claim carbon neutrality.
However, when supporting projects, companies should be carful about the quality of the offset project. Projects have been criticized to not have the impact and climate benefits that they claim as for example research from the Guardian claimed in 2023. When deciding for offset projects, companies therefore need to be very selective. Additionally, carbon offset cannot be seen as the ultimate solution to become carbon neutral as it should only be used as the last resort for emissions that cannot be avoided in any other way.
Carbon-Neutral vs. Net-Zero
While carbon-neutrality involves balancing total carbon emissions with equivalent offsets, net-zero carbon means that no carbon emissions were generated in the first place, eliminating the need for offsets. For instance, a company’s building running entirely on solar power, with zero reliance on fossil fuels, can be described as having zero carbon energy.
Another way to reach net zero are direct measures for carbon removal by the company. This differs from carbon offsets, as offsets are something a company purchases from a third party in what case the company uses monetary payments to a third party project to offset emissions.
Some companies even want to beyond that and aim to become "carbon negative" by removing more emissions from the atmosphere than they emit. One famous example of this is Microsoft who aim to become carbon negative by 2030 mainly by cutting their emissions drastically and investing in carbon reduction and removal technology through their own Climate Innovation Fund.
The Role of CO2 Equivalents
When discussing carbon emissions, we often use CO2 as a shorthand for all greenhouse gases, collectively referred to as CO2 equivalents (CO2e). CO2e is a unit of measurement that enables us to compare the climate impact of various greenhouse gases over a specific period.
This comparison is essential because different greenhouse gases have varying capacities to affect the climate, their so-called global-warming potential (GWP). This GWP is the basis for the conversion into CO2 equivalents.
By converting their impacts into a single measure, we can more accurately assess and compare the total climate impact.
Achieving Carbon Neutrality: Is It Realistic?
Many companies have claimed carbon neutrality over the past few years and the task is ambitious and very comprehensive. The typical process for achieving carbon neutrality includes:
Carbon Accounting Companies begin by mapping their CO2 emissions through a carbon inventory, followed by reduction initiatives based on insights from this inventory.
Energy Reduction Companies can reduce energy consumption by investing in energy-efficient technologies, optimizing operational processes, and improving building insulation. Ideally, emissions would be avoided altogether, but there is a limit on how much can be directly avoided as the business still needs to operate, so reduction is the next alternative.
Renewable Energy Switching to renewable energy sources like solar, wind, alternative fuels, etc. helps reduce reliance on fossil fuels and lower CO2 emissions. This could be both, the installation of solar panels or other renewable sources that the company consumes directly or by choosing energy suppliers that offer renewable energy.
Sustainable Suppliers Often, most emissions arise in a companies supply chain, which makes dealing with suppliers essential to reach carbon neutrality. This step can be challenging for companies, as they do not have direct control over their suppliers’ operations as they do over their own. Companies can select suppliers with sustainable and less carbon-intensive operations and engage with their suppliers for a joint effort to reduce emissions.
Offsetting Residual Emissions Even after significant reductions, some emissions remain unavoidable. These can be offset by investing in projects that reduce or remove CO2 from the atmosphere, such as reforestation or carbon capture technologies.
Becoming carbon neutral is not a one-time task, but rather a process that requires continuous effort, controlling and targets. This makes long-term commitment essential to achieve carbon neutrality goals.
The Future of Carbon Neutrality Claims
The EU's Green Claims Directive aims to combat greenwashing by imposing stricter regulations on companies' environmental claims. From 2026, businesses will no longer be able to market products and services as "carbon-neutral" unless they can directly correlate their CO2 emissions with their communication. This means companies must substantiate their environmental claims with verifiable data supporting the claims.
How NIVI Can Help
Navigating the path to carbon neutrality can be complex, but we at NIVI are here to guide you all the way! The NIVI platform provides tools to help measure and manage carbon emissions effectively. We offer comprehensive support to ensure your business meets its carbon reduction goals and communicates its progress transparently and in compliance with EU's Green Claims Directive.
Feel free to reach out to us for more information on how we can support your carbon-neutral journey and ESG reporting needs.
