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Carbon neutral or net zero? What’s the difference?

Updated: Apr 5, 2022

With increasing pressure on companies to play their role in the fight against climate change, what should your company be doing? What is a suitable target that is demanding but achievable? Rawstone Consulting explains everything that you need to know about carbon targets.

First, a bit of technical information to put targets into context. The GHG Protocol Corporate Standard is the most widely used method for measuring carbon emissions. The Standard defines 3 types of carbon emissions – scope 1, scope 2 and scope 3. Scope 1 and 2 emissions relate to an organisation’s direct energy and electricity use – i.e. core operational emissions. Scope 3 emissions are the company’s indirect emissions – e.g. those arising from the supply chain or from customers using the company’s products or services. As a company often has less influence over scope 3 emission sources they are typically more difficult to measure and reduce than scope 1 and 2.

In terms of carbon targets, there are four main types to consider: reduction, science-based, carbon neutral and carbon net zero.

  1. Carbon reduction target. This is where an organisation commits to reduce emissions by a certain amount, typically a percentage. Reduction targets can relate to your absolute emissions (i.e. the total volume of emissions) or an intensity measure (e.g. tCO2e per £m turnover). Assuming your business is growing the former is more challenging, but generally speaking is perceived more favourably than an intensity measure for that very reason.

  2. Science-based target. These are interim reduction targets (5-10 years) where the reduction amount is determined scientifically by the Science-Based Target Initiative (SBTi) to be the reduction needed to limit global warming to 1.5 degrees. If scope 3 emissions are anticipated to be 40% or more of the company’s total carbon footprint (which they are more often than not), then they must be included in the company’s target. A science-based target is more well-regarded than a non-science based reduction target, and will boost CDP Climate Change and ESG rating scheme scores. The process for setting a science-based target involves committing to setting a target (for which the company can receive positive press), and then using the SBTi tool to submit data and the proposed target within a two year time frame. The SBTi review and verify the target level (at a cost of $4,950), keeping a public record of all targets here.

  3. Carbon neutral target. These targets involve reducing emissions as much as possible and then offsetting residual amounts by purchasing carbon offsets that prevent future carbon emissions (c.£12 per tonne CO2e gives a good estimate of cost). Common schemes involve preventing deforestation or providing cook stoves to people who cook on open fires. It is important to use reputable offset schemes that are third party certified (e.g. by Gold Standard or VCS). Companies claiming carbon neutral status without emission reductions can been portrayed unfavourably in the media therefore it is very important that these targets are only used alongside challenging reduction targets. Carbon neutral is really a plaster on a problem, not the real fix.

  4. Carbon net zero target. As with carbon neutral, carbon net zero involves reducing emissions as much as possible (generally accepted to be 90-95%), and then removing the remaining emissions from the atmosphere. The most accessible way of doing this is by planting trees, however these take 10 years to grow large enough to sequester carbon. For this reason companies taking this approach can only commit to carbon net zero a minimum of 10 years ahead. Whilst many companies have committed to net zero targets over the past few years, there is now a recognised best practice standard for net zero that has been developed by the SBTi. Read more here.

So what should you do? The most comprehensive approach is a science-based medium-term target with net zero long term target, both relating to scope 1, 2 and 3. Combine this with some short-term management targets to drive performance delivery (e.g. source X% emissions from renewable electricity) and for completeness purchase carbon offsets to neutralise emissions whilst you wait for your purchased trees to grow sufficiently large for net zero to be achieved.

Of course, if you’re just starting out on your journey then instead focus on doing the above but only for scope 1 and 2 (noting that a science-based target may not be possible). Once you’ve measured scope 3 you can then set new targets covering those emissions. The important thing is to do something. Don’t be held back by not having all the data you need – set targets for what you can and develop (and publish!) a plan to meet them.

If you need some advice on your carbon targets or abatement strategy then please contact Rawstone Consulting here.


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