More and more companies or products claim to be carbon-neutral. However, these claims are increasingly being challenged and disputed.
The goal of this article is to explain the limits of such claims, and how a company or product can contribute in the global effort to reach carbon-neutrality.
What is carbon neutrality?
💡 Carbon neutrality or "net-zero emissions" is defined by the act of sequestering as much carbon as one emits, in order to stabilize its concentration level in the atmosphere and thus limit the global temperature increase of the planet.
To achieve this global neutrality objective, it implies, on one hand, drastically reducing emissions, whether they originate from fossil fuels or living matter, and on the other hand, increasing the sinks (forests, soils, and possibly technological solutions) that allow for the sequestration of carbon.
The French Environmental Agency (ADEME) argues that carbon neutrality makes sense primarily on a global scale and for states, as it implies a balance between large-scale CO2 emissions and absorptions. Smaller territories and companies should instead focus on how they can contribute to this global goal, rather than seeking their own carbon neutrality. This is due to considerations of equity and efficiency, and the need for a drastic reduction in GHG emissions to achieve the global objective [1].
Why should a company not claim that it is carbon-neutral?
Since the Paris Agreement, States have been coordinating to achieve carbon neutrality by the second half of the 21st century by translating this global objective with the deployment of national strategies. However, it is important to remember that carbon neutrality, as defined above, cannot be directly applied at any other scale (sub-national territories, companies, associations, communities, products or services, etc.).
In a paper published by the ADEME, researchers explain that attempting to apply arithmetical carbon neutrality (balance between emissions and sequestration) on another scale leads to methodological and ethical biases [1]:
Non-additionality of procedures: If a business wanted to counter-balance its emissions with carbon sinks, it should solely focus on its direct emissions. This is because including both direct and indirect emissions in the balance would overly increase the need for carbon sinks, as indirect emissions are accounted for by multiple entities. However, limiting the consideration to direct emissions would often overlook a significant portion of a company's environmental impact, since the bulk of their emissions typically lies within indirect emissions, or "scope 3".
Equity between actors: Narrowing the focus of emission accounting would worsen inequalities in balancing emissions and sequestration capabilities. For example, without a national approach to carbon neutrality, a forest-rich territory could lean on its carbon sink without needing ambitious ecological policies, whereas a forest-poor territory would face the need for far greater reduction efforts. In this case, the forest-rich territory should try to be carbon-negative instead of just "neutral".
Passivity: By aiming to showcase their individual carbon neutrality, actors might be tempted to opt for directly accessible, low-cost offsetting actions, at the expense of genuinely reducing its own emissions and impact on climate change.
For these reasons, in 2023, members of the European Parliament voted to outlaw the use of terms such as “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” without evidence, while introducing a total ban on using carbon offsetting schemes to substantiate the claims [2].
Terms such as “climate neutral” or “climate positive” that rely on offsetting will be banned from the EU by 2026 as part of a crackdown on misleading environmental claims.
As an alternative to these claims, the Net Zero Initiative (NZI)[3] suggests a paradigm shift by moving from "being carbon-neutral" to "contributes to carbon neutrality." The goal is thus different. The company should shift focus from achieving immediate, standalone neutrality to dynamically managing its climate performance, thereby enhancing its contribution towards global neutrality. Abandoning the quest for personal neutrality helps to perceive the business's role within the larger system.
With the ADEME, the NZI encourages companies to commit to global carbon neutrality by leveraging various actions.
How to contribute to global carbon neutrality?
To contribute to the global carbon neutrality, the NZI recommends to focus on three pillars (in that order):
Reduce my company's emissions, induced emissions, direct and indirect (scope 1,2 & scope 3). Read more about avoided emissions here.
Reduce other company's emissions, avoided emissions thanks to products and services sold by my company
Remove CO2 from the atmosphere, negative emissions, absorbing CO2 emissions in the company's value chain, or absorbing CO2 emissions by financing financial carbon sequestration projects.
These actions must be included in a global carbon strategy that aligns with the Paris Agreement.
⚠️ Financial contribution
One way to contribution to global neutrality is to engage in the voluntary carbon market and purchase credits. By doing so a company doesn't "offset" its emissions, as these credits do not reverse induced emissions. A more appropriate term would be "contribute."
Read more about carbon "offset" projects here.
Resources
[1] ADEME, Opinion: All players must act collectively to achieve carbon neutrality, but no player should claim to be carbon-neutral, 2021 (link)
[2] The Guardian, EU bans ‘misleading’ environmental claims that rely on offsetting, 2024 (link)
[3] Carbone4, Net-Zero Initiative, 2020 (link)