The terms Carbon Neutral and Net Zero are often used synonymously, but they hold distinct meanings in carbon accounting. Both concepts are based on a mathematical balance, where an organisation’s carbon emissions are offset through reduction strategies or by removing carbon from the atmosphere.
Let’s explore these terms in detail.
Understanding Net Zero
Net Zero refers to a state of equilibrium where the greenhouse gas emissions produced by an entity are equal to the amount removed from the atmosphere.
Achieving net zero requires substantial emission reductions. According to the Science Based Targets Initiative’s (SBTi) Net Zero Standard, organisations need to cut their emissions by a minimum of 90% from their baseline to make a credible Net Zero claim.
Achieving this goal involves a comprehensive overhaul of current practices, such as eliminating fossil fuels, adopting renewable energy sources, and engaging with suppliers who have also embraced similar changes. It represents a systemic transformation rather than a quick fix.
Defining Carbon Neutral
Carbon Neutral, on the other hand, involves an organisation offsetting its total emissions for a given year by purchasing carbon credits. These credits can be from projects that prevent emissions, like forest conservation, or those that remove carbon from the atmosphere, such as reforestation.
An organisation can buy one carbon credit for each tonne of carbon emitted. This process may include receiving certification or a logo from a carbon credit provider. However, this approach has been criticised for oversimplifying the solution to climate crisis challenges.
Imagine a company, GreenTech, which produces 10,000 tonnes of CO2 annually. GreenTech could purchase 10,000 carbon credits from a reforestation project, for example, to achieve Carbon Neutral status. This action balances their emissions on paper, but the company’s actual emissions have not actually been reduced.
In contrast, for Net Zero, GreenTech would implement strategies to significantly cut their emissions by, for example, shifting to 100% renewable energy, upgrading to energy-efficient technologies, and optimising their waste management.
They might reduce their emissions to 3,000 tonnes and then use carbon credits for the remaining amount, aligning with the more stringent requirements of ‘Net Zero’. To further reduce their emissions, GreenTech would then look to their suppliers and ensuring they have a plan to reduce emissions.
In some industries, the majority of emissions actually come from the supply chain. Astra Zeneca, for example, cites that 96% of their emissions come from their supply chain. Consequently, many SMEs will have to track, report declare their strategies to reduce carbon emissions in order to keep working with their customer.
The focus is shifting from simply making claims about being carbon neutral to genuinely reducing emissions and backing up the claims with facts. Misleading carbon neutral claims are increasingly being scrutinised in international lawsuits highlighting the importance of actual emission reductions over merely supporting carbon reduction projects. It’s only a matter of time before we see cases coming to light in Australia.
The Role of Carbon Accounting
Carbon accounting is crucial for tracking progress towards net zero goals. It involves measuring, calculating, and reporting carbon data transparently and rigorously, akin to financial accounting.
It is often viewed as the most accessible method for quantifying and monitoring emissions because it translates complex environmental impacts into a common denominator: the carbon footprint. This method simplifies emissions’ diverse and intricate nature into a uniform metric, allowing for straightforward calculation and comparison. It leverages established protocols and standards, such as the Greenhouse Gas Protocol, which provides comprehensive guidance and tools that enable organisations to measure their emissions effectively.
Additionally, Carbon Accounting can be integrated into existing financial accounting systems, making it more manageable for organisations to adopt and maintain. Its standardisation across industries also facilitates transparency and comparability, crucial for benchmarking performance, setting reduction targets, and complying with reporting regulations.
The clear, quantitative results of carbon accounting provide a tangible way for businesses to communicate their environmental performance to stakeholders, helping them to make informed decisions and strategise for a sustainable future.
Want to know more?
We’re more than happy to have a chat about your business and what’s involved with getting started with carbon accounting. Give us a ring on (02) 8188 9019 or complete our enquiry form.
Check out our Carbon Accounting FAQs, our Carbon Accounting Glossary or head over to our Carbon Accounting Software page to get an idea of the reporting apps we work with.
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