What do the “climate neutral” and “net zero” claims mean and when can companies use them?

Author: Maria-Antoanela Ioniță – Sustainability Communications Specialist

As we continue to explore the depths of corporate sustainability communications (check our guide to avoid greenwashing at the shelf here), we make another step at two of the most criticized, yet widely used claims: net zero and climate neutral.

They are, in fact, similar – one includes the other. Net zero refers to the result of avoiding the production of greenhouse gas emissions and then removing the ones that get produced, for which different methods are available. Climate neutrality takes several steps forward and refers to reducing all GHG to zero while eliminating all other negative environmental impacts produced by the company.

Both targets are ambitious, much like the European Climate Law they aim to align companies with. After all, EU member states are required to achieve a net reduction of greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. Yet recent moves by regulators show that these claims have become obsolete.

While the European Commission formalized the climate-neutral Europe ambition in the Green Deal agenda, they have recently started to place more scrutiny on sustainability communications that can lead to greenwashing. As such, the European Parliament has voted in favour of banning the use of the climate neutrality claim in the absence of substantial evidence.

The problems with the net zero and climate neutral claims

Both net zero and climate neutral claims have been enthusiastically embraced by companies who want to be at the forefront of sustainability action to define their climate ambitions. Having ambitious sustainability goals can boost investor confidence, increase brand reputation and consumer loyalty, and show compliance with regulations.

The big issue is the lack of accountability for these pledges, which arises from previously missing EU-wide regulation and guidance on such claims. We got to the point where two-thirds of the global economy has net zero targets. But how many have clear strategies, plans, and intermediary steps? Only 5%, according to a study. Left unguided and unsupervised, companies fumble in the dark for ways to signal their commitments without being restrained by timelines and methods.

The other issue that arises from the emissions-related pledges, in particular, is the extent to which it allows companies to rely on offsets. Carbon offsets or credits are instruments that companies can buy to compensate for the carbon emissions they generate.

What often happens with carbon offsets in practice, as documented by journalists and NGOs, is vastly different from what’s agreed on paper. Forests that have never been planted or trees that haven’t been monitored and died, conservation programs that never took place, and many other activities whose results haven’t been shared. Such practices have gradually eroded trust in offsetting practices. Moreover, experts argue offsets can divert companies’ attention from directly reducing carbon emissions in their operations and supply chains.

All this has brought carbon offsetting schemes under intense scrutiny. European lawmakers recently voted to ban carbon neutrality claims solely based on carbon offset schemes without reducing CO2 emissions generated by the company across its operations and supply chain.

Finally, an important issue stems from how climate neutrality, net zero, and other environmental claims are communicated to customers. As mentioned before, EU lawmakers are eyeing greenwashing attempts and consumer protection with their latest regulations. Not only are they banning the use of climate neutrality and other absolute claims without detailed evidence, but they also require more transparency and clarity in communications, such as explaining whether they refer to the entire company, a product, or a portion of a product.

Photo credit: Canva.com

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