Quick Comparison
| Carbon Neutral | Net Zero | |
|---|---|---|
| Scope | Typically Scope 1 and 2; Scope 3 optional | All material scopes including Scope 3 |
| Applicability | Products, events, organizations, buildings | Whole organizations or value chains |
| Required/Voluntary | Voluntary | Voluntary but increasingly expected |
| Geography | Global; certified under PAS 2060 or similar | Global; aligned with SBTi Net-Zero Standard |
| Key Focus | Balancing current emissions through offsets | Deep decarbonization with minimal residual offsets |
What is Carbon Neutral?
Carbon neutrality means that an entity's net carbon emissions equal zero over a defined period, achieved by balancing measured emissions with an equivalent amount of carbon offsets or credits. The concept has been formalized through standards like PAS 2060 (published by the British Standards Institution), which provides a specification for demonstrating carbon neutrality through measurement, reduction, and offsetting.
Under PAS 2060, an organization measures its carbon footprint, implements a carbon management plan to reduce emissions, and purchases offsets for the remainder. The standard requires a commitment to ongoing reductions but does not prescribe how deep those reductions must be. A company emitting 100,000 tonnes that reduces by 5% and offsets 95,000 tonnes can technically claim carbon neutrality.
This flexibility is both the appeal and the vulnerability of carbon neutrality. It's achievable relatively quickly—any organization with a carbon footprint assessment and enough budget for offsets can claim it. But the reliance on offsets, particularly low-quality avoidance offsets, has made carbon neutral claims a lightning rod for greenwashing criticism. The EU moved to ban generic "carbon neutral" claims on products under its Green Claims Directive, reflecting regulatory skepticism about the label's integrity.
What is Net Zero?
Net zero means reducing greenhouse gas emissions as close to zero as possible, with any residual emissions balanced exclusively by carbon removal. The SBTi Net-Zero Standard, published in 2021, operationalizes this: companies must reduce emissions by at least 90% across all scopes, and only then neutralize the remaining ≤10% with permanent carbon dioxide removal (CDR).
Net zero is fundamentally a transformation target. It requires systemic changes—switching to renewable energy, electrifying fleets, redesigning products, transforming supply chains. Offsets cannot substitute for reduction. The 90% threshold eliminates the possibility of buying your way to compliance, which is exactly the point.
The timeline for net-zero targets generally aligns with the Paris Agreement's goal of reaching global net-zero CO₂ emissions by 2050. Sector-specific pathways may vary—some sectors can decarbonize faster, others (like cement, aviation, and agriculture) face harder-to-abate emissions requiring longer timelines. The ISO published IWA 42:2022, the Net Zero Guidelines, providing additional guidance that aligns with SBTi's approach while offering flexibility for different contexts.
Key Differences
1. Reduction ambition. Carbon neutrality sets no minimum reduction threshold—100% offsetting is permitted. Net zero requires at least 90% absolute reduction before any offsetting. This isn't a technicality; it's the fundamental distinction between compensating for emissions and eliminating them.
2. Role of offsets. Carbon neutral allows any certified offset (avoidance or removal) to balance emissions. Net zero restricts residual neutralization to carbon removal only—no avoidance credits. Paying someone not to cut down trees doesn't count; you need to physically pull CO₂ from the atmosphere.
3. Scope coverage. Carbon neutrality often covers only Scope 1 and 2, or even just a subset (a single product or event). Net zero under SBTi requires coverage of all material emission scopes, including Scope 3, which typically represents the vast majority of a company's footprint.
4. Timeline structure. Carbon neutral can be claimed immediately—it's a point-in-time status. Net zero is a long-term target requiring near-term milestones. SBTi mandates near-term targets (5-10 years) alongside the long-term net-zero target.
5. Regulatory trajectory. Carbon neutral claims face increasing regulatory pushback. The EU Green Claims Directive restricts product-level carbon neutral claims. Net zero, when backed by science-based targets, remains the credible standard. Regulators and standard-setters are converging on net zero as the legitimate framework.
6. Cost profile. Carbon neutrality is relatively cheap—offset costs range from a few thousand to a few hundred thousand dollars for most organizations. Net zero requires capital-intensive operational transformation that may cost millions or billions, depending on the company's size and sector.
7. Stakeholder perception. Carbon neutral was once impressive; it's now viewed with skepticism by informed stakeholders. Net zero, particularly when SBTi-validated, carries genuine credibility. The reputational value has shifted decisively toward net zero.
Which One Do You Need?
If you want a credible, future-proof climate commitment, pursue net zero with SBTi validation. Carbon neutral as a standalone claim is losing value rapidly—regulatory restrictions are tightening, stakeholder skepticism is growing, and the gap between carbon neutral and net zero is well understood by investors and customers.
Carbon neutrality can still serve a purpose as an interim milestone. A company that achieves carbon neutrality while building toward validated net-zero targets demonstrates both immediate action and long-term ambition. The problem arises when carbon neutrality becomes the destination rather than a waypoint.
For product-level claims, be cautious. The EU's Green Claims Directive may prohibit carbon neutral product claims based on offsets by 2026. Companies marketing "carbon neutral" products should plan for regulatory changes and consider shifting to claims based on measured reductions, lifecycle improvements, or verified environmental product declarations.
Can You Use Both?
Yes, but sequentially and with clear communication. Carbon neutrality can serve as year-one action: measure, reduce what you can, offset the rest. Net zero is the long-term destination: transform operations, eliminate emissions at source, remove only the residuals.
The risk is muddling the two. Claiming carbon neutrality through offsets while also claiming a net-zero target can confuse stakeholders or, worse, suggest that your net-zero commitment relies on the same offset-heavy approach. Clear communication is essential: "We are carbon neutral today through a combination of reductions and offsets. Our net-zero target requires 90%+ reduction by 2045, validated by SBTi."
Some organizations are abandoning carbon neutral claims entirely to avoid the perception problem and focusing exclusively on net-zero communication. This is a defensible strategy, particularly for companies with strong reduction trajectories that don't want to be associated with offset-dependent approaches.
Council Fire's Perspective
Carbon neutrality had its moment, and it served a purpose—it got companies measuring and managing emissions when the alternative was doing nothing. But the bar has moved. In 2026, carbon neutrality through offsets alone doesn't demonstrate climate leadership; it demonstrates access to a checkbook. Net zero, backed by science-based targets and real operational transformation, is where credibility lives.
We guide clients through the transition from carbon neutral thinking to net-zero planning. That means building robust Scope 3 inventories, identifying decarbonization levers across the value chain, and reserving offsets for their legitimate role: neutralizing the genuinely hard-to-abate residual after everything else has been addressed. The destination is clear; we help with the route.
Frequently Asked Questions
Is carbon neutral going away?
Not entirely, but its credibility is declining and regulatory restrictions are growing. The EU Green Claims Directive limits carbon neutral product claims based on offsets. Companies that want durable climate credibility should treat carbon neutrality as a stepping stone, not an endpoint.
Can a company be carbon neutral but not net zero?
Yes, and most carbon neutral companies are not net zero. Carbon neutrality through offsets doesn't require the deep operational reduction that net zero demands. A company offsetting 100% of its emissions is carbon neutral but nowhere near net zero if it hasn't reduced absolute emissions by 90%+.
Is net zero achievable for every company?
In principle, yes—every sector has a net-zero pathway, though timelines differ. Heavy industry, aviation, and agriculture face harder-to-abate emissions that may require longer timelines and emerging technologies. SBTi's sector-specific guidance provides pathways for different industries.
What about "climate positive" or "carbon negative"?
These terms describe going beyond net zero—removing more carbon than emitted. Microsoft and Ikea have made carbon negative commitments. While ambitious, these terms lack standardized definitions, and stakeholders should evaluate the underlying methodology rather than the label.
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