In recent years, terms like “carbon neutral” and “net zero” have become marketing staples for companies keen to showcase their green credentials. But beneath the surface, these claims can be misleading and often fail to deliver the environmental impact they promise.
Understanding the limitations of carbon neutrality and the issues with carbon offsetting is essential for businesses and consumers aiming to make truly sustainable choices.
What does carbon neutrality mean?
Carbon neutrality refers to balancing the amount of carbon dioxide (CO₂) a company or product emits with actions that remove an equivalent amount of CO₂ from the atmosphere. Many companies achieve this balance by purchasing carbon offsets—credits linked to environmental projects such as reforestation or renewable energy development.
For example, a company might manufacture a product that generates emissions during production but offset those emissions by funding a forest conservation project. On paper, this makes the product “carbon neutral,” but in practice, the story is more complicated.
Measuring carbon
A critical factor in the validity of carbon-neutral claims lies in how a company calculates its carbon emissions. Many businesses focus only on Scope 1 (direct emissions from their operations) and Scope 2 (indirect emissions from purchased energy), while ignoring Scope 3 emissions, which include the wider environmental impact of their supply chain, product use, and disposal.
Since Scope 3 often accounts for the majority of a company’s total carbon footprint, leaving it out creates an incomplete and misleading picture. Offsetting only Scope 1 and 2 emissions while neglecting the significant contribution of Scope 3 means the business is far from truly carbon neutral—it’s merely addressing a fraction of its actual environmental impact. This selective accounting can further contribute to greenwashing, eroding trust and delaying genuine progress toward sustainability.
Problems with Carbon Offsetting: Why it’s not a silver bullet
While carbon offsets sound like an ideal solution, they come with several issues that undermine their effectiveness and credibility:
- Lack of verifiable impact
Not all offset projects deliver the carbon reductions they promise. Many schemes overestimate their impact, with some offering little to no real-world benefit. For instance, protecting a forest may not prevent logging or deforestation elsewhere. - Double counting and transparency gaps
Carbon credits are often counted by multiple parties—both the companies using them and the organisations running the offset projects. This “double counting” undermines the validity of the credits and leads to inflated environmental claims. - Avoiding the real problem
Over-reliance on offsets allows businesses to sidestep the hard work of cutting their actual emissions. Instead of adopting renewable energy or improving efficiency, companies focus on compensating for emissions, effectively kicking the can down the road. - Variable quality of offsets
The quality of offsets varies widely. While some projects adhere to strict standards, others are poorly regulated, and some even harm local communities or ecosystems. Choosing high-quality offsets is challenging, adding further doubt to carbon-neutral claims.
Regulatory crackdowns on misleading green claims
To address the growing issue of greenwashing, regulators in the UK and EU are implementing stricter rules around carbon neutrality claims:
- EU Green Claims Directive: The European Parliament has banned using “carbon neutral” claims for products unless they meet rigorous requirements. However, these rules don’t currently apply to company-wide claims, leaving a significant loophole.
- UK Advertising Standards Authority (ASA): The ASA is cracking down on terms like “carbon neutral” and “net zero.” Companies relying on offsets must prove the effectiveness of their schemes or face bans on advertising such claims.
These efforts aim to ensure that businesses communicate their environmental impact honestly and accurately, protecting consumers from misleading claims.
What should businesses do instead of offsetting?
For companies committed to genuine sustainability, the focus should shift from carbon offsetting to emissions reduction and climate contributions:
- Prioritise emission reductions
The most impactful way to combat climate change is by cutting emissions directly. This can involve adopting renewable energy, improving energy efficiency, optimising supply chains, or switching to low-carbon materials. - Adopt the contribution model
Instead of claiming to “neutralise” emissions, businesses can transparently fund environmental projects and describe these efforts as contributions. This approach avoids misleading claims and supports broader climate goals. - Implement Science-Based Targets
Setting clear, measurable goals through frameworks like the Science-Based Targets initiative (SBTi) ensures businesses align their climate action with global efforts to limit warming.
Why misleading carbon neutral claims harm progress
When companies misuse terms like “carbon neutral” or “net zero,” it creates confusion and erodes public trust in sustainability efforts. Consumers are left questioning which brands are genuinely committed to change and which are merely using greenwashing tactics to boost sales. Worse, it diverts attention from the urgent need for systemic changes to reduce emissions across industries.
The path to genuine climate leadership
To truly lead on sustainability, businesses must go beyond offsetting and take bold, transparent steps to reduce their carbon footprints. While offsetting may have a role to play for hard-to-abate emissions, it should not be the cornerstone of a company’s environmental strategy.
Instead, companies should focus on meaningful emissions reductions, investing in innovative technologies, and contributing to climate action without overstating their impact. These steps will help rebuild trust, protect the planet, and meet the growing demand for genuine sustainability.