You probably see or hear the term “carbon neutral” a lot. Businesses, brands, and large corporations generally use the phrase as it has become a growing trend, even among politicians. By 2040, Amazon and General Motors both intend to be carbon neutral. Google says it has been carbon neutral since 2007, whereas Apple wants to achieve carbon neutrality by 2030. Major organizations, and even entire nations, are becoming more and more interested in going carbon neutral.
In simple terms, it means that the company removes as much carbon from the atmosphere as it put in it. Companies, mostly the ones in the manufacturing sector produce carbon emissions in the process of manufacturing goods or shipping to the consumers. Apple as a company, for example, causes carbon emissions in the process of shipping their products across the world – the ships and trucks used to transport their products emit greenhouse gases. To be carbon neutral, these companies put money into initiatives to remove carbon, for example by planting trees. So, for each carbon emission caused by them, they make sure they invest in projects or initiatives that will offset the number of carbon emissions caused by them – essentially compensating for their emissions.
This process eliminates the negative environmental impacts that an organization may cause, effectively making them carbon neutral. There are some accountings that go into calculating how much carbon emission a company has caused and how much offsetting of carbon emissions a particular initiative will do. For example, a company might plant a tree and then calculate the estimated tons of carbon it would absorb from the atmosphere.
What is Net Zero & What does Net Zero mean for a Company?
Firstly, Zero Carbon means that you emit no carbon at all. If your home is from a renewable source like solar energy, you do not need fossil fuels for heating or electricity, and your carbon footprint is likely to be net zero. However, it may be more difficult for businesses to avoid all carbon emissions.
Carbon Neutral vs. Net Zero Carbon: What’s the Difference?
While some companies achieve carbon neutrality in their product manufacturing, others struggle to create a supply chain that doesn’t emit. For instance, if a company’s product is transported from the manufacturing facility to the point of sale, it is most likely using C02 emitting combustion engine vehicles, such as trucks or ships.
What differentiates carbon neutrality from net zero is that, with carbon neutrality, a company produces emissions but ensures that emissions are offset, while with net zero, there is no emission at all.
What are Carbon Credits
While trying to attain carbon neutrality, certain corporations try to overcompensate for the carbon emissions they are causing. For example, planting more than enough trees to absorb their carbon emissions, which results in being carbon negative. This means the company has reduced its carbon footprint to less than neutral.
Certain laws are in place to limit the number of carbons a company can emit without compensating for it. If a company’s carbon emission falls below what the law stipulates, you get carbon credit. When certain companies cannot emit less carbon than the limit imposed on them, they can reach out to companies that are carbon negative and purchase carbon credits from them. This serves as an incentive for companies to produce little carbon to avoid incurring more costs on purchasing carbon credits. Carbon credits are also a way for companies to achieve carbon neutrality.
Over the last few years, the term “ESG Investing” has been gaining traction. ESG stands for Environmental, Social, and Governance. They are known for “Impact Investing” or “Sustainable Investing”, which is an investment where the environment and wellbeing are prioritized. ESG investing is influencing more companies to implement strategies to reduce their carbon footprints and emissions. Companies try to attract ESG investors as an entity trying to address the environmental and social issues facing society.