Carbon neutral vs net zero: How they’re different and why it matters
The world of sustainability is full of jargon and terms that sound similar but aren’t quite the same. That’s why we make a point of helping businesses understand what key terms mean because language shouldn’t be a barrier between you and sustainability goals.
In this article, we help you understand the two key terms of “carbon neutral” and “net zero”. Read on to find out how they’re different and why that matters.
What does carbon neutral mean?
To be considered “carbon neutral” an organisation needs to balance the greenhouse gases (also known as carbon emissions) it emits into the atmosphere by removing or offsetting an equivalent amount – achieving a neutral emissions outcome.
Offsets are generated from an activity that prevents, reduces or removes greenhouse gas emissions from being released into the atmosphere.
Achieving carbon neutrality is usually assessed annually. and In theory, it does not require organisations to set targets to reduce their emissions – it only involves offsetting them.
However, in Australia there’s a bit more to it if your organisation is aiming for nationally recognised carbon neutral certification. This is because the Australian Government program, known as Climate Active, requires organisations to set near-term emissions reduction targets by 2030 and be externally audited.
What does net zero mean?
“Net zero” is a more ambitious and comprehensive goal than being “carbon neutral”.
Net zero It means reducing all avoidable greenhouse gas emissions and then only offsetting what’s left using high-quality carbon removals, not just any offsets. It requires the organisation to align their emissions reduction targets or decarbonisation plan with a reduction pathway that keeps global warming below 1.5°C.
Science-based targets play a significant role in achieving this. Targets are only considered “science-based” if they align with what the latest climate science deems necessary to meet the goals of the Paris Agreement, which aims to keep global warming below 1.5°C.
To achieve net zero, an organisation must also demonstrate a 50% reduction in emissions by 2030, and a minimum reduction of 90% by 2050 or earlier. Setting these targets ensures that organisations are taking the necessary steps to reduce their greenhouse gas emissions and contribute to the global effort to combat climate change.
Key differences: carbon neutral vs net zero
- Timeframe: Carbon neutrality can be achieved yearly, while net zero represents a long-term transformation of business operations.
- Carbon neutral is not aligned with Science-based targets under the Paris Agreement to keep global warming below 1.5°C.
- Offset usage: Carbon neutral status can be achieved primarily by buying carbon offsets, while net zero requires an organisation to reduce emissions by 90-95% before purchasing carbon offsets.
- Scope: Net zero typically demands more comprehensive emissions reduction across all activities, including supply chains (which generate Scope 3 emissions).
| Aspect | Carbon Neutral | Net Zero |
|---|---|---|
| Scope | Focuses on CO₂ emissions, and may omit full Scope 3 emissions. | Covers all greenhouse gas emissions, across Scopes 1, 2 and 3. |
| Emissions reduction | Not always required; Offsets may suffice. | Required: At least 90% absolute emissions reduction. |
| Use of offsets | Can rely entirely on offsets (including avoidance projects). | Only used for residual emissions and must be permanent removals. |
| Timeframe | Achievable yearly. | Long-term goal (typically by 2050). |
| Science-based? | Not always aligned with climate science. | Must align with 1.5°C pathways and science-based targets. |
Why it matters for your business
Until about five years ago, “carbon neutral” and “net zero” were often used interchangeably. But as science, standards, and public expectations have evolved, the distinction is now critical.
Failing to understand the difference can lead to reputational risks, especially if your business markets itself as “net zero” while only achieving carbon neutrality. Regulators and watchdog groups are increasingly scrutinising these claims under greenwashing laws.
More importantly, if your business wants to make a meaningful contribution to limiting global warming, net zero is the only path that aligns with what the climate science tells us is necessary.
Three steps for Australian businesses to start towards net zero
While net zero can seem like a harder goal to achieve, it’s easier one step at a time. Here’s an outline of the first three steps that will set you well on your way to net zero.
- Conduct a detailed emissions inventory across emissions scopes 1, 2 and 3, following the GHG Protocol. Focus on identifying major emissions sources in operations and supply chains.
- Develop a science-based emissions reduction strategy aligned with a 50% reduction near term target for 2030 and 90-95% reduction long term target to 2050, prioritising actions in high-impact areas such as energy use, travel and procurement.
- Implement renewable energy solutions suitable for your business in the Australian context, such as on-site solar installation, power purchase agreements, participation in demand response programs or use power control solutions. Work with your energy provider to see what solutions they can offer to help reduce your emissions.
What if you need to purchase carbon offsets?
As explained above, net zero requires an organisation to reduce emissions by 90-95% before purchasing carbon offsets.
This aligns with our view at Climate Zero – that there will always be a role for carbon offsets particularly while businesses work towards investing in emission reduction initiatives. However, not all carbon offsets are created equally.
To really trust carbon credits are actually offsetting emissions, you need to know who is selling them and what their projects involve, rather than it being a blind transaction from a long list of resellers.
At Climate Zero, we’ve partnered with Carbon Neutral to ensure our customers access high-integrity, independently verified offsets. We believe transparency matters – organisations should know who is behind the offsets and what the projects actually deliver.
Our platform allows businesses to calculate their footprint, track reduction progress, and offset responsibly, all in one place.
Find out more
Achieving carbon neutrality can be a useful milestone on the journey, but it’s not the final destination. If your organisation is serious about aligning with climate science and contributing to a liveable future, net zero is the gold standard.
If you’d like help developing a science-aligned, future-ready climate strategy backed by clear data and trusted partnerships, reach out to our team. You can also find out more about why we chose to partner with Carbon Neutral and what it means for our customers.
We hope you found this article helpful. If you’d like to share your thoughts, message us here or on LinkedIn.
