What is Carbon Neutrality?


Courtesy of Sphera

The recent World Economic Forum in Davos, Switzerland is just another example of the intense pressure on companies to aim for carbon neutrality by 2050. Investors are increasingly demanding that corporations take action on the climate. Large companies across sectors have started announcing deadlines for reaching their carbon neutrality targets.

What is Carbon Neutrality?

Because there is no common definition of “carbon neutrality,” and companies have a variety of different perspectives on it, approaches for reaching carbon neutrality differ greatly.

A holistic assessment of the entire value chain contributes to a company’s credibility when it comes to announcing carbon neutrality. Setting a Science Based Target (SBT) gives businesses a path toward carbon neutrality and helps define a comprehensive strategy for achieving carbon neutrality.

How to Achieve Carbon Neutrality

A serious and holistic decarbonization strategy must include all emission sources that are associated with the scope of a business’s activities, the product or the service they provide. First, it must include the emission sources of the entire value chain (scope 1, 2 and 3). Second, it must include realistic timelines and reduction targets. The best place to begin is to set a Science Based Target.

The Science Based Targets initiative (SBTi) is a partnership between the Carbon Disclosure Project (CDP), United Nations Global Compact, World Resources Institute (WRI) and World Wildlife Fund (WWF), and gives guidance on how an emissions-reduction target can be set so that it is in line with the 1.5°C (2.7°F) target as defined in the Paris Agreement (1.5°C above preindustrial levels).

Setting a robust SBT will help align an organization’s reduction and emission avoidance efforts with climate science (prior to offsetting) to achieve carbon neutrality. It therefore gives companies a framework in which to operate and sets a major milestone on the path to carbon neutrality.

What is Carbon Offsetting?

In the debate on how to act during our current climate crisis, many organizations are very vocal about becoming carbon neutral. Municipalities, companies and even the European Union have announced that they will become carbon neutral. And most of the announced plans include one important component: carbon offsetting. Carbon offsetting is a process of compensating for CO2 emissions that an organization has made by financing a project to reduce CO2 emissions or other greenhouse gases elsewhere through another means such as CO2 sequestration.

In a world that still runs mostly on fossil fuels, voluntary offsetting of a large amount of one’s greenhouse gas emissions is critical to becoming carbon neutral. Despite the criticism of carbon offsetting as the “selling of indulgences,” it’s a big first step—in a global context with limited carbon taxes—to create greater consciousness about reducing emissions.

Important: Select a project that requires carbon offsetting to be real, measurable, verifiable and additional. The “Additionality Principle” is a concept that questions whether or not the emissions reductions would have happened without the project’s rollout.

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