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2024 was a landmark year for climate accountability, as policies continue to develop, which ensure companies are even more transparent about their carbon emissions.
The EU, through the Fit for 55 package, has moved from planning to real-world implementation—tightening CO₂ standards, refining the Emissions Trading System, and launching the Carbon Border Adjustment Mechanism, all aimed at reducing greenhouse gases by at least 55% before 2030.
Countries are updating tax rules, investing more in renewables, and raising carbon prices. Corporations aren’t just setting net-zero goals; they’re overhauling entire supply chains to align with long-term climate goals. Meanwhile, terms like “Net Zero” and “carbon neutrality” are being refined to ensure accountability and meaningful impact.
In this article, we’ll discuss what “carbon neutral” and “Net Zero” each mean, highlight key differences, and, most importantly, explore how companies can optimize their energy procurement strategy to support carbon neutral or Net-Zero goals.
What Are Carbon Emissions and Greenhouse Gases (GHGs)?
Before we look at Net Zero and carbon neutral, let’s explore what are carbon emissions and greenhouse gas (GHG) emissions since the terminology varies depending on what emissions are being discussed.
Carbon emissions include the CO2 output from a process such as combustion. However, when GHG emissions are quoted, this includes carbon and a number of other gases that contribute to global warming. These gases are methane, nitrous oxide, and F-gases.
Many sources convert GHG emissions into a Carbon Dioxide equivalent, CO2e, as a way to measure how much warming each gas causes relative to CO2. As a result, a company’s total “carbon” footprint might look different from their total CO2e output.
The emissions of all GHG gases are converted to a reference gas (or CO2e), as all gases have different Global Warming Potential (GWP). Although methane (CH4) emissions are much less in quantitative terms than CO2, methane plays a key role in global warming due to a high 100-year GWP of 28-36 (compared to GWP of 1 for CO2).
Over a 100-year period, it’s about 28 times more powerful at trapping heat than CO2. Because methane breaks down faster in the atmosphere, reducing methane emissions has a quicker effect on reducing warming. Despite being a smaller share of GHGs by weight, methane alone has been responsible for roughly a quarter of the warming we’ve seen since 1750.
What Does "Carbon Neutral" Mean?
Now that we have clarified carbon emissions vs. GHG emissions, let's look at carbon specific targets.
Carbon neutral is commonly used by companies to describe their services and products. It’s about having a Net Zero balance between carbon emissions and carbon removal.
When a company, product, or service is carbon neutral, it means any CO2 that gets emitted is effectively canceled out by removing or offsetting an equivalent amount from the atmosphere.
In practice, many businesses offset CO2 by funding projects like reforestation or renewable energy initiatives. Others look at directly reducing their own carbon footprint through energy efficiency measures or by switching to greener sources of power (e.g., solar or wind).
The end goal is to hit a Net Zero balance for carbon emissions alone. This is often achieved through carbon offsetting, and less often by reducing the need for energy by becoming more efficient and sourcing energy from no-and-low carbon sources.
Keep in mind, though, that “carbon neutrality” is one subset of Net Zero. So, while carbon neutrality is a vital step in tackling climate change, it’s a smaller piece of the puzzle than aiming for Net Zero (which looks at reducing all greenhouse gas emissions).
What Does "Net Zero" Mean?
The UK’s Institute for Government defines Net Zero as “achieving a balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere”.
They identify two different routes to achieving Net Zero, which must work in tandem: reducing existing emissions and actively removing greenhouse gases. This can be achieved by reducing emissions as much as we can and then offsetting whatever is left—mainly through natural carbon sinks like forests and oceans.
The Net-Zero target accepts that there will be some emissions, but they must be fully removed. The closer we get to lowering emissions, the less we need to offset—making that final step to Net Zero much easier.
Key Differences Between Carbon-Neutral and Net-Zero Carbon
While the two concepts are similar, Net-Zero Carbon targets are generally seen as more ambitious than just being carbon neutral. Here’s why:
- Reduction vs. Offsetting
- Net Zero requires you to cut emissions as much as possible before relying on removals or offsets.
- Carbon neutral often allows businesses to offset emissions right away without prioritizing direct reductions first.
- Emissions Coverage
- Net Zero looks at all greenhouse gases (not just CO2) across the entire value chain.
- Carbon neutral usually focuses on balancing out CO2 alone or may overlook indirect emissions.
- Investment in Clean Solutions
- Net Zero encourages companies to invest in energy efficiency, renewables, and low-/no-carbon fuels, reducing the need for offsets.
- Carbon neutral may rely more on buying carbon credits, sometimes without substantial changes to core operations.
In short, the key difference between carbon neutral vs. Net Zero can be summarized as below:
The goal of Net-Zero Carbon is to eliminate emissions as much as possible before using other tactics such as carbon removal or offsetting. For companies, that means investing in energy efficiency, purchasing renewable electricity, and using zero carbon fuels. With this approach, it’s important to first offset or remove carbon from the atmosphere as much as possible. In many industries, reducing carbon emissions to zero (or Gross Zero) will not be possible so some level of offsetting/removal will be needed.
In contrast to this, carbon neutrality does not have the same requirement to prioritise eliminating emissions at source in the first instance. In recent years, companies have claimed carbon neutrality by simply compensating all of their emissions with carbon credits or offsets.
By prioritizing real reductions, Net-Zero Carbon addresses the root causes of emissions. Meanwhile, carbon neutral doesn’t demand the same level of upfront changes. Both strategies can help reduce carbon pollution, but when comparing carbon neutral vs. Net Zero, the latter is typically the more effective strategy for tackling emissions at the source.
Understanding Carbon Offsetting
Carbon offsetting plays a key role in both Net Zero carbon and carbon neutrality targets. It is the approach to compensate for carbon dioxide emissions by participating in schemes designed to make equivalent reductions of carbon dioxide in the atmosphere.
Carbon offsetting has not been without controversy and suffered many credibility issues in the past.
According to a 2023 Carbon Brief analysis, two-thirds of the world's largest companies with Net-Zero targets are utilizing carbon offsets to achieve their climate goals. This includes major fossil fuel producers, automakers, and tech firms that have claimed to "cancel out" significant portions of their emissions through the purchase of carbon credits. The analysis also revealed significant gaps in public information regarding offset purchases, making it challenging to track which companies are using specific credits.
Critics argue that many offset projects fail to deliver genuine emissions reductions, labeling the practice as a "license to pollute." Over half of the offsets used were sourced from REDD+ (Reducing emissions from deforestation in developing countries plus) forest protection projects, which have been criticized for overstating their climate impact.
A 2021 investigation by the Guardian and Unearthed (Greenpeace’s investigative arm) found that some of the world’s largest airlines are claiming carbon neutrality based on flawed deforestation offset projects. Although these forest protection schemes are doing valuable conservation work, the credits they generate rely on a flawed and widely criticized system to support “carbon-neutral flying” and Net-Zero pledges.
The increase in global wildfires is also threatening the viability of forestry carbon credits, with many global companies having previously purchased credits from projects that have since burned down or are at risk of wildfire destruction.
Some companies are shifting towards higher-quality offsets that provide more reliable emissions reductions. However, concerns remain about the ethical implications of offsetting practices, particularly regarding land use in the Global South.
How Net-Zero and Carbon Offsetting Works in the Energy Sector?
Carbon emissions are split into three categories in accordance with the GHG Protocol. These are Scope 1, 2 and Scope 3. Scope 2 primarily relates to a company’s use of grid electricity. Depending on the sector, this could be responsible for a large portion of a company’s emissions from operations.
To achieve Net Zero Scope 2 emissions, companies can take energy efficiency measures and use renewable energy. A common method for reducing emissions is the purchase of Energy Attribute Certificates (EACs), such as GOs, REGOs, RECs, or I-RECs, depending on the market. When a business buys an EAC, it essentially claims the environmental benefits of that renewable energy, even if the power it consumes comes from the grid. Purchasing these certificates allows you to report zero carbon emissions for Scope 2, making it easier for companies to substantiate their decarbonization efforts.
Flexidao’s EAC management and monitoring tool streamlines every step of a company’s EAC management to provide a centralized, auditable repository for contracts and evidence, ensuring full compliance with CSRD and CDP. This end-to-end solution also enhances your general energy reporting on Scope 2 emissions by automating data collection and consolidating electricity consumption metrics.
However, this could be changed to the current method of offsetting Scope 2 using annual accounting of renewable electricity. With annual accounting, companies do not actually cover all their electricity use with renewables. Instead, they purchase or generate enough renewable energy to match 100 percent or more of their electricity use over the course of the year.
However, it’s worth considering the real operation of the grid and the fact that these companies will be using electricity from fossil fuels, such as coal and natural gas, when renewables are unavailable.
As an example, take a company which consumes electricity during a windless night and offsets its energy emissions by purchasing EACs generated by wind and solar farms. Would this company be able to claim it is 100 percent renewable? Yes, but it might not necessarily lead to full emissions reduction.
Additionally, companies are now increasingly looking into the physical grid, not at the virtual accounting layer of certificates. To look into the physical grid, time and location need to be taken into consideration. The sum of these two variables is called deliverability, and it was already mentioned in some official EU documents regarding the certification of renewable fuels from non-biological origin (RFNBO).
Aligning clean energy production with actual consumption not only helps reduce supply fluctuations but also drives demand for advanced renewable technologies, long-duration energy sources, and batteries. These solutions at scale have led to the development of the 24/7 carbon-free electricity (24/7 CFE) concept. Although these technologies are still in development and can be costly, increasing demand for renewable electricity around the clock when businesses are actually using it helps create strong market incentives for innovation and scale.
Flexidao helps companies to execute an advanced energy procurement strategy—such as 24/7 CFE or Emissions-First—by providing a dedicated platform to track electricity and emissions data up to hourly intervals. Our inventory tool simplifies the complexity of granular carbon emissions KPIs to make it easier to monitor progress with a detailed view of your energy portfolio's performance.
How to Get Started with Carbon Neutral or Net-Zero Goals
Whether your organization is aiming for a carbon-neutral status or a more comprehensive Net-Zero target, there are various paths you can take. Some businesses may rely on conventional carbon offsets, while others prioritize direct emission cuts—like investing in energy efficiency or switching to on-site renewables.
24/7 Carbon-Free Electricity (CFE) is one carbon-aware energy procurement strategy gaining momentum among global businesses that are seeking to align their emissions accounting with the actual carbon impact of the grid.
It aligns a buyer’s electricity demand, hour-by-hour, with clean energy generation from their local grid or bidding zone. This means operating on 100 per cent carbon-free electricity, 24 hours a day, seven days a week, 365 days a year.
24/7 CFE removes the need for fossil fuels to fill gaps in renewable electricity generation, thanks to a predictable supply of carbon-free electricity being available. With this approach, a company’s power use is matched with a renewable source for all 8,760 hours in a year, ensuring that every hour of electricity consumption is matched by local, carbon-free energy.
Although the concept of 24/7 CFE is still relatively new, companies like Google, AstraZeneca, Iron Mountain Data Centres, Shree Cement, AirTrunk, and Vodafone UK are leading the charge as founding partners of Climate Group’s 24/7 Carbon-Free Coalition. Their goal is to pave the way for other organizations to decarbonize electricity usage around the clock and transform systems to run entirely on carbon-free electricity.
If a 24/7 CFE strategy fits your goals, check out our comprehensive guide for practical steps and data-driven insights to help your business transition to the next generation of energy procurement.
How Flexidao Can Help
Adopting an advanced energy procurement strategy means leveraging granular data and planning meticulously to cut the carbon intensity of your electricity supply around the clock.
Companies purchasing renewable energy are already on the right path to carbon-free electricity. Regardless of your current progress, any organization can apply an advanced procurement strategy today and gain better insights into its energy supply’s carbon footprint.
Flexidao delivers the advanced data capabilities you need to optimize your procurement strategy—whether you’re expanding an existing climate initiative or starting a 24/7 CFE journey.
Our platform:
- Certifies 24/7 energy consumption without disrupting existing climate agendas or certification schemes—just upgrading them.
- Measures historical gaps between the hourly carbon-free energy you source and your hourly electricity consumption to allow data-driven decisions.
- Provides hourly emissions data, enhancing the accuracy and credibility of your energy reports.
- Simplifies compliance with a clear view of your EAC balances, statuses, and transactions, helping cut auditing costs and hit reporting deadlines.
Monitor granular carbon emissions KPIs with our intuitive dashboards. You’ll gain clear insights on your progress, enabling you to communicate results effectively, set realistic targets, and select the best procurement options based on your organization’s consumption volumes and energy team size.
Flexidao’s platform also supports companies with accounting for annual EAC portfolio and emissions reporting, ensuring compliance to disclosure schemes like RE100, CDP, and CSRD. Our dashboards flags discrepancies, ensures full audit readiness with supporting documentation, and automates EAC allocation by region.
Ready to harness the power of data for smarter procurement decisions? Explore Flexidao’s platform to see how you can join the 24/7 Carbon-Free Coalition with the right tools in place.
Sources:
- https://www.science.org/doi/10.1126/science.1210026
- https://essd.copernicus.org/articles/12/1561/2020/
- https://interactive.carbonbrief.org/carbon-offsets-2023/companies.html
- https://www.theguardian.com/environment/2021/may/04/carbon-offsets-used-by-major-airlines-based-on-flawed-system-warn-experts
- https://www.greenpeace.org.uk/news/airlines-carbon-offsets-solution-climate-change-wrong/
- https://www.iea.org/reports/renewables-2024/executive-summary
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