Head of Marketing
Edited: 13 Aug 2025
15 min read
UK businesses face increasing pressure to reduce their environmental footprint, leading many attempting to choose between carbon-neutral certification and net-zero commitments. But what do they really mean, how do they differ, and which is right for your organisation?
Many businesses still use these terms interchangeably, risking accusations of greenwashing and missing genuine opportunities for meaningful climate action. Meanwhile, new international standards like ISO 14068 carbon neutrality and updated guidance from the Science Based Targets initiative (SBTi) net-zero standards have raised the bar for what credible climate action looks like across company value chains.
Here, we’ll break down the key differences between carbon neutrality and net-zero, explain the latest standards and guidance for UK businesses, and take you step by step through a practical decision framework for sustainability leaders to increase your company’s climate leadership.
Defining carbon neutral and net-zero in business
What does carbon neutral mean? (ISO 14068 explained)
Carbon neutral means measuring your business’s greenhouse gas emissions and compensating for them by purchasing carbon credits equivalent to your total business emissions. For example, if your business emits 5,000 tonnes of carbon dioxide equivalent each year, you would need to purchase 5,000 carbon credits (each representing one tonne of carbon removed or avoided) each year to claim carbon neutrality.
Being carbon neutral typically does not require you to make significant reductions in emissions first. Under the new ISO 14068 carbon neutrality standard, however, businesses must develop a credible plan to measure and reduce their emissions before attempting to ‘neutralise’ or ‘compensate’ their remaining emissions through the purchase of an equivalent volume of carbon credits. This is a step up from the now-retired PAS 2060, aligning better with today’s climate science.
In short: Carbon neutrality means compensating your current business emissions using carbon credits, but doesn’t demand emission reductions before doing so.
What does net-zero mean? (SBTi standard explained)
Net-zero means deeply reducing business emissions before ‘neutralising’ any remaining emissions by purchasing carbon removal credits. According to the SBTi Net-Zero Standard, most companies looking to claim net-zero will have to reduce 90-95% of their scope 1, 2, and 3 emissions by 2050, with only unavoidable emissions addressed using removals.
In short: Net-zero requires your business to deeply reduce emissions across its value chain before using carbon removal to address any remaining emissions.
Key differences between carbon neutral and net-zero
There are a number of differences between carbon neutrality and net-zero, including:
What they require in terms of emissions reductions,
The type of carbon credits companies must buy,
Which emissions scopes they cover,
The level of ambition for climate action,
The particular standard or certification required,
Where the boundaries are drawn for a company or product’s emissions,
Time frames (how long it takes to achieve), and
How consistent they are with a 1.5°C pathway.
We’ve summarised those differences here and explored each in more detail below.
Category | Carbon neutral (ISO 14068) | Net-zero (SBTi Standard) |
|---|---|---|
Definition | Balancing measured emissions by purchasing carbon credits; no required reduction level. | Reducing emissions in line with 1.5°C pathway; neutralising only unavoidable residuals with removals. |
Types of carbon credits | Can use carbon reduction and removal credits. | Must use carbon removal credits for unavoidable residual emissions only. |
Scope | Must include scopes 1 & 2; scope 3 assessment required, and material scope 3 emissions strongly encouraged to include. | Requires scopes 1, 2 & 3 (full value chain) to be covered. |
Level of ambition | No minimum reductions required before offsetting; ISO 14068 encourages, but doesn’t mandate, reductions. | At least 90–95% reduction across scopes 1, 2 & 3 by 2050, with residuals addressed through removals. |
Standards & certification | ISO 14068-1:2023 sets out requirements; certification available via accredited bodies like BSI or SGS. | SBTi Corporate Net-Zero Standard provides target validation; no ISO certification yet, equivalent to SBTi. |
Boundary | Can apply to a product, service, or whole organisation. | Must apply to the entire organisation and full value chain. |
Time frame | Short-term goal achievable immediately by measuring emissions and offsetting. | Long-term goal with near-term (2030) and long-term (2050) science-based targets. |
Consistency with 1.5°C | Alone, not sufficient for 1.5°C pathway; useful as a stepping stone. | Designed to align with 1.5°C pathway; central to limiting climate impacts. |
Types of carbon credits businesses can purchase: reduction vs. removal
What separates carbon neutrality and net-zero is the extent companies must go to in order to reduce emissions, but also the types of carbon credits required to claim each one.
Carbon neutrality strategies can use either carbon reduction credits (e.g. funding renewable energy or energy efficiency projects that avoid future emissions being released) or carbon removal credits (projects that actively remove CO₂ from the atmosphere), or both, to compensate for their company’s emissions. This means businesses can achieve neutrality by investing in projects that simply prevent new emissions from occurring.
→ Understand the difference between carbon removal and carbon avoidance
Net-zero strategies must prioritise carbon removal credits – projects that physically remove CO₂ from the atmosphere. Under the SBTi Net-Zero Standard, only carbon removals can be used to neutralise residual emissions once a company has reduced its emissions in line with a 1.5°C pathway.
What is carbon removal?
Carbon removal, or carbon dioxide removal (CDR), refers to nature-based and technological solutions that take CO₂ out of the atmosphere. The IPCC says all 1.5°C pathways rely on removals to neutralise unavoidable emissions.
Nature-based solutions
Reforestation: Planting trees where forests were lost.
Afforestation: Planting trees where none grew before.
Blue carbon: Expanding coastal ecosystems like mangroves and seagrass that store CO₂.
Soil carbon sequestration: Farming practices, like those used in regenerative agriculture, that boost CO₂ storage in soils.
Biochar: Turning plants into charcoal added to soil for long-term CO₂ storage.
Technological solutions
BECCS: Burning plant biomass for energy, then capturing and storing the CO₂ produced.
Direct Air Capture (DAC): Machines that chemically pull CO₂ directly from the air.
Captured CO₂ must then be permanently stored, typically underground (geological storage) or by turning it into stable rock (mineral carbonation).
Carbon credit costs: What UK businesses need to know
Carbon avoidance projects, like renewable energy installations or methane capture, typically cost around £10–£20 per tonne of CO₂ avoided. These projects are often used for carbon neutrality claims, as they offer lower-cost credits that reduce emissions elsewhere.
Carbon removal projects, such as biochar, direct air capture, or reforestation at scale, generally cost much more – anywhere from £40 to over £1,000 per tonne, depending on the technology and the permanence of the carbon storage.
Industry note:For service-based businesses with relatively low direct emissions, paying for carbon removals can feel disproportionately expensive compared to your turnover or budget, since there are fewer emissions but every tonne costs the same. Meanwhile, industrial companies usually have higher overall emissions but more opportunities to reduce them in-house, which can often be more cost-effective than purchasing expensive removals for everything.
You can see an example of a carbon avoidance project (cookstoves) on the left-hand side, vs. an example of a carbon removal project (ARR) on the right-hand side in the image below.
Which requires more ambition: carbon neutral or net zero?
Carbon neutral approaches allow businesses to maintain existing emissions levels as long as they offset them – there is no minimum requirement for actual reductions before balancing emissions with credits. While the new ISO 14068 standard encourages setting reduction targets, it doesn’t specify how much companies need to reduce, meaning you can still technically achieve carbon neutrality without deep cuts to your emissions.
Net-zero, on the other hand, requires ambitious reductions to emissions. According to the SBTi Net-Zero Standard, most businesses must reduce emissions by at least 90–95% across scopes 1, 2, and 3 by 2050. Only a company’s truly unavoidable emissions, which should represent no more than 5-10% of your total footprint, can then be neutralised by purchasing the equivalent volume of carbon removals.
To date, no company in the world has achieved net-zero status. The level of ambition required by SBTi is extremely high, but as we rapidly approach a milestone year (2030), and eventually 2050, we will no doubt see some high-achieving companies achieve net-zero status.
Scope: what emissions must be included?
Carbon neutrality claims used to only require covering direct emissions (scopes 1 and 2), with the inclusion of scope 3 (indirect emissions from supply chains, travel, etc.) considered optional under the old PAS 2060 standard. However, the new ISO 14068 standard raises the bar:
It requires all scope 1 and 2 emissions to be included within the carbon neutrality boundary.
It also requires businesses to identify, assess, and justify any exclusions of material scope 3 emissions - meaning if your indirect emissions are significant, they should be part of your carbon neutrality plan for it to be credible.
This shift reflects the growing recognition that many companies’ largest climate impacts come from scope 3 emissions, and ignoring them risks undermining real climate progress.
Net-zero, in contrast, has always required the inclusion of scopes 1, 2, and 3. Under the SBTi Net-Zero Standard, companies must reduce emissions across their entire value chain, ensuring deep, science-based climate action that covers everything from their own operations to suppliers and end-use of products.
Standards and certification: how to prove your claims
Carbon neutrality in the UK was previously guided by PAS 2060, which many businesses used as a benchmark for demonstrating carbon neutrality. However, the new ISO 14068-1:2023 standard has replaced PAS as the global, more ambitious specification for achieving and certifying carbon neutrality. Certification under ISO 14068 involves:
Measuring your scope 1 and 2 emissions, and assessing scope 3.
Setting a credible plan to reduce emissions over time.
Offsetting remaining emissions with verified carbon credits.
Documenting your approach, demonstrating reductions, and disclosing offset purchases. Companies can obtain certification through accredited bodies such as BSI, SGS, or other recognised auditors offering ISO 14068 assurance.
Net-zero certification is guided by the SBTi Corporate Net-Zero Standard, which provides the most widely adopted framework for validating science-based net-zero targets. Under the SBTi Net-Zero Standard, businesses must:
Set near-term and long-term science-based targets aligned with a 1.5°C pathway. Companies can have their net-zero targets validated and certified directly by the Science-Based Targets initiative.
Achieve reductions of at least 90–95% across scope 1, 2, and 3 emissions by 2050.
Neutralise only unavoidable residual emissions with carbon removal credits.
Boundary: what do your claims cover?
Carbon neutrality can be applied to a specific product, service, event, or an entire organisation. For example, you could certify a single product line as carbon neutral under ISO 14068 while your broader operations remain outside that boundary. This flexibility makes carbon neutrality an accessible option for businesses looking to pilot climate action on a smaller scale, but it also creates a risk of fragmented or misleading claims if not clearly communicated.
Net-zero, by contrast, must include your entire company and value chain emissions - including upstream suppliers and downstream impacts. The SBTi Net-Zero Standard does not allow a single product or site to be certified as ‘net-zero’ in isolation; it requires company-wide emissions reductions aligned with a 1.5°C pathway.
Industry note: Service businesses might find it easier to set company-wide boundaries, while manufacturers with diverse product lines may face challenges integrating all emissions sources into a single boundary. We recommend pursuing organisation-wide targets wherever feasible to ensure credibility and impact.
Time frame: when can you achieve your goals?
Carbon neutrality is often positioned as a short-term goal, achievable almost immediately once you’ve measured emissions and purchased offsets. Businesses can claim carbon neutrality today, provided they follow credible standards like ISO 14068 and ensure offsets meet quality requirements.
Net-zero, on the other hand, is inherently a long-term goal. The SBTi Net-Zero Standard requires companies to set:
Near-term targets: For reducing emissions by 2030, aligned with a 1.5°C pathway.
Long-term targets: For achieving at least 90–95% reductions in scopes 1, 2, and 3 by 2050, with only unavoidable emissions neutralised by removals.
Achieving net-zero involves years of dedicated emissions reduction work (not just purchasing offsets) and requires strategic planning across supply chains, operations, and product design.
Consistency with the 1.5°C pathway
Carbon neutrality is a great starting point for many businesses, but it’s not sufficient to align with a 1.5°C pathway, even under ISO 14068. Without ambitious emissions reductions, balancing emissions with offsets does not put your business (or the world) on track for limiting warming below dangerous levels. Carbon neutrality can be a helpful early step, but it should be part of a broader strategy to cut emissions at the source.
Net-zero, by definition, is designed to align with a 1.5°C pathway. The SBTi Net-Zero Standard explicitly requires deep reductions across scope 1, 2, and 3 emissions, consistent with scenarios limiting warming to 1.5°C. Businesses pursuing net-zero should aim to cut CO₂ emissions by at least 45% by 2030, in line with the UN’s latest findings, and achieve net-zero emissions by no later than 2050.
Why it matters: Sticking to a 1.5°C pathway dramatically reduces the severity of climate impacts on communities, economies, and ecosystems - helping businesses manage physical and transition risks, maintain competitiveness, and meet rising stakeholder expectations.
What does 1.5°C compared to 2°C of global warming look like?
Impact area | At 1.5°C warming | At 2°C warming |
|---|---|---|
Extreme heat exposure | 14% of global population affected | 37% of global population affected |
Arctic sea ice | 1 ice-free summer every 100 years | 1 ice-free summer every 10 years |
Coral reefs survival | 10–30% of reefs survive | Nearly all reefs disappear |
Global GDP loss | 0.3% by 2100 | 0.5% by 2100 |
Maize crop yields | 3% reduction | 7% reduction |
Plant species loss | 8% of species lost | 16% of species lost |
Permafrost loss | 4.48 million km² thawed | 6.6 million km² thawed |
Why is the 1.5ºC pathway so important?
As part of the Paris Agreement, countries around the world committed to keeping global warming well below 2°C above pre-industrial levels, and to pursue efforts to limit warming to 1.5°C. Achieving the 1.5°C goal is far more ambitious, requiring global emissions to fall to around 25 Gt CO₂e by 2030 and reach net-zero by 2050.
Right now, based on current policies and commitments, emissions are projected to hit 56 Gt CO₂e by 2030 - more than double the level needed to stay on a 1.5°C pathway. To close this gap, global emissions must decline by 7.6% every year through 2030.
While limiting warming to 1.5°C won’t eliminate all climate impacts, scientists agree it significantly reduces the severity of risks compared to higher levels of warming, and it remains an achievable target if urgent action is taken. Every fraction of a degree beyond 1.5°C brings more severe and costly consequences for people, economies, and ecosystems.
For example, the difference between 1.5°C and 2°C of warming may seem small, but the impacts are dramatically different across key systems:
Extreme heat exposure: About 14% of the global population would face extreme heat events at 1.5°C warming, compared to 37% at 2°C.
Arctic sea ice: There would be one ice-free Arctic summer every 100 years at 1.5°C, versus at least one every 10 years at 2°C.
Coral reefs: Between 10–30% of existing coral reefs could survive at 1.5°C, but virtually all would disappear at 2°C.
Global GDP: Economic losses are projected at 0.3% of global GDP by 2100 at 1.5°C, compared to 0.5% at 2°C.
Crop yields: Maize yields would decline by 3% at 1.5°C, compared to a 7% drop at 2°C.
Plant species loss: About 8% of plant species face loss at 1.5°C, compared to 16% at 2°C.
Permafrost loss: An estimated 4.48 million km² of permafrost would thaw at 1.5°C, rising to 6.6 million km² at 2°C.
There is a dramatic difference between the effect we will see at 1.5°C compared to 2°C of warming. With each fraction of additional warming, we’ll see more extreme negative effects on communities, economies, and ecosystems.
How to decide: Carbon neutral or net-zero for your business?
Many companies are excited about the prospect of claiming carbon neutrality or net zero - and so they should be. Each one is a massive achievement! However, choosing the right climate journey for your company needs to be about more than a label. Carbon neutrality and net zero represent very different pathways, workloads, and sometimes, costs. Here’s some quick guidance on picking the right path for your company.
1) Where are you starting from?
If you’re early in your climate journey, lack robust data, or have limited resources for deep reductions right now, starting with carbon neutrality can build momentum - but ensure you align with ISO 14068 and communicate transparently.
If you already measure emissions accurately and have a decarbonisation plan, prioritising net-zero commitments shows ambition and credibility.
2) What do people expect from you?
Customers, investors, and regulators increasingly expect science-aligned net-zero commitments. If your industry faces rising scrutiny (e.g. finance, consumer goods, tech), moving directly to net-zero is often the safer choice.
If you operate in a sector where climate leadership isn’t yet expected but you want to stand out, carbon neutrality can still be a positive differentiator, as long as it’s credible and certified.
3) Are you ready to tackle your scope 3 emissions?
For nearly all businesses, scope 3 emissions will make up the majority of your carbon footprint, covering your supply chain, purchased goods, business travel, and more.
If you have capacity and influence to engage suppliers and partners now, moving directly to a net-zero commitment makes sense and will show your stakeholders that you’re serious about climate action.
If you don’t yet have the data, supplier relationships, or resources to address scope 3 effectively, starting with carbon neutrality (covering scopes 1 and 2 with a clear plan to expand) can get you on the right path in the short term.
4) Do you have short- and long-term plans?
Consider combining both:
Carbon neutrality can serve as an early milestone, proving immediate action.
Net-zero should be your long-term goal, backed by a science-based reduction roadmap.
Key takeaway:
Start with a credible carbon neutrality claim, aligned to ISO 14068, only if you use it as a stepping stone to deep reductions. Build towards a net-zero commitment aligned with SBTi to ensure your climate strategy supports the 1.5°C goal.
Transition roadmap: from carbon neutral to net-zero
Many businesses start their climate journey unsure of where to begin. Here’s a clear roadmap that outlines how a company might move from no current climate action, achieve credible carbon neutrality, and ultimately pursue net-zero status.
Stage 1: Establish your baseline
Measure your emissions, at least for scopes 1 and 2, using tools like Ecologi. Identify key hotspots in your operations and supply chain. Communicate internally why climate action matters to your business, employees, and stakeholders.
Stage 2: Achieve carbon neutrality
Set clear boundaries (e.g. scopes 1 and 2, with a plan for scope 3). Offset measured emissions with high-quality carbon credits, following ISO 14068 requirements. Publish a credible carbon management plan that outlines intentions to reduce emissions over time, not just offset indefinitely.
Stage 3: Expand your coverage
Bring scope 3 emissions into your accounting and climate strategy, as they often make up the majority of your footprint. Engage suppliers and partners to begin measuring and reducing emissions along your value chain.
Stage 4: Set science-based targets
Develop near-term targets for reducing emissions by 2030, and long-term targets for at least 90–95% reduction by 2050, aligned with the SBTi Net-Zero Standard. Register targets with SBTi for validation if possible.
Stage 5: Prioritise deep reductions
Shift investment focus from offsets to direct decarbonisation in your operations, energy use, products, and services. Look for opportunities to make real, systemic change, like redesigning products, electrifying fleets, or changing sourcing decisions.
Stage 6: Achieve net-zero
Neutralise only unavoidable residual emissions using carbon removals, once deep reductions have been achieved. Continue to reduce any remaining emissions wherever possible. Disclose your progress transparently and update plans regularly. You might also want to go beyond net-zero and focus on making climate impact outside of your value chain - also known as Beyond Value Chain Mitigation (BVCM).
Key takeaway: Moving from inaction to net-zero takes time - sometimes, decades. Carbon neutrality can serve as a practical milestone, but businesses must plan early for deep reductions and credible long-term commitments to align with a 1.5°C future.
Conclusion: choose a path that matches your climate ambition
Ultimately, it’s up to each company to determine whether carbon neutrality or net-zero makes the most sense for them. Most companies will find it easier to pursue carbon neutrality in the short-term, but we recommend keeping your eyes on net-zero, especially if you’re a larger organisation, as this is where you can make the most meaningful climate action. Ultimately, only net-zero commitments drive the deep emissions cuts needed to keep global warming within 1.5°C.
Either way, the process looks fairly similar for both: measure your emissions, set targets, focus first on what you can reduce, and then look at buying high-quality carbon credits to make up for what you can’t.
When you talk about your climate action, be clear, honest, and always follow the latest guidance from ISO, the SBTi, and other relevant regulations and standards.
Build your climate strategy with confidence. Work with Ecologi.
Carbon credits are an essential part of carbon neutrality and net-zero journeys, but they need to be used well. That means reducing what you can, restoring what you can’t, and reporting on your actions with clarity and transparency.
At Ecologi, we help businesses do exactly that. We’ll work with you to reduce your emissions, fund high-quality carbon avoidance & removal projects, and report your progress with confidence.
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