Yes, and... A high bar in a big tent

25th May 2023

In a thoughtful piece, Rebecca Fay, Chief Marketing Officer at Climate Impact Partners, weighs in on why carbon neutrality remains a crucial tool for companies to include in their comprehensive climate action strategies.

This week it was reported that the European Parliament is proposing changes, or bans, to the use of terms like carbon neutral and climate neutral, and that the UK’s Advertising Standards Authority (ASA) is doing the same.

That is not quite the case (I’ll tell you why in a minute).

Even so, it is critical that the concept of carbon neutrality is not lost in the greenwash backlash:

  • Now, more than ever we need to incentivize corporate climate action to close the gap between government commitments and the global goal to keep warming below 1.5 degrees. To do that, companies need clear, credible claims that show what they’ve done in a meaningful way. All companies should be reducing their own footprints as quickly as possible, but internal reductions alone will not get us globally to where we need to be.
  • A key strength of carbon neutrality is that it ties private sector, voluntary action, to a footprint therefore ensuring that a company’s action is commensurate with the scale of its environmental impact, and is comparable from one business to another. None of the alternative ‘contribution’ type labels automatically do this and therefore run a greater risk of potential greenwashing; one company can plant a single tree as ‘climate action’ another can reduce and offset its entire business footprint for the same claim.
  • Yes, the ultimate goal is net zero but to reach it is a long term play, requiring investments in a whole host of removal technologies, from new trees, to Carbon Capture and Storage, to Direct Air Capture. Carbon neutrality demonstrates action being taken right now to avoid and reduce emissions – turning off the tap that’s filling our carbon budget bathtub, while we try to pull the plug out and remove the carbon that’s filled it up.
  • There is plenty of evidence that companies that are offsetting emissions now and are carbon neutral are doing far more to make internal reductions than those that aren’t. It makes sense – they are spending money on offsetting, which goes down as their footprint goes down. Our research into the climate actions of the Fortune Global 500 found that carbon neutral companies were twice as likely to have a Science Based Target, and Sylvera research found that companies using carbon credits are cutting internal emissions by 6.2% compared to 3.4% internal reductions from companies that aren’t.

For sure, there are bad actors who mis-use carbon or climate neutral labels to avoid reducing their own footprint. But the evidence demonstrates that is not the norm. How all companies talk about their climate action and leadership must improve. It is through claims like carbon neutral that we are driving a significant proportion of the more than £2 billion that is currently being funneled to emission reduction projects each year. A flow of finance we need to protect and grow.

We must have a ‘Yes, and’ approach to this global challenge – a high bar that we all reach for in a big tent that crowds everyone in.

A note on the news of ‘bans’ that has been reported in the press:

The EU Parliament has proposed amendments to draft legislation that covers terms like ‘carbon neutral’ and ‘climate neutral’. However, the Parliament proposal now has to be debated and approved by the Trilogue meetings of Commission, Parliament and Council, a process which normally leads to several compromises. To complicate matters, the EU Green Claims Directive which was proposed in March had a different approach to carbon neutrality by laying out clearer requirements for what organisations would need to achieve and disclose for a claim to be credible. The EU has taken a strong and united position on ensuring that claims are accurate and reflect real action on climate: they now need to bring that together into one set of rules.

Another ‘clickbait’ headline stated that the UK’s Advertising Standards Authority (ASA) was banning carbon neutrality. That is not the case. In February of this year it improved its guidance about the information that should support a carbon neutral claim. We expect similar guidance from the US Federal Trade Commission (FTC) in coming months as it updates its Green Guides. These requirements for greater transparency are positive: companies should be clear and proud of what they are doing to finance a global transformation to a low carbon economy, supporting communities most impacted by climate change yet least responsible, improving health and livelihoods, and restoring and conserving the natural systems we need to thrive.

And the handy glossary I mentioned:

ICVCM – Integrity Council for the Voluntary Carbon Market (an initiative looking at core standards for carbon credit quality)

VCMI – Voluntary Carbon Market Integrity Initiative (an initiative creating a framework for consistent claims of corporate action using carbon offsetting)

ISO – International Organization for Standardization (consensus based, independent standard setting body that brings together 168 national standards bodies)

By Rebecca Fay, Chief Marketing Officer at Climate Impact Partners