Professionals often mix up carbon neutral and net zero climate terms. Companies just need to drastically reduce their emissions over the next couple of decades to reach carbon neutrality by 2050. A recent study shows that more than 60% of companies have set their targets too far in the future or lack clear deadlines.
Carbon neutrality balances emissions through offsetting, while net zero takes a more rigorous path. The Science Based Targets initiative defines net zero as cutting 90-95% of a business’s value chain emissions. The remaining 10% becomes reduced through permanent removals. This difference goes beyond simple terminology and shapes your business strategy and credibility.
Climate goals bring unexpected benefits that are nowhere near limited to environmental effects. Companies that achieve carbon neutrality save capital through improved operations and tax breaks. These companies also protect the natural environment they need for future success. Next, we will explain the key differences between these approaches to help you choose the appropriate climate commitment for your organization in 2025 and beyond.
Climate terminology shows various levels of environmental commitments, each with unique meanings and requirements. Businesses need to distinguish these differences to navigate corporate climate action in 2025 and beyond.
Carbon neutrality marks the beginning of climate action. Companies achieve this status by balancing their CO₂ emissions through carbon credits or investments in carbon sinks. Short-term measures can quickly achieve this goal, primarily by offsetting emissions instead of reducing them.
Net zero sets a higher bar for environmental responsibility. Companies must cut greenhouse gas emissions throughout their value chain by at least 90-95%. Permanent carbon removals can then neutralize the remaining unavoidable emissions. Net zero also covers all greenhouse gasses, not just carbon dioxide.
Climate neutrality goes a step further than previous approaches. This all-encompassing path looks at greenhouse gas emissions and an organization’s environmental effects. Organizations aiming for climate-neutral status offset all major contributors to global warming. They also put environmentally responsible practices in place for resource consumption, waste management, and water usage.
Carbon negative (also known as climate positive) represents the highest level of climate commitment. Organizations must remove more carbon dioxide from the atmosphere than they emit.
Companies working toward carbon negativity use these strategies:
Microsoft shows this commitment with its plan to become carbon negative by 2030. The company will then remove all carbon it has released since 1975.
These terms can be confusing at times. People often use the terms climate positive and carbon positive interchangeably with carbon negative. They all describe how an organization supports reducing atmospheric carbon beyond its emissions.
A business must follow clear steps to move from carbon neutral to net zero status. This approach goes beyond simple offsetting. It focuses on reducing emissions and removing carbon permanently.
Every climate strategy starts with calculating your carbon footprint. You need a complete picture of emissions in three areas: direct emissions from owned sources (Scope 1), indirect emissions from purchased electricity (Scope 2), and all other indirect emissions in your value chain (Scope 3). This measurement shows your organization’s real environmental effect and points out major emission sources.
The original step toward carbon neutrality comes through carbon offsetting. Organizations buy carbon credits to fund projects that reduce or remove CO₂ elsewhere. Offsetting helps balance things out for now, but it’s just the first step in a bigger experience.
The middle phase calls for aggressive cuts throughout operations and the supply chain. The task becomes extra challenging because Scope 3 emissions—those outside your direct control—usually make up over 85% of a company’s total carbon footprint. You will need cooperative work across departments and strong supplier involvement to tackle these emissions.
Budget-friendly strategies include switching to renewable energy, using energy-efficient measures, and creating sustainable products. Companies should set science-based targets that line up with keeping global warming under 1.5°C. This commitment usually means halving emissions by 2030. Companies will spend about $275 trillion between 2021 and 2050 globally across all sectors during this phase.
Even with aggressive reductions, some “residual emissions” will stay—these come from activities that are too demanding or expensive to eliminate completely. Current projections show residual emissions might reach 2.2 Gt/yr by 2050, about 17.9% of current emissions.
Permanent carbon removal becomes essential for these unavoidable emissions. Unlike temporary offsets, permanent solutions store carbon for over 1,000 years. Options range from tech solutions like direct air capture and storage (DACS) to natural methods with low reversal risk. The Science Based Targets initiative now asks companies to remove CO₂ starting in 2030 instead of waiting until their net-zero target year.
This three-step progression shows the key difference between carbon neutral and net zero approaches—you quit compensating for emissions and start eliminating them at the source.
You need specific tools that line up with your climate goals to work, whether you choose carbon neutral or net zero targets. Each path needs different investments and commitments.
Companies achieve carbon neutrality through two main types of offsetting projects. Nature-based solutions like afforestation, reforestation, and soil carbon sequestration offer economical and adaptable options. Tech-based methods such as direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS) provide permanent CO₂ removal. Many companies now invest in both approaches. United Airlines bought rights to 500,000 tons of CO₂ through DAC startup Heirloom. Microsoft put $200 million into 3.5 million carbon credits to restore Brazilian forests.
A solid baseline measurement builds the foundation of any climate claim. Your baseline helps you measure current emissions against past performance. The GHG Protocol suggests using consistent data over time. Companies should recalculate baselines when structural changes happen. Carbon accounting platforms have made this process easier. These platforms connect to data sources directly and turn raw numbers into useful insights.
The Science Based Targets initiative (SBTi) gives companies a proven framework that matches corporate climate goals with current science. Over 4,000 companies and financial institutions verified their targets through SBTi by 2023. These targets follow clear steps: cut emissions roughly in half by 2030, then reduce more than 90% before 2050. Companies must set checkpoints to track progress. These goals help coordinate efforts and create reliable action plans.
Technological advancement is vital, especially for steel and cement sectors that make up about 70% of industry-related emissions. Technologies currently under development will contribute approximately 35% of the CO reductions required by 2050. We have seen promising breakthroughs. Electric vehicles made up nearly 15% of total car sales in 2022. The first commercial-scale fossil-free steel using 100% electrolytic hydrogen rolled out in 2021.
The difference between carbon neutral and net zero has real-life implications in 2025’s business environment. These differences affect everything from consumer trust to regulatory compliance and investment opportunities.
Brand perception depends on your choice of climate claim in today’s climate-conscious marketplace. A March 2025 study showed that over 40% of companies abandoned or stopped reporting on their climate goals. Such actions created a credibility vacuum, and consumers now examine environmental claims with unprecedented skepticism.
Accusations of greenwashing can devastate brand trust. The research shows 48% of consumers would buy products from brands associated with greenwashing “as little as possible”. Courts have started to analyze the assumptions behind individual offsets and climate claims.
The upcoming EU Green Claims Directive will not allow unsubstantiated climate labels unless supported by solid evidence. The UK Competition and Markets Authority’s Green Claims Code actively monitors and prosecutes greenwashing abuses.
Climate commitments face mounting pressure from investors. Long-term investors expect companies to support economic policy measures that alleviate climate risks when they engage with policymakers.
Regulatory frameworks change faster now. The International Sustainability Standards Board develops basic standards for sustainability disclosure. Companies must identify how climate risks specifically affect enterprise value. Climate commitments remain voluntary without standardized, legally binding frameworks, but this landscape is shifting.
SEC Chair Gary Gensler emphasized the necessity for “unambiguous guidelines” to ensure companies are held responsible for their declared climate objectives. Greenwashing liability has expanded beyond reputation damage to substantial legal and financial risks.
To select between carbon neutral and net zero claims:
Research shows companies that combine carbon credits with broader net zero strategies are more likely to include Scope 3 emissions and have verified science-based targets. Your climate strategy’s name might matter, but building it properly matters much more.
In 2025, the distinction between carbon neutral and net zero has become crucial for businesses’ climate commitments. Carbon neutrality serves as an entry point through offsetting, while net zero just needs rigorous emissions reduction and permanent carbon removal.
Your choice between these commitments shapes what it all implies. Carbon-neutral strategies allow you to act faster but face growing scrutiny due to their reliance on offsets. Net zero builds stronger credibility but needs major organizational changes and long-term planning. The climate claims spectrum offers more options based on your ambition—from climate neutrality to carbon-negative approaches.
The pressure keeps mounting as regulations get stricter and consumers recognize greenwashing more easily. False climate claims can ruin a brand’s reputation, while science-backed commitments build trust. Companies that treat climate goals as real business priorities instead of marketing tools perform better financially, build stronger reputations, and achieve environmental targets.
Your climate strategy should match your organization’s capabilities, timeline, and values. Begin with accurate emissions baselines to determine if carbon neutrality works as your immediate goal or as a step toward net zero. Whatever path you choose, transparency in your methods and consistent progress reporting matter the most.
