Carbon offsetting and carbon neutrality

What do "carbon offsetting" and "carbon neutral" actually mean?

You have probably heard businesses describe themselves as "carbon neutral" because they have bought carbon offsets. But what do these terms really mean?

Carbon offsetting is when a business pays for a project somewhere else to reduce or absorb carbon emissions, in order to compensate for the emissions they produce. Examples include planting trees, protecting forests, funding energy efficient cookstoves, or supporting renewable energy projects.

Carbon neutrality means a business claims its emissions are balanced out by the offsets it has purchased. Importantly, this does not require the business to reduce its own emissions. It only means it has paid for reductions elsewhere.

While carbon neutral labels sound reassuring, they can give the impression that emissions can simply be cancelled out through payments, rather than by reducing the real impact of operations.

Why is carbon offsetting widely criticised?

Offsetting sounds simple: you emit here, someone reduces or absorbs emissions there. But the reality is more complex.

• Uncertainty: Many offset projects cannot accurately measure or guarantee the benefit they claim. Some reductions would have happened anyway. One study, by Oxford University, suggests that "carbon offsets have failed for 25 years, and most should be phased out".

• Timing mismatch: A flight emits carbon immediately, while a newly planted tree may take 15 to 20 years to absorb the same amount. This compares "emissions today" with "removals decades from now."

• Non permanence: Trees can burn, be cut down, or die. When that happens, the stored carbon is released back into the atmosphere, sometimes very quickly.

• False confidence: Offset marketing can lead organisations to believe they have solved their footprint without changing how they operate. This is why many offset based claims now face public and regulatory scrutiny.

Is carbon neutrality a useful climate goal for SMEs?

For many SMEs, carbon neutral status seems attractive. It appears quick, affordable, and customer friendly. But carbon neutrality is often less meaningful than it appears.

Because neutrality can be achieved without reducing emissions, it is much less ambitious than a Net Zero approach. A business whose emissions are rising can still call itself carbon neutral if it buys enough credits.

This creates three problems:

1. Reputational risk: Customers increasingly question claims based on offsets alone.

2. Unregulated language: Carbon neutral is not a protected or standardised term.

3. Limited climate benefit: Offsetting does not reduce the real world emissions created by the business.

Green Business does not consider carbon neutrality achieved through offsetting to be a credible climate strategy for SMEs.

Should SMEs ever buy carbon offsets?

While we do not support the concept of offsetting as a climate solution, some projects do deliver genuine environmental or social benefits. Examples include nature restoration, biodiversity enhancement, and access to clean energy.

However, these should always be treated as contributions, not as a way to cancel out emissions.

If your business chooses to support environmental projects, the most responsible approach is to:

• Be clear about your intentions

• Avoid using the term "offset"

• Avoid making carbon neutral claims

• Reduce your own emissions as the priority

• Choose projects with strong independent verification

And to be clear: we will never sell carbon offsets, and we do not recommend using them as part of a carbon strategy.

What should SMEs do instead of offsetting?

The most effective way to cut your climate impact is to reduce emissions at source. For SMEs, this can be practical and achievable with small steps, including:

• Improving energy efficiency in buildings

• Reducing business travel and choosing lower carbon options

• Switching to genuine green energy tariffs

• Choosing lower carbon suppliers

• Designing products and services to reduce waste

• Training staff in simple behaviour changes

• Reducing packaging and optimising logistics

Once you have reduced your emissions as much as possible, you may choose to support environmental or social projects. This can be part of your values or B Corp journey, but it should not be presented as cancelling out your footprint.

What's the bottom line for SMEs?

Offsetting and carbon neutrality may appear simple, but they rarely deliver the impact businesses expect. The key points are:

• Offsetting is uncertain and often temporary

• Carbon neutrality is an accounting idea, not a climate solution

• Real climate action begins with reducing your emissions

• Contributions to environmental projects can be positive, but they should not be used as proof of carbon balance

• SMEs can make meaningful progress through small, practical changes

If your business understands its footprint, reduces emissions realistically, and communicates honestly, you are already ahead of many organisations relying on offset based neutrality claims.