What carbon neutral and net zero mean for small business
Author | Tim Maiden
Reading Time - 2 mins
Why these terms matter for SMEs
Carbon neutral and Net Zero are often used as if they mean the same thing but for SMEs, they create very different expectations, requirements, and risks. Understanding the difference helps avoid greenwash, build credibility, and focus limited time and resources where they make the biggest real-world impact.
Defining the terms: Carbon Neutral vs Net Zero
Carbon Neutral
A business is carbon neutral when it balances emissions through a mix of internal reductions and purchased carbon credits, whether those credits represent avoidance, reduction, or removal projects. Crucially, carbon neutrality does not require deep reductions to a company's own footprint and can be achieved largely through buying these credits.
Net Zero
A science-aligned Net Zero target requires:
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Deep emissions reductions of around 90% across the value chain, and
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Neutralising only the small residual with carbon removals, a specific subset of offsets.
Removals are needed only at the end-state, and only once reductions have been maximised. For more detail about the full Net Zero journey, see our Net Zero for SMEs blog.
So what's the real difference?
| Carbon Neutral | Net Zero | |
|---|---|---|
| Core approach | Balance emissions using credits | Reduce ~90%, then use removals only |
| Offset type | Any type (avoidance, reduction, removal) | Removals only |
| Timescale | Can be achieved quickly | Requires long-term change |
| Risk | High greenwashing risk | Lower risk with a clear plan |
Carbon neutral can be achieved without changing how the business operates. Net Zero cannot.
Why conventional offsetting falls short
Offsets often suggest an appealing symmetry - emit here, compensate there. But this "carbon balancing" frequently breaks down on closer inspection:
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False equivalence over time. A tonne emitted today causes warming immediately. A tonne "absorbed" by a tree may take 15-20 years to be sequestered, if it survives that long. The climate system does not treat these as equivalent.
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Non-permanence. Biological sequestration can be reversed by fire, land-use change, disease or simply project underperformance.
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Additionality and measurement challenges. Many credits cannot robustly prove their benefit wouldn't have happened anyway, or avoid double-counting.
Our position: The concept of traditional "offsetting" is not helpful for credible climate action. We do not promote, recommend, or sell carbon offsets nor claims of carbon neutrality.
Why Net Zero is harder, and why SMEs often struggle
Whilst Net Zero commitments are vital, even committed SMEs face practical barriers: limited time, fragmented data, landlord-controlled utilities, supplier dependence, and the challenge that emissions often rise alongside business growth. A one-size-fits-all pathway is unrealistic.
Our Net Zero for SMEs article addresses many of these realities in depth.
Ambition and realistic trajectories: why they must go together
Setting a Net Zero ambition alone isn't enough. SMEs need a trajectory that is:
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Science-aligned (top-down). Reflecting what climate science requires. Deep long-term reductions.
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Operationally realistic (bottom-up). Grounded in your growth plans, resourcing, and practical constraints.
This dual approach is essential, and directly reflects the principles in our target-setting service. We combine science-based Net Zero target setting with bottom-up modelling rooted in SME realities.
What a credible Net Zero pathway looks like
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Measure your footprint. Understand your baseline, hotspots and data limitations.
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Model realistic pathways. Use science-aligned reduction scenarios and bottom-up SME-specific feasibility to identify where reductions can actually come from.
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Reduce deeply. Prioritise controllable emissions first, then those you can influence through procurement and supplier engagement.
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Use removals only for the genuine residual. After maximising reductions, apply high-quality carbon removals. Never to compensate for avoidable emissions.
Our stance on carbon neutral
Because carbon neutral status relies heavily on credits and often avoids real operational change, it creates:
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Minimal climate impact
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High reputational risk
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Increasing scrutiny from customers and procurement bodies
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A pathway that diverges from science-aligned Net Zero requirements
We do not recommend aiming for or claiming carbon neutrality.
Are there still carbon offset projects worth supporting?
Projects with clear environmental or social co-benefits - biodiversity, water quality, community development - can be valuable in addition to a focus on emissions reductions, not instead of them. We just don't recommend claiming that investing in such projects offsets your carbon footprint.
See our post on 1% for the Planet for suggestions on a credible approach to supporting environmental projects.
