Carbon Market Watch–New Climate Institute Report: A Closer Look at the “Carbon Neutrality” Commitments of 25 Multinational Corporations

It's official: "carbon-neutral" companies are (often) a load of nonsense

On February 7, the think tanks Carbon Market Watch (Belgium) and New Climate Institute (Germany) have published a report that thoroughly analyzes the carbon neutrality commitments made by 25 of the world's largest companies^[1]. Pointing out the discrepancy between their claims and the scope of the commitments actually made, the authors—including three members of the international expert group of the Net Zero Initiative^[2], highlight the many shortcomings related to companies’ claims of “carbon neutrality” and “net zero.” Their conclusions are thus in line with those expressed by Carbone 4 on several occasions in various articles and publications.

The first limitation highlighted in their report: the varying degrees of seriousness with which measure the impact of an activity on the climate. Only 8 of the 25 companies examined account for all emissions attributable to their operations. In other words, the other 17 exclude from their scope such crucial areas as the manufacturing, use, and transportation of raw materials or products—even though these often account for more than two-thirds of a carbon footprint. With Scope 3 excluded, an automaker, for example, can achieve “neutrality” without having to worry about the emissions coming out of its vehicles’ exhaust pipes. Similarly, without Scope 3, an investor’s “neutrality” will be determined primarily by replacing old boilers and light bulbs in its facilities, rather than by the emissions from the activities it finances—even though those activities are central to its business model...

Beyond this lack of clarity regarding the scope of measurement, five companies in the panel claim to be aiming for carbon neutrality without even committing to reducing their emissions by more than 15%, a figure that should be considered in light of the 40- to 50% reduction required by 2030 compared to 2010, in order to limit global warming to 1.5°C^[3]. Carbon neutral by 2050? Easy!

The third complaint highlighted in the report: A significant portion of the discussion on net neutrality still revolves around the misnamed “compensation”, despite the widespread criticism directed at it^[4]. 19 of the 25 selected companies base the bulk of their carbon neutrality commitments on this controversial approach, without, however, specifying how, or without providing sufficient assurance regarding the long-term sustainability of the projects they fund: yet their quality varies greatly, depending on whether they take into account adaptation to existing ecosystems, future climate changes, and so on... Like any investment, the financing of carbon sequestration projects is subject to uncertainties that vary depending on their quality—uncertainties that are all the more critical in a rapidly changing climate system. Any carbon neutrality strategy must therefore be accompanied by clear details on the operational resources (financial, human, technical, etc.) and the nature of the proposed projects—a prerequisite for their credibility.

The simplicity of the terms “neutrality” and “net zero” gives them undeniable rhetorical power, but in the absence of clear guidelines, it leads to ambiguous and oversimplified communication. For, as this publication so effectively demonstrates, the term “neutrality” encompasses an extremely diverse range of realities and actions, and therefore cannot, on its own, serve as a guarantee of credibility. This finding underscores the urgent need for robust tools to assess and steer carbon neutrality strategies, particularly on issues related to carbon sequestration, which have not yet reached the same level of maturity as carbon footprinting. As Silke Mooldijk and Sybrig Smit, co-authors of the report, summarize: “Regulators should not rely on pressure from consumers and shareholders to drive corporate action. Companies must be subject to close scrutiny to confirm whether their promises and claims are credible, and must be held accountable if they are not.” The Net Zero Initiative intends to do its part.