Carbon neutral vs net zero: what is the difference for a small business?

The difference between carbon neutral and net zero comes down to how much you cut versus how much you offset. Carbon neutral means your emissions for a given period have been balanced out, usually by buying carbon credits, and you can claim it this year. Net zero means you’ve cut your emissions by the vast majority, typically around 90%, and only the small remainder is neutralised with permanent carbon removals. It’s a long-term target, not something you buy.

Both phrases get used loosely, and that’s where small businesses get into trouble. Here’s what each one actually means and which one is worth putting your name to.

What does carbon neutral mean?

A carbon neutral claim says that the emissions from a defined subject, such as your business, a product or an event, over a defined period have been balanced to zero. In practice that means:

1. Measure your carbon footprint for the period.
2. Reduce what you reasonably can.
3. Buy carbon credits to cover what’s left.
4. Explain how you did it.

The main standard used to be PAS 2060 from BSI. That was withdrawn at the end of 2025, and the international standard ISO 14068 has taken its place. It expects a reduction plan alongside any offsetting, not offsetting alone.

The weak point is the credits. Their quality varies a great deal, and a carbon neutral claim is only as good as the projects behind it. Buyers, regulators and journalists know this.

What does net zero mean?

Net zero is a destination, not a status. It means reducing your emissions across Scope 1, 2 and 3 as far as possible, then neutralising the small amount that’s genuinely unavoidable with carbon removals, such as projects that take carbon out of the atmosphere and store it, rather than credits for emissions avoided elsewhere.

The most widely used definition comes from the Science Based Targets initiative. Its route for small and medium-sized businesses expects net zero targets to cut Scope 1, 2 and 3 emissions by at least 90% by the target year, with 2050 as the latest date, and to neutralise anything left over.

The UK itself has a legal net zero target for 2050, set in the Climate Change Act 2008 as amended in 2019. That doesn’t place a duty on individual small firms, but it’s why the phrase appears in so many tender and supplier documents.

Carbon neutral vs net zero side by side

	Carbon neutral	Net zero
Timeframe	A specific year or period	A target date, often 2050 at the latest
Reduction required	Some, plus a plan	Deep cuts, around 90% under SBTi
Role of offsets	Credits balance remaining emissions	Only removals, and only for the residual
Can you claim it now?	Yes, if done properly	Usually no, you claim a commitment
Main risk	Low-quality credits, greenwashing	Vague targets with no plan behind them

Which one should a small business aim for?

For most small businesses, the honest answer is a net zero commitment with a near-term reduction target. It’s the version buyers and tender evaluators recognise, it describes things you control, and you don’t have to spend money on credits to make it.

A practical version looks like this:

• A measured baseline year, such as “our 2026 footprint was 8.4 tCO2e”
• A near-term target, such as “a 50% cut in Scope 1 and 2 emissions by 2030”
• A long-term commitment, such as “net zero across Scope 1, 2 and 3 by 2045”
• Two or three named actions, such as moving to a renewable tariff, switching a van to electric and adopting a rail-first travel policy

Our net zero commitment statement example shows the wording in full.

Carbon neutral can still make sense. Some businesses, often consumer brands or event organisers, choose to compensate for their emissions each year while they reduce. If you do, buy credits from recognised standards, follow ISO 14068, and say exactly what the claim covers.

Are carbon credits worth buying for a small business?

They can be, as long as you treat them as an extra rather than the plan. A small office-based business with a footprint of around 5 tonnes isn’t going to spend much on credits, so the cost is rarely the issue. The questions are about quality and how you describe them.

If you buy credits, look for projects certified under a recognised standard, check whether they represent avoided emissions or genuine removals, and keep the certificates. Then report them as a separate line: “we emitted 5.1 tCO2e and separately funded 6 tonnes of verified carbon removal”. That’s far more convincing than “we are carbon neutral”, and it can’t be accused of hiding anything.

Spending the same money on a smart heating control or a deposit towards an electric van will often do more for your footprint next year, and it shows up in your figures for good.

How does this affect public sector tenders?

Central government contracts above £5 million a year that fall under PPN 006 ask for a Carbon Reduction Plan with a commitment to net zero by 2050 at the latest, your Scope 1 and 2 emissions, a defined set of Scope 3 categories and the measures you’re taking. A carbon neutral certificate isn’t a substitute.

ESG Now doesn’t produce the PPN 006 document itself. It gives you the carbon footprint, baseline and figures you need to complete the official Carbon Reduction Plan template. Our PPN 006 guide explains the rest.

How do you avoid greenwashing?

The Competition and Markets Authority’s Green Claims Code sets out how environmental claims should be made. In short, they must be truthful, clear, substantiated and must not leave out important information. For carbon claims, that means:

• Don’t say “carbon neutral” or “net zero” as a description of your business today unless you can evidence it.
• Do say “committed to net zero by” a date, backed by a measured baseline and a plan.
• Say what’s included. If your footprint covers Scope 1, 2 and some Scope 3, say so.
• Separate reductions from offsets. If you buy credits, report them alongside your footprint, not netted off it.

Statements like “we measured our 2026 footprint at 5.1 tCO2e and have committed to cut Scope 1 and 2 emissions by half by 2030” are specific, checkable and hard to fault. That’s the tone that reassures a buyer. More on the risks in our glossary entry on greenwashing.

Where do you start?

With the footprint. Neither claim means anything without one, and once you have it, the target and the actions tend to suggest themselves.

The ESG Now questionnaire calculates your footprint from heating fuels, company vehicles, refrigerants, electricity, EV charging, water, waste, deliveries, business travel, commuting and homeworking, and asks whether you have a carbon target. Your report and action plan then reflect your commitments and next steps. Most small businesses finish in under 30 minutes. Start your free report, or see how it helps with public sector tenders.