WHAT IS CARBON NEUTRALITY?

Why is the Carbon Neutral Protocol important?

The Carbon Neutral Protocol is important for businesses because it provides a clear, credible, and transparent pathway to achieving carbon neutrality. As climate change becomes a central concern for consumers, investors, and regulators, businesses that can demonstrate their commitment to reducing their carbon footprint gain a significant competitive advantage. The protocol’s comprehensive approach, which includes measuring, reducing, and offsetting emissions, ensures that companies are making genuine progress toward sustainability.

New European Union greenwashing regulations

In September 2023, the European Union introduced regulations to combat greenwashing and improve consumer information on product sustainability. These rules prohibit companies from making vague claims, such as "carbon neutral," without verifiable evidence. Companies must substantiate such claims with detailed information on how they achieve carbon neutrality, including emission reductions and the use of carbon credits. For businesses operating in the EU, this means they must be more diligent in communicating their carbon neutrality efforts. While these regulations apply within the EU, UK businesses should also be mindful if they market to EU customers. This underscores the importance of adhering to the standards set by the Carbon Neutral Protocol to avoid accusations of greenwashing. 

Key Updates to the Carbon Neutral Protocol in 2024

The 2024 updates are designed to enhance the transparency, accountability, and effectiveness of carbon neutrality efforts:

The protocol now requires businesses to conduct an annual measurement, estimation, or evaluation of their organisational GHG inventory. Importantly, the 2024 updates require companies to report all relevant categories of Scope 3 emissions, covering every emission source according to the minimum boundary criteria. This ensures that companies maintain up-to-date and accurate records of their emissions, which is critical for setting and achieving reduction targets.

Companies must now set near-term, science-aligned emissions reduction targets, typically within a 5- to 10-year timeframe. These targets are designed to ensure that businesses take immediate, measurable steps to reduce their carbon footprint before considering offsetting.

The protocol places a greater emphasis on internal emissions reductions. Companies are expected to demonstrate year-on-year reductions in their emissions, either in absolute terms or through intensity metrics (such as emissions per unit of output). This update ensures that carbon neutrality is achieved through tangible reductions in emissions, rather than merely offsetting.

The protocol includes updated guidance on corresponding adjustments under the Paris Agreement. This ensures that when carbon credits are transferred between countries or entities, they are accurately accounted for to avoid double counting, thus contributing to actual reductions in global emissions.

The protocol introduces new standards for approved environmental instruments, such as high-quality carbon credits. These instruments must meet rigorous criteria for environmental integrity, ensuring that they represent real, additional emissions reductions.

Businesses seeking certification must now provide more comprehensive disclosures regarding their GHG inventories, reduction strategies, and the carbon credits used to achieve neutrality. This aligns with global trends toward more rigorous environmental reporting and ensures that stakeholders have access to clear and accurate information about a company’s carbon neutrality claims.

The Carbon Neutral Protocol 2024 represents a significant evolution in the global push for climate action, offering a comprehensive framework for companies to achieve carbon neutrality while adhering to stricter standards and regulations. These updates, coupled with the new EU regulations, underscore the need for businesses to adopt transparent, genuine carbon reduction strategies. 

For support with the Carbon Neutral Protocol and other sustainability reporting, get in touch with Optimised’s Net Zero Advisory team.