Business sustainability - Understanding Carbon Footprint, Carbon Neutral, and Net Zero

11 min read
Business sustainability - Understanding Carbon Footprint, Carbon Neutral, and Net Zero

Understanding Carbon Footprint, 

Carbon Neutral, and Net Zero

The concepts of carbon footprint, carbon neutrality, and net zero are central to the dialogue on climate action across various sectors.

For businesses, a carbon footprint refers to the total greenhouse gas emissions produced across their operations and supply chain.

Achieving carbon neutrality involves balancing these emissions with an equivalent amount of absorption or offsetting, typically through renewable energy projects or carbon credits.

Net zero takes this a step further by aiming for an overall balance between emitted and removed greenhouse gases from the atmosphere, often requiring more profound, systemic changes to operations and business models.

1. Direct and indirect environmental impacts

    It is essential for your sustainability initiatives to address both the direct and indirect environmental impacts of your business.

    The Greenhouse Gas Protocol (GHGP), jointly developed by the World Business Council for Sustainable Development and the World Resources Institute, classifies a business's carbon emissions into three distinct scopes:

    Scope 1:

    These encompass direct emissions stemming from sources under your ownership or control. This includes emissions generated by your manufacturing processes, company-owned vehicles, and on-site heating facilities, such as gas boilers.

      Scope 2:

      These comprise indirect emissions associated with the electricity, heat, or steam purchased or acquired for your internal use, typically from your utility provider.

      Scope 3:

      These involve indirect emissions occurring throughout your value chain, encompassing both upstream (e.g., raw materials acquisition and pre-processing activities) and downstream (e.g., distribution, storage, product use, and end-of-life activities) emissions.

      • This category includes emissions generated by purchased goods and services, transportation, employee commuting, outsourced activities, and more.
      • Scope 3 emissions can be more challenging to evaluate, but because they usually constitute a significant portion of a business's carbon footprint, it's crucial to incorporate them into any sustainability audit.

      2. Carbon Footprint

      The term carbon footprint refers to the total amount of greenhouse gases (GHGs), primarily carbon dioxide, that are emitted directly or indirectly by human activities, and it's usually expressed in equivalent tons of carbon dioxide (CO2e). These emissions come from a variety of sources and the carbon footprint concept helps businesses understand their impact on climate change and identify ways to reduce or offset these emissions.

      Reducing CO2 emissions within a business is crucial for mitigating climate change, enhancing sustainability, and potentially reducing operational costs.

        DID YOU KNOW

        An SME office-based business, with around 10 employees, could expect a carbon footprint in the region of 3.7 tCO2e per employee per year.

        3. Understanding the Difference between Carbon Neutral and Net Zero

          In the realm of environmental sustainability, the terms "carbon neutral" and "net zero" are often used interchangeably. However, they refer to distinct concepts with unique implications for how organisations approach the reduction of their carbon footprints.

          As the global community intensifies its efforts to combat climate change, understanding these differences is crucial for implementing effective strategies to reduce greenhouse gas emissions.

          While 'carbon neutral' focuses solely on carbon dioxide emissions, net zero covers all greenhouse gases, including methane, nitrous oxide, and fluorinated gases, which can be more potent but less prevalent than carbon dioxide. Reaching net zero involves drastically reducing greenhouse gas emissions across all sectors and compensating for any remaining emissions by removing greenhouse gases from the atmosphere, thereby achieving a net zero balance.

          a. Defining the Terms

          • Carbon Neutral measures CO2
          • Net Zero measures all greenhouse gases
          4. Carbon Neutral

            Achieving carbon neutrality involves balancing the amount of carbon dioxide released into the atmosphere with an equivalent amount seized or offset, or buying enough carbon credits to make up the difference.

            This means that any emissions produced by a company and products/services are balanced by funding an equivalent amount of carbon savings.

            Carbon neutrality is often achieved through a combination of reducing emissions and compensating for remaining emissions with carbon offsets such as planting trees or investing in renewable energy projects.

            5. Net Zero

            Net zero refers to achieving a balance between the amount of greenhouse gases emitted and the amount removed from the atmosphere.

            Key differences – Net Zero vs Carbon Neutral

            Scope of Emissions

            Net Zero

            Carbon Neutral

            Encompasses all greenhouse gases, not just carbon dioxide, reflecting a more comprehensive approach to emission reduction.

            Primarily focuses on carbon dioxide emissions, which are the most significant greenhouse gases emitted by human activities.

            Strategies for Emission Reduction

            Net Zero

            Carbon Neutral

            Requires a more extensive transformation of the economy and energy systems to cut emissions across all sectors, including transportation, agriculture, and industry. The approach is more about actual reductions in emissions rather than offsets.

            Allows for more flexibility in how emission reductions are achieved, often relying heavily on carbon offset projects such as reforestation, soil management, or renewable energy.

            Long-term Sustainability

            Net Zero

            Carbon Neutral

            Represents a longer-term and more sustainable goal that aligns with the global targets to limit warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels as outlined in the Paris Agreement.

            Can be seen as a shorter-term solution or stepping stone towards deeper decarbonization. It is easier to achieve and often used as an interim target by companies and countries.

            6.End of life products and their emissions

              The environmental impact of products extends far beyond their use phase, reaching into the often-overlooked end-of-life stage where disposal, recycling, or repurposing takes place. This critical phase can significantly contribute to a product's total carbon footprint, primarily through emissions released during waste processing or decomposition. Addressing these emissions is crucial as they play a substantial role in the overall lifecycle impact of products, influencing global sustainability efforts and the push towards circular economies.

              a. Incentivise customers to recycle

              • You may think that once your product is in the hands of the customer you have little influence over what happens when it reaches the end of its life, however, there are ways to encourage customers to recycle and ensure your products end up back in the supply chain. This could involve ‘nudging’ customer behaviour by offering an incentive for returning used products to you i.e. money off another purchase, or outlining the benefits of recycling, and clear instructions of how best to do so, on your packaging.
              • Some tech companies offer trade-in schemes where customers can get cashback when they return qualifying devices, for example: they’ll also collect old electronic goods of any brand, in any condition, and recycle them for free.

              b. Emissions for sold products

              • Calculating the emissions from the use of sold products, which fall under Scope 3 in greenhouse gas accounting, involves understanding the full lifecycle impact of those products, from production through disposal.
              • The focus here is specifically on the emissions that occur when customers use the products. This is particularly relevant for products like vehicles, appliances, electronics, and other goods that consume energy or resources during their operation.

              Step 1: Define the Product's Lifetime

              Determine the expected lifetime of the product, which includes how long it is typically used by the consumer. For example, a car might have a lifespan of 10 years, while a smartphone might be used for 2-3 years before replacement.

              Step 2: Estimate Usage Patterns

              Gather data on how the product is used by the average consumer:

              • Frequency of use (e.g., daily, weekly)
              • Intensity or volume of use (e.g., number of hours a device is operated per day, miles driven per year for vehicles)
              • Energy consumption per unit of use (e.g., kWh per hour for an appliance, liters of fuel per 100 km for a vehicle)

              Step 3: Obtain Emission Factors

              Find appropriate emission factors for the energy or resources consumed by the product. Emission factors can typically be sourced from governmental or international environmental agencies and will vary depending on the type of energy or resource and the region.

              • Emission factors for electricity consumption (kWh) will differ based on the regional energy mix.
              • Emission factors for gasoline or diesel consumption per litre or gallon.

              Step 4: Calculate Annual Emissions

              Multiply the average annual usage of the product by the appropriate emission factors to estimate the annual emissions per product.

              • For an appliance: Emissions = Average daily hours of operation × Days per year × Energy consumption per hour (kWh) × Emission factor (kg CO2e per kWh)
              • For a vehicle: Emissions = Annual mileage × Fuel consumption per mile (litre per km) × Emission factor (kg CO2e per litre)

              Step 5: Aggregate for Total Product Emissions

              Multiply the annual emissions estimate by the expected number of years the product will be used to find the total emissions over the product’s lifetime. To calculate the emissions for all products sold, multiply this figure by the total number of units sold.

              Step 6: Adjust for Real-World Factors

              Consider adjusting these calculations for real-world factors that might affect usage and emissions, such as variations in consumer behaviour, changes in energy sources, or advancements in product efficiencies over time.

              Example Calculation:

              Suppose a company sells air conditioners with the following data per unit:

              • Lifetime: 10 years
              • Average usage: 5 hours per day, 120 days per year
              • Energy consumption: 2 kWh per hour
              • Emission factor for electricity: 0.5 kg CO2e per kWh

              Annual Emissions per Unit = 5 hours/day × 120 days/year × 2 kWh/hour × 0.5 kg CO2e/kWh = 600 kg CO2e/year

              Total Emissions per Unit Over Lifetime = 600 kg CO2e/year × 10 years = 6,000 kg CO2e

              If 1,000 units are sold, then Total Emissions for All Sold Units = 6,000 kg CO2e × 1,000 units = 6,000,000 kg CO2e

              This calculation shows the total emissions for all units sold over their lifetime.

              This method provides a structured way to estimate the emissions impact of products when they are used by consumers, helping companies to understand and potentially reduce the environmental footprint of their products.

              Effectively managing the end-of-life emissions of products is not merely an environmental necessity but a strategic imperative for sustainable development. By optimising recycling processes, encouraging the repurposing of materials, and innovating in waste-to-energy technologies, businesses and policymakers can dramatically reduce the environmental footprint of products. This holistic approach not only mitigates harmful emissions but also propels us towards a more sustainable and resilient future, where the lifecycle of products is intrinsically linked to ecological conservation and economic efficiency.

              DID YOU KNOW

              In late March 2024, 50% of businesses reported taking at least some level of action to reduce their carbon emissions, 
              a rise of 4 percentage points from early November 2023; the most reported 
              action taken was switching to light emitting diode (LED) bulbs (30%). (

              Understanding and actively managing carbon footprints, striving for carbon neutrality, and setting ambitious net zero targets are crucial for any entity committed to responsible environmental management. These efforts not only contribute to combating global climate change but also enhance reputations, comply with regulatory demands, and meet the growing environmental expectations of consumers and investors. Ultimately, the journey towards carbon neutrality and net zero is not just about reducing emissions but transforming these challenges into opportunities for innovation, sustainability, and long-term economic viability.

              Choosing bespoke software solutions not only tailors technology to your unique business needs but also reflects our shared commitment to fostering sustainable business practices while saving you time and money. Contact us now and start your sustainability journey!


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