Net zero is the state where a company’s greenhouse gas emissions are reduced to the greatest extent possible, with any small residual emissions neutralised through permanent carbon removal. It represents the gold standard of corporate climate commitment , and it is increasingly what regulators, investors, and customers expect.
But net zero is widely misunderstood. It is not simply buying carbon offsets to “cancel out” emissions. Genuine net zero requires deep, science-aligned emission reductions before any compensation enters the picture.
Net zero vs carbon neutral: what is the difference?
These terms are often used interchangeably, but they mean very different things:
| Aspect | Net Zero | Carbon Neutral |
|---|---|---|
| Reduction required | ≥90% of emissions | Any amount |
| Offsets allowed | Only for residual ≤10% | Unlimited |
| Offset quality | Permanent removal only | Any type (avoidance OK) |
| Standard | SBTi Net-Zero Standard | PAS 2060 |
| Timeline | By 2050 at latest | No fixed timeline |
A company claiming carbon neutrality can theoretically offset 100% of its emissions without reducing anything. A net-zero company must first cut emissions by at least 90% , only then can it compensate the remaining fraction through high-quality permanent removal.
The SBTi Net-Zero Standard
The Science Based Targets initiative (SBTi) provides the most rigorous framework for setting and validating net-zero targets. The standard requires:
Near-term targets (2030)
Companies must set 5–10 year targets covering:
- Scope 1 and Scope 2: Mandatory reduction targets aligned with 1.5°C pathways
- Scope 3: Required if Scope 3 represents more than 40% of total emissions (which it does for most companies)
Long-term targets (2050)
The deep decarbonisation requirement:
- Reduce total emissions by at least 90% from a base year
- Only residual emissions (≤10%) may be addressed through permanent carbon dioxide removal
- Achieve by 2050 at the latest
Beyond value chain mitigation
While pursuing their own reductions, companies are encouraged to invest in climate mitigation outside their value chain. This is separate from the net-zero target itself.
The path to net zero: step by step
Step 1: Measure your carbon footprint
Everything begins with a comprehensive carbon footprint calculation following the GHG Protocol. You need accurate baseline data across all three scopes before you can set meaningful targets.
Step 2: Set science-based targets
Work with the SBTi framework to set near-term and long-term targets. This involves modelling reduction pathways and determining which levers will deliver the greatest impact.
Step 3: Develop a transition plan
Create a detailed roadmap covering:
- Energy efficiency improvements
- Renewable energy procurement
- Fleet electrification
- Supply chain engagement for Scope 3
- Process changes and technology investments
- Timeline with milestones
Step 4: Execute and track
Implement reduction initiatives and track progress annually. This is where ESG platforms become essential , manual tracking across hundreds of data points is neither scalable nor audit-ready.
Step 5: Neutralise residual emissions
Once you have achieved deep reductions (≥90%), address remaining emissions through high-quality permanent carbon removal. Options include direct air capture with geological storage, biochar, and enhanced rock weathering.
Net zero and CSRD
Under the CSRD, companies must disclose their climate transition plans as part of ESRS E1 (Climate change). This includes:
- Whether the company has adopted a transition plan aligned with 1.5°C
- GHG reduction targets and base year
- Progress against those targets
- Key actions and investments planned
- How the transition plan relates to the company’s business model
Having an SBTi-validated net-zero target significantly strengthens these disclosures. It signals to auditors, investors, and regulators that the company’s climate commitments are science-aligned , not aspirational marketing.
Common pitfalls on the net-zero journey
Relying on offsets instead of reductions
The single biggest mistake. Purchasing avoidance credits (renewable energy in developing countries, avoided deforestation) does not constitute progress toward net zero under the SBTi framework.
Ignoring Scope 3
Many companies set ambitious Scope 1 and 2 targets while leaving Scope 3 , typically 70–90% of their footprint , untouched. The SBTi requires Scope 3 targets for companies where it exceeds 40% of total emissions.
Setting targets without a plan
A net-zero pledge without a detailed transition plan is greenwashing. Stakeholders increasingly demand concrete roadmaps with interim milestones, not just long-term aspirations.
Choosing the wrong base year
The base year should represent a typical year for the company. Choosing an unusually high-emission year makes targets look easier to achieve.
How Dcycle helps
Dcycle’s decarbonisation platform supports companies at every stage of their net-zero journey:
- Automated carbon footprint calculation across Scopes 1, 2, and 3
- Scenario modelling to identify the highest-impact reduction levers
- Target tracking aligned with SBTi pathways
- CSRD-ready reporting with transition plan disclosures under ESRS E1
- Expert advisory to guide target-setting and validation
Request a demo to see how Dcycle can accelerate your path to net zero.
