“Net zero” and “carbon neutral” are often used as if they meant the same thing. In corporate climate claims they now mean quite different things, and the difference decides which credits you need and what you can say. This page compares the two terms as the main standards and regulators use them. It is part of our claims and rules section.
Net zero and carbon neutral at a glance
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| Aspect | Net zero (SBTi) | Carbon neutral (common use) |
|---|---|---|
| Own emissions | Cut to a residual level in line with 1.5°C pathways | No minimum cut is implied by the term itself |
| Credits used for | Only to neutralise residual emissions, with removals | To cover all remaining emissions |
| Type of credit | Carbon removals | Reductions or removals |
| Timing | At the net-zero target year, 2050 at the latest | Often claimed now, ahead of any net-zero date |
| Main standard | SBTi Corporate Net-Zero Standard | ISO 14068-1:2023 |
As of Oct 2026
The table summarises the SBTi Corporate Net-Zero StandardSource 1Source 2 and the Oxford Offsetting Principles’ description of how “carbon neutral” is used in practiceSource 3.
What net zero means
The Science Based Targets initiative (SBTi) defines corporate net zero in two parts. A company must reduce its scope 1, 2 and 3 emissions to zero or to a residual level consistent with eligible 1.5°C pathways, and it must permanently neutralise any residual emissions at its net-zero target year and any emissions released after thatSource 1.
The SBTi says most companies will reduce emissions by at least 90% through their long-term science-based targetsSource 1. It also says a company cannot claim to have reached net zero until it has met its long-term target across all scopes and neutralised its residual emissionsSource 1.
Version 2.0 of the standard, published in June 2026, keeps that structure. At the net-zero target year, companies must reduce emissions to zero or residual levels and neutralise all residual emissions using eligible carbon removals. Residual emissions of long-lived greenhouse gases must be neutralised with long-lived removalsSource 2. Our page on SBTi and carbon credits covers the version change in detail.
EU sustainability reporting uses a similar figure. Under ESRS E1, a company that discloses a net-zero target must explain how its residual emissions, after approximately 90–95% of emission reduction, are intended to be neutralisedSource 5.
What carbon neutral usually means
The Oxford Offsetting Principles say carbon neutrality and net zero should be functionally equivalent. In practice, though, practitioners, standards and regulators have come to read “carbon neutral” as a less rigorous, interim claim: an organisation buys credits, either reductions or removals, to compensate for all its remaining emissions, often ahead of its net-zero targetSource 3.
The principles describe this as a departure from net zero, which is reached through deep emission reductions, with only the residual emissions compensated by removals that have a low risk of reversalSource 3.
There is an international standard for carbon neutrality claims: ISO 14068-1:2023, Climate change management, Part 1: Carbon neutrality, published in November 2023Source 4. If you make a neutrality claim outside the places where such claims are banned, following a recognised standard like this is the minimum.
Where carbon credits fit
The two terms use credits very differently.
- Under net zero, credits do not count towards emission cuts. SBTi says carbon credits must be reported separately from the greenhouse gas inventory and do not count as reductions towards near-term or long-term targets. They can be used only to neutralise residual emissions or to finance climate mitigation beyond a company’s targetsSource 1.
- Under a typical carbon neutral claim, credits cover the whole remaining footprint, and they can be reduction credits as well as removal creditsSource 3.
That is why the type of credit matters. A net-zero balance needs removals that store carbon for a long time; an avoidance credit from a renewable energy or cookstove project can’t do that job under the SBTi standardSource 2. Our guide to removal vs avoidance credits explains the difference.
How regulators treat the two words
Regulators tend to treat both terms with suspicion when they rest on credits.
Claims rules for both terms
- EU. From 27 September 2026, offset-based claims that a product has a neutral, reduced or positive greenhouse gas impact are banned. The directive’s examples include “climate neutral”, “CO₂ neutral certified” and “climate net zero”Source 6.
- UK. The ASA and CAP advise advertisers to avoid unqualified carbon neutral, net zero or similar claims, to say whether they are reducing emissions or relying on offsetting, and to base future net-zero goals on a verifiable strategySource 7.
- US. The FTC’s Green Guides say marketers should not make unqualified general environmental benefit claims, because such claims are hard to substantiateSource 8.
The ASA’s consumer research found that people tended to believe carbon neutral claims implied an absolute reduction in emissions, and could feel misled when the role of offsetting was revealedSource 7. A net-zero claim made today about a 2040 or 2050 target is a statement of intent, and the ASA expects it to be backed by a verifiable planSource 7.
Which claim should you make?
- Measure first. You can’t claim either term without a full inventory of the emissions the claim covers. See scope 1, 2 and 3 explained.
- Set reduction targets. A net-zero target only means something with science-based near-term and long-term targets behind itSource 1.
- Report credits separately. Show your own cuts and the credits you retired as two different numbersSource 1.
- Use factual wording. Describe what you did, rather than a one-word label, especially in the EU, where offset-based product neutrality claims are bannedSource 6.
For the wider rules on the phrase, read carbon neutral claims. If you want a framework for using credits alongside your targets, the VCMI Claims Code is the main one. And for the logic of cutting first, see reduce vs offset.