How to become a carbon neutral business

A step-by-step guide

Most businesses can take immediate climate action by becoming carbon neutral, yet very few know where to start.

The good news is you don’t need to be a sustainability expert to become carbon neutral. Just follow this step-by-step guide and bring in the right tools, people and partners along the way.‍

What does it mean for a business to be carbon neutral?

A business can claim to be  'carbon neutral' when all of the carbon emissions (scopes 1, 2 and 3) produced by the business operations are equal to or ‘neutralised’ by the carbon emissions avoided or removed from the atmosphere through the purchase of carbon credits (also known as carbon offsets). For every tonne of carbon produced, a business needs to purchase one verified carbon credit to consider those carbon emissions offset.

Carbon neutrality is an achievable short-term goal for most businesses. We consider it the first step in the journey to net-zero. To reach net-zero, a business ultimately needs to reduce or avoid most of its carbon emissions, reducing the need to purchase carbon credits over time and reducing its contribution to carbon emissions in the atmosphere, which are one of the key factors driving climate change.

Note: Different carbon neutral certification standards may define specific rules for how to measure and offset emissions in order to qualify. However, the high-level definition of carbon neutral as it’s described above is widely accepted.

A diagram summarising the difference between Carbon Neutral and Net Zero. Carbon Neutral - Immediate Action - Have measured & offset 100% of business emissions. Net Zero - By 2030 - Have reduced emissions by 90%+ and offset the rest.

Learn more:

How do carbon offsets work?

How is becoming carbon neutral different to reaching net zero?

How does a business become carbon neutral?

There are three key steps to becoming carbon neutral.

Step 1: Measure

“You can’t manage what you can’t measure” and managing carbon emissions is no exception!

Measuring and understanding your business’ carbon footprint is the first step to taking climate action on decreasing carbon emissions. You might hear different terms like carbon inventory, carbon footprint or carbon assessment; these generally all refer to the same thing.

Greenhouse gas emissions (primarily carbon emissions) are a by-product of almost all of the operations a business undertakes, no matter what type of business you’re in. This includes the energy used, waste created, business related travel and the emissions from suppliers. 

Best practice for measuring a businesses’ carbon footprint is to use a methodology that is based on the Greenhouse Gas (GHG) Protocol.  The GHG Protocol defines where the boundaries should be drawn for a business, which activities should be included and over what timeframe.

To measure your business carbon footprint specific data will be needed such as, energy use, waste produced, business travel and supplier spend over a 12 month period. This data is referred to as your ‘activity rate’ - in other words, how often you do something that produces emissions. 

These business activities are then multiplied by a specific ‘emissions factor’ to calculate the volume of emissions produced by that activity. An emissions factor is the quantity of carbon released into the atmosphere for a specific activity based on scientific evidence. 

Activity Rate multiplied by Emissions Factor equals Carbon Footprint

Here’s an example of how your data could be used in this equation:

[An office located in Melbourne, Victoria uses 1000kwh of electricity per month] X [the kg of carbon emissions produced by the Victorian energy mix per kwh electricity produced] = The carbon footprint of their office energy usage in tonnes CO2

This calculation is repeated across all major areas of your business until you’ve accounted for the vast majority of your emissions-producing activities. The combined total of each calculation produces your total carbon footprint calculation over a 12 month period.

Unless you have up to date in-house knowledge on carbon emission calculation methodology it is important to use a trusted provider to measure and validate your carbon footprint, especially if you want to use it as the basis for a carbon neutral claim.

An animated GIF of the 'Measure' dashboard in the Trace app which includes an interactive pie chart breakdown of an example company's carbon footprint, including Energy, Suppliers, Travel and Waste emissions.

An example of what a carbon footprint breakdown looks like in the Trace platform.

Step 2: Create a reduction plan

Measuring your carbon footprint is incredibly powerful because it gives you insight into where your emissions are coming from and where your opportunities are to  manage and reduce them. 

You can use your carbon footprint to dive into the detail of each measured category to uncover what is contributing to the bulk of your carbon emissions. This will allow your team to start thinking about the initiatives and actions you could take to reduce these emissions. 

For example, for service-based companies,  energy use and suppliers are often significant contributors to their overall carbon footprint, so should be a focus of carbon reduction initiatives. 

You don't need to have already reduced your emissions in order to become carbon neutral with Trace, however we do encourage that you bring all your relevant team members and stakeholders together to start working on a carbon reduction plan as soon as possible. This will give you the maximum time to achieve your goals before re-measuring your footprint in 12 months time a d is an important part of a business' broader journey to reach net zero emissions.

Step 3: Offset your emissions with carbon credits

The final step to make your business carbon neutral is to purchase carbon credits to offset your carbon emissions.

You can think about carbon neutrality like you’re using a set of balance scales. Imagine your business’s emissions (tonnes of carbon) on one side, which need to be 'balanced out' by carbon credits on the other side. 

Carbon credits are created through the development of climate projects that verifiably help sequester or avoid carbon being released into the atmosphere. The purchase of carbon credits by companies, governments or individuals who want to ‘neutralise’ their carbon emissions helps finance these projects which would otherwise not have existed (and so the carbon would not have been removed/ avoided).

1 carbon credit equals 1 tonne of CO2e

Because every carbon credit represents one tonne of carbon removed from the atmosphere or avoided, you need to purchase one credit for every tonne of carbon your business produces to ‘balance the scales’ and become carbon neutral.

You can purchase carbon credits through a range of platforms or partner organisations, however it’s important to ensure they’re credible. At Trace, we use a range of criteria when choosing carbon credits for our portfolio, so our customers can be confident they're buying the best available.

It’s important to note that offsetting isn't a standalone solution. Using the information gathered through the process of becoming carbon neutral, every company should be developing a strategy to reduce emissions today and then shift their focus to the longer term goal of a transition to net-zero.

How much does it cost for a business to be carbon neutral?

The cost to become carbon neutral usually consists of three key components, some of which might be bundled together depending on your approach / selected partners. These include:

  1. Carbon footprint measurement
  2. Purchasing of offsets
  3. Certification/ licence fees

‍The final cost can vary widely, depending on the following factors:

  • Whether you measure your carbon footprint yourself or use an external platform or consultant to help. Most businesses will need outside help and expertise for this process. Large businesses or those with complex supply chains will likely want to enlist the help of a specialised consultant. Many businesses  can usually use tech platforms such as Trace to collect their data and measure their footprint at a fraction of the cost.
  • The price of the carbon offsets you want to purchase. This can vary depending on the project locations and type. For example, Australian-based carbon offset projects are limited in number and more expensive to develop so generally cost more than their overseas counterparts.
  • The size of your carbon footprint, which determines the number of tonnes of carbon credits  you need to buy, will be one of the biggest cost factors.
  • The cost of official certifications. To certify that you’ve measured and offset your carbon footprint, you may want to gain certification from a third party, which usually comes with a ‘badge’ you can use on marketing collateral. One example is the Australian Government’s Climate Active certification. Not only can this have an associated cost (usually a licence fee paid annually), but may also require you to meet certain criteria in order to qualify for that certification (for example, involving a third-party consultant to verify your data and calculation methodology), which can impact the other costs outlined above. Not sure whether Trace or Climate Active is right for your business? Read through this deep-dive on the differences, and how the two can complement one another.

For an indication of costs to become carbon neutral with Trace get in touch with our team today!

You’ve made it this far – starting is easy

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