- Thousands of companies with climate goals use confusing jargon like "carbon neutral" and "net zero."
- Corporate climate advisors told Insider what makes a pledge credible or misleading.
- Global efforts are underway to rid the market of greenwashing.
The amount of jargon thrown around in climate circles can feel dizzying.
Corporate climate pledges are rife with terms like "carbon neutral," "net zero," and "carbon negative," leading to confusion among consumers and investors, among others, about what it all means.
It's little surprise so many of us are perplexed. There's no standard definition of these claims, nor are there many institutions policing whether a company is using them to mislead the public about its climate record.
UN Secretary General António Guterres put it this way in November during the annual climate conference: "The problem is that the criteria and benchmarks for net-zero commitments have varying levels of rigor and loopholes wide enough to drive a diesel truck through."
That said, there are global efforts underway to rid the market of greenwashing and help companies trying to slash their greenhouse-gas emissions do it with integrity and transparency. Regulators are also ramping up scrutiny of the sustainable-finance markets.
Insider spoke to several experts about how they assess whether a company's climate claims are legit. Here's their advice:
Unpacking 'net zero'
If a company sets a net-zero goal, that generally implies it plans to reduce greenhouse-gas emissions across its entire value chain as much as possible by 2050, said Simon Fischweicher, the head of corporations and supply chains for CDP North America, a nonprofit that runs the world's largest environmental-disclosure program.
The goal should cover emissions from a company's own operations, such as office buildings, manufacturing plants, and energy consumption, as well as from its suppliers and customers. These are known as Scope 1, 2, and 3 emissions.
A credible net-zero goal also includes near-term targets, because absent short-term goals it appears as though corporate leadership isn't serious, said Mike Wallace, the chief decarbonization officer at Persefoni, a software company that helps companies disclose their climate footprint.
"When a CEO signs off on these targets now, but they are far enough away that the CEO will most likely be dead, are they really committed?" Wallace said.
A good indication that a company's net-zero pledge is solid is sign-off by the Science Based Targets initiative, which has a partnership with CDP, the UN Global Compact, World Resources Institute, and World Wildlife Fund.
The initiative has strict criteria for net-zero goals, including requiring that companies reduce emissions as much as possible before purchasing carbon offsets to meet the goal. SBTi also ensures that a company's climate strategy is aligned with limiting global warming to 1.5 degrees Celsius above preindustrial levels.
This is a threshold scientists say could avert the most catastrophic impacts of the climate crisis, such as massive drought, habitat loss, and famine in some parts of the world. Holding warming to 1.5 degrees is the overarching goal of the Paris Climate agreement.
When 'net zero' may be greenwashing
The UN in November identified when a net-zero claim might be greenwashing, such as with banks and oil companies that continue to invest in and build fossil-fuel infrastructure.
Some companies, including ExxonMobil, also have net-zero goals that only cover direct operations.
"That means there aren't goals to reduce emissions associated with the use of oil and gas, which is the largest source when looking at the fossil-fuel sector," Fischweicher said, pointing to all the fuel used to power cars, trucks, and buildings.
The UN also said companies might use their lobbying power to undermine government climate policies or have a weak governance structure that doesn't tie executive compensation to reaching environmental and social goals.
"It's really good if the board is involved somehow," Wallace said.
Another red flag: companies that buy "cheap" carbon credits that lack integrity instead of immediately cutting their own emissions, according to the UN.
Why 'carbon neutral' can be misleading
The UN's concerns about carbon offsets are why claims of an organization or product being "carbon neutral" can also be worrisome.
This assertion typically indicates that the company is buying offsets to compensate for emissions it hasn't reduced on its own. A carbon offset represents one ton of carbon that was prevented or removed from the atmosphere because of a project elsewhere in the world, such as protecting forests or building renewable-energy plants.
But climate experts don't want companies to solely rely on offsets instead of slashing their own carbon footprint, in part because there are concerns about the quality of some offsets and whether they are truly reducing emissions.
"I think there is rightfully some skepticism around climate neutral," Fischweicher said.
'Carbon negative'
There's fewer definitions of what it means to be "carbon negative," Fischweicher said. But in general, it indicates that a company is going to achieve zero emissions and then go even further by removing its historical contributions to the climate crisis.
Microsoft made a splash in 2020 when it announced that it aimed to be carbon negative by 2030. Achieving that goal requires the development of carbon-removal technologies, which remain nascent and expensive. Reforestation is, for now, Microsoft's main method of zapping carbon from the atmosphere.
"Some companies are starting to think about targets that go beyond neutralizing their own impact and taking back carbon from the atmosphere," Fischweicher said.