Why the days of carbon neutral claims are numbered

Companies have previously viewed achieving carbon neutral status as a clear, public demonstration of their commitment to climate action. However with questions surrounding the integrity of the global carbon offset market, public trust in corporate green claims falling, and governments cracking down on greenwashing claims – the days of companies promoting carbon neutral claims are numbered.

In Europe the writing is on the wall, with plans to ban carbon neutral status claims based on carbon offsetting schemes by 2026. Here in Australia, the government is also conducting a review of the nation’s carbon neutral certification program – ClimateActive.

With the integrity of the carbon offset market (which underpins carbon neutral claims) in serious question, some companies are already backing away from carbon neutrality. For example, Nestle announced it will no longer use carbon offsets or promote its products as ‘carbon neutral’. Meanwhile UK airline easyJet is scrapping its carbon offsetting scheme in favour of investment in measures to reduce their real emissions.

The reasons carbon neutral claims have been so effective and popular is that ‘carbon neutrality’ was a simple, marketable claim that could be cheap to achieve while being easy to visual and promote – especially before regulators starting cracking down.

So as trust in carbon neutral claims declines, what will brands do? 

We know that consumers, especially young people, want to spend their money with brands that minimise their impact on the environment. Savvy consumers in 2024 want meaningful proof that green claims are legitimate, and want to know what action brands are taking to reduce their footprint.

That is where carbon labelling comes in.

A carbon label is an easy to understand product label that shows consumers the total volume of greenhouse gas emissions generated by a product or service. While consumers will be aware of health labels on food for example, carbon labelling is still in its infancy, but we are seeing some innovative brands move early.

For example, travel company Intrepid has started to place a carbon label representing the amount of CO2 emitted per person per day on each of its top 500 trip itineraries. Fashion brand All Birds has been publishing carbon labels on its products since 2020, and Logitech is also expanding its range of products that come with a carbon label.

While carbon labelling is an important, authentic and transparent way for brands to communicate with its customers, it’s also an incentive for companies to continue to reduce emissions and earn customer loyalty. For example, climate and environmentally conscious consumers could be more likely to become return customers if a product’s carbon footprint reduces over time.

Another positive impact of carbon labelling is that it will force companies to gain a deeper understanding of their supply chains. While carbon labels are primarily a consumer-facing initiative, suppliers to brands that implement carbon labelling systems will also need to report their climate impact to their B2B customers.

As with any ‘green’ marketing claim, a company that produces carbon labels will need to ensure it has robust data to support its claims, or face accusations of greenwashing and the regulatory and reputational harm that follows. Brands should also be prepared for governments to step in to regulate carbon labelling once the practice becomes more common.

The more consumers lose trust in carbon offsets and carbon neutral claims, the more we will see brands seek to establish their environmental credentials in other ways. Carbon labelling is the type of authentic, transparent and accountable measure that could prove a winner with consumers, while also helping to drive real reductions in emissions.