Consultation on the term 'carbon neutral': its definition and recommendations for good practice

Comments from ACCA to the Department of Energy and Climate Change (DECC), May 2009.

ACCA is pleased to comment on the above consultation. We have not commented on each and every question, but have provided some general points for those sections deemed most relevant to the accounting profession. These comments have been prepared in consultation with the ACCA Social and Environmental Committee.

ACCA would like to stress that although we do not disagree with the term ‘carbon neutral’ or ‘offsetting’ per se, it needs to be stressed in the document that these are not a replacement for absolute reductions in emissions and should only be a last resort to counteract any residual, unavoidable emissions. All too often, organisations are making claims in their public materials, which can be misleading as absolute emissions are found to have actually increased. If the term carbon-neutral is to be used we think it should always be part of a fuller disclosure which includes information on absolute emissions.

Any final carbon neutral document that is published by the UK Government should be done in consultation with, and reference to, the already available emissions reduction standards – for example, the Carbon Trust Standard and Carbon Reduction Label (see the Carbon Trust website by clicking on the link at the bottom of this page).


ACCA agrees that in the absence of an international accounting standard for GHG emissions, the most suitable and widely used standard available is the WBCSD GHG Protocol. However, this does not mean that this is sufficient and ACCA is advocating the publication of an international accounting standard for greenhouse gas emissions (from the International Accounting Standards Board) which deals with issues such as emissions management and reporting in more detail.

In terms of which emissions the term ‘carbon neutral’ covers, ACCA believes that in an ideal world, all GHG emissions across the organisation should be covered when making assertions as to carbon neutrality. However, if an organisation uses the term and it does not cover all emissions, this needs to be made extremely clear in any claims and disclosures on the topic – in other words, the scope of the emissions reported must disclosed.

The recommendations for emissions reporting are both clear and appropriate, but are not sufficient for certain sectors such as financial services and other service providers in terms of the boundaries of scope 3 emissions. Some banks are making carbon neutral claims, when in fact their emissions measurement and offsetting does not contemplate the impact of investment portfolios which is by far the largest impact of these organisations.

Transparency guidelines are clear, but as for emissions reporting they are insufficient and require more detail in terms of how an organisation can be transparent in practice – ie what format transparency will take (financial reporting, sustainability reporting etc) and where it will fit in with other disclosed information. ACCA feels that any reporting on emissions (and subsequent reductions) should be kept separate from any assertions on neutrality.

If the term ‘carbon neutral’ is not applied to all emissions then the carbon impact of these residual emissions that are not covered should be declared, to avoid giving the reader a false sense of security in terms of scope and coverage of assertions.


ACCA does not feel that the Government definition of carbon neutrality should include specific emissions reductions for the reasons outlined in the consultation document i.e. that different sectors and organisations will have different impacts so there is no one figure that would be appropriate. In addition to this, companies should be encouraged to use national and international targets as a guide to increase consistency, and one would hope that the CRC trading scheme and subsequent carbon market will also help set targets.

The carbon neutral document could strengthen the good practice for reducing emissions by referring directly to the relevant regulation and national/international targets set. The section could also start with an upfront description of the business case of reducing emissions and carbon neutrality – why should organisations do it in the first place?

ACCA feels that absolute emissions reduction is the only appropriate way of measuring emissions and making subsequent carbon neutrality claims. Relative data may also be included, if required, but only in addition to absolute data.

Transparency elements of the reducing emissions section are sufficient, but more information should be included on disclosure and monitoring of data and claims. Claims of future aspirations for emissions reductions or carbon neutrality should not be acceptable on their own.


Carbon offsetting should only be considered a short term, transitional solution to reducing emissions – not a long term solution or avoidance of actual, absolute emissions reductions. Carbon offsetting also needs to be followed and monitored carefully to ensure it is credible.

The recommendations for offsetting are a good start, but ACCA does not believe that they are detailed enough to provide sufficient guidance to organisations. Feedback on the transparency elements for offsetting are similar to that of the other transparency elements – more needed on how organisations can report on offsetting activities, as well as measuring and carrying it out.


The proposed definition and recommendations could work in practice because they are sufficiently flexible for a range of organisations of different sectors and sizes to adopt. However, this does not necessarily guarantee that their use will be effective and result in an actual reduction in emissions or credible use of the term ‘carbon neutral’ for precisely the reason that they are so flexible.

ACCA does not believe that the term ‘carbon neutral’ should be regulated. However, when disclosing information on an organisation’s perceived neutrality, this reporting (in the financial or annual report) should be appropriately audited and the disclosures made sufficiently transparent (as suggested earlier in this letter).

Uses of the definition should be as comparable as possible so that interested parties, especially investors, can easily compare across companies and sectors. However, again, transparency is key here so that it is very clear what scopes of emissions are measured and reported and what corresponding level of neutrality has been achieved (so that it is clear if company ‘a’ has only become neutral against scope 1, but company ‘b’ across scopes 1-3).

ACCA is supportive of the development of an international accounting standard for the assurance of carbon emission reporting. We therefore feel that assurance of carbon reporting in general should be regulated, not specifically carbon neutrality (the latter of which would be included in the former). This assurance of carbon neutrality in particular should include issues such as the credible inclusion of VERs in calculations. ACCA is involved in the IFAC/IAASB project on the assurance of carbon reporting and feels that having an overall accounting standard for this area is the best solution.

ACCA looks forward to any subsequent drafts of the carbon neutral consultation document and to continuing this dialogue.

Last updated: 11 Apr 2012