Net Zero vs. Climate Neutrality: The Difference, Claims, and What Companies Need to Know Now

In two weeks, on March 27, 2026, the implementation deadline for the EU’s “Empowering Consumers” (EmpCo) Directive will expire. What many companies have so far treated as an abstract announcement from Brussels will then become applicable German law. Starting in September 2026, the ban will take full effect: Anyone who advertises a product as “climate-neutral” even though this claim is based solely on the purchase of carbon credits will be in violation of competition law and risks warnings, fines, and reputational damage.

The time for waiting is over. Climate communication, product labeling, and procurement decisions must be reviewed now. Six months until full implementation may sound like a buffer, but it isn’t when product packaging, marketing materials, and internal approval processes need to be updated.

At the same time, the expectations of investors, buyers, and customers are shifting. Those who continue to rely on offsetting through their balance sheets and market this as “neutral” are thinking backward, while the market is moving forward. In this article, we explain what the difference between climate neutrality and net zero really means, what specific regulatory changes companies can expect, and what the right response is at each level.

What is a climate claim, and how should it be understood?

A climate claim is any public statement regarding the climate impact of a company or product. Typical examples include “climate-neutral production,” “CO₂-offset,” or “net zero by 2040.” While these may sound similar at first glance, they differ in two key ways: the nature of the claim and its scope.

Dimension 1: Type of claim—compensation or contribution?

A compensation claim states: Our emissions are offset by the purchase of CO₂ credits. The emissions profile itself remains unchanged. This model is coming under regulatory pressure.

A Contribution Claim states: We are actively reducing our emissions and, in addition, making an extra contribution to climate protection, for example by funding forest restoration projects. The distinction between reduction and additional contribution is made explicit. This approach shifts the narrative: from offsetting to responsibility.

Dimension 2: Level of the claim, product, or company?

Just as important as the nature of the claim is the question of at what level it is made. A product-related claim refers to a single good or service: “This product is manufactured in a climate-neutral way.” A company-wide claim concerns the overall strategy: “We aim to achieve net-zero by 2040.”

This distinction is not merely academic. It determines which regulatory requirements apply, what burden of proof is involved, and which solutions are even viable. Starting in 2026, product claims will be subject to significantly stricter scrutiny than corporate statements. Without knowing the level of their claim, companies cannot assess whether they are on solid ground.

Why both dimensions matter

Only by combining both dimensions can we identify the actual risk and the right path forward. A compensation claim at the product level—such as “this product is climate-neutral through CO₂ credits”—will no longer be legally tenable as of September 2026. A contribution claim at the corporate level, such as “we are reducing our emissions in line with the SBTi target pathway and additionally financing forest restoration projects,” is, by contrast, regulatory robust and communicatively credible.

The fundamental strategic question is therefore no longer simply: What are we communicating? But rather: At what level, and on what basis?

The Difference Between Climate Neutrality and Net Zero

Now that we understand the different types and levels of claims, the strategic question arises regarding the principles underlying them. This is where climate neutrality and net zero diverge fundamentally—not only in terms of content, but also in terms of the level at which they operate.

Carbon neutrality: Offsetting, at the product or company level

For example, a company emits 10,000 tons of CO₂ per year, purchases an equal number of credits, and reports “zero” on its balance sheet. The actual emissions profile remains unchanged. Climate neutrality can be communicated at the corporate or product level and has been used particularly frequently in practice as a product claim: “This packaging is climate neutral.”

The current standard is ISO 14068-1, which replaces the withdrawn PAS 2060. Climate neutrality does not require a mandatory reduction target. Scope 3 emissions—that is, emissions from the entire supply chain—are often not included. This makes the concept achievable in the short term but vulnerable in the long term, especially at the product level.

Net Zero: Systematic reduction, exclusively at the corporate level

Net Zero is a corporate framework, not a product standard. It applies to the entire organization, not to individual goods or services. Companies must reduce their Scope 1, Scope 2, and Scope 3 emissions by at least 90 to 95 percent compared to a base year. Only the remaining, unavoidable residual emissions may then be offset.

The framework for this is the Net Zero Standard of the Science Based Targets initiative (SBTi). It requires science-based emission reduction pathways, transparent progress reporting, and a timeline extending to 2050. Offsetting is permitted, but only as a supplementary measure and only once the company’s own emission reductions are well underway. There is no recognized net-zero standard at the product level.

An overview of the key differences

Standards and Frameworks: What Really Matters?

SBTi Net Zero Standard

The Science Based Targets initiative (SBTi) is currently the most widely used framework for net-zero targets at the corporate level. It requires deep emissions reductions before offsetting even comes into play. Companies must set their targets based on science and transparently document their progress. There is no equivalent net-zero standard for individual products. Here, a life cycle assessment (LCA) serves as the methodological basis for credible reduction claims.

Beyond Value Chain Mitigation (BVCM)

BVCM describes climate protection measures outside a company’s own value chain, such as the financing of forest restoration projects. These measures are considered an additional contribution, not a substitute for a company’s own reduction obligations. This is precisely the basis for contribution claims: the financing of forest restoration projects can be communicated if it is clearly identified as an additional contribution and not as proof of a product’s climate neutrality.

ISO Net Zero Guidelines

ISO IWA 42:2022 provides an international framework for net-zero definitions at the organizational level. It enhances comparability and increases the pressure to make precise, verifiable claims. The direction of all relevant standards is clear: reduction first, offsetting only as a supplement, and always clearly separated by level.

What EmpCo will mean in practice starting in 2026

With an understanding of the types and levels of claims, the EmpCo regulation can be clearly categorized. The law applies where the risk is greatest: to compensation claims at the product level.

Starting in September 2026, EmpCo will prohibit product-specific climate neutrality claims that are based solely on CO₂ offsetting. Anyone who advertises a single product as “climate neutral” without demonstrating actual emissions reductions throughout the product’s life cycle will be in violation of the law. General terms such as “sustainable,” “green,” or “environmentally friendly” will also only be permitted at the product level if recognized, outstanding environmental performance can be demonstrated. Self-developed labels without independent certification will no longer be permitted.

Company-wide climate communication—such as net-zero targets or long-term climate strategies—is not automatically subject to the same ban. However, it must also be verifiable and transparent. The key requirement here is not the ban itself, but the obligation to provide evidence: anyone claiming to be pursuing net-zero must be able to demonstrate how.

As early as 2024, the Federal Court of Justice (BGH) ruled in a landmark decision (I ZR 98/23) that climate-related advertising claims must be clear, transparent, and verifiable. The EmpCo now enshrines these requirements as binding provisions in competition law. The Green Claims Directive, which was originally intended to introduce an ex-ante verification requirement, has been on hold since June 2025. The EmpCo, on the other hand, is certain to take effect.

The correct answer depends on the level

EmpCo is limiting product-related compensation claims. Net Zero is not the answer, because Net Zero simply does not exist at the product level. Confusing the solutions creates new risks. The key question is: At what level does the problem lie?

At the product level, either a verified reduction in emissions across the product lifecycle—documented by a life cycle assessment (LCA)—is required, or a shift to a contribution claim. Instead of “this product is climate-neutral,” the statement would then read something like: “We are continuously reducing emissions during production. In addition, we fund certified forest restoration projects in Germany.” No promise of neutrality, but an honest and regulatory-compliant statement.

At the corporate level, Net Zero is the strategically superior framework according to the SBTi. It requires science-based reduction pathways across all scopes, excludes offsetting as a primary tool, and is aligned with the requirements of investors, buyers, and regulators. Companies seeking to communicate credibly at the corporate level need this framework not as a marketing statement, but as an operational foundation.

Clearly distinguishing between these levels is not a mere formality. It is essential for ensuring that climate communication is legally sound and internally consistent.

Three questions to assess where you stand

Before you revise your climate communication, it’s worth asking yourself three honest questions:

1. Do you reduce emissions through structural measures, or do you primarily offset them?
2. Do you know whether each climate claim refers to the product or the company, and do you have the appropriate supporting evidence for each?
3. Would your claim still be convincing even if the word "neutral" weren't included?

If any of these questions remain unanswered, there is a lack of strategic substance.

Where it starts: With your own carbon footprint

Credible climate communication doesn't start with a claim, whether at the product or company level. It starts with a number.

How high are emissions throughout the product lifecycle? What are the company’s total Scope 1, Scope 2, and Scope 3 emissions? Which of these can actually be avoided? As long as these questions remain unanswered, any climate strategy remains a mere assertion, and any claim carries a risk. Only when you know where emissions originate can you prioritize, invest in the right measures, and communicate credibly at the appropriate level.

We help companies calculate their complete carbon footprint across the entire value chain. Not merely as a reporting requirement, but as a foundation for genuine reduction and reliable communication—at both the product and company levels.

Frequently Asked Questions (FAQs)

Will it still be permissible to advertise climate neutrality after 2026?

At the product level, only under strict conditions: Starting in September 2026, EmpCo will prohibit product-related claims based solely on CO₂ offsetting. Any company wishing to continue advertising a product as climate-neutral must demonstrate a verifiable reduction in emissions throughout the product’s lifecycle, not just provide certificates. A more robust alternative is to switch to a contribution claim. At the corporate level, climate-neutrality communication remains possible, but it must also be transparent and verifiable.

Does the EmpCo apply to our corporate communications as well, or only to products?

The EmpCo primarily addresses product-related claims made to end consumers. Company-wide climate communications—such as goals, strategies, or sustainability reports—are not automatically subject to the same prohibition. However, such statements must also be clear, transparent, and verifiable. At the same time, CSRD reporting requirements and supply chain due diligence are tightening standards in the B2B sector as well.

What is a contribution claim, and when is it the better choice?

A contribution claim communicates the financing of a climate protection project as an additional contribution that is explicitly separate from the company’s own emissions reductions. At the product level, it is the more robust regulatory alternative to the neutrality claim: Instead of “this product is climate-neutral,” the statement essentially reads, “we reduce emissions during production and additionally finance certified climate protection projects.” This is more honest and will remain valid even after 2026.

What is the difference between net zero and climate neutrality?

Climate neutrality offsets emissions through carbon credits and can be communicated at the product or company level. Net Zero is exclusively a corporate framework: It prioritizes systematic emissions reduction across the entire value chain (Scopes 1, 2, and 3) and allows offsetting only for unavoidable residual emissions, following a reduction of at least 90 to 95 percent. There is no recognized net-zero standard at the product level.

What exactly does the SBTi Net Zero Standard require?

Companies must set science-based emissions reduction targets that are consistent with the 1.5-degree pathway. This includes Scope 1, 2, and 3 emissions. Progress must be transparently documented and reported on a regular basis. Offsetting through high-quality carbon removal is only permitted if residual emissions amount to less than 5 to 10 percent of the baseline. The standard applies to organizations, not to individual products.

Conclusion

The question is no longer whether climate communication is changing, but how quickly companies will respond and at what level. With the EmpCo taking effect in September 2026, the regulatory framework for product claims is clear: compensation claims without proven reductions in the product lifecycle will be legally vulnerable. The answer to this is not net zero, but rather LCA-based emissions reduction or the shift to a contribution claim.

Net Zero according to the SBTi is the strategic response at the corporate level. It demands more, but it also offers more: a science-based reduction pathway, regulatory certainty for the future, and communication that stands up to scrutiny. Those who clearly distinguish between the two levels and establish the right foundation at each one communicate not only in compliance with regulations, but also credibly.

If you’d like to know where your emissions come from and what a robust approach for your company and products looks like, please contact us.

Sources

Regulatory framework

1. Empowering Consumers Directive (EmpCo) – Official Journal of the European Union Directive(EU) 2024/825 of the European Parliament and of the Council of February 28, 2024https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX%3A32024L0825

2. Bundestag Passes EmpCo Implementation Act (December 2025) – Hook-QuelleSAIM: EmpCo Directive: What Applies to Green Claims in 2026https://saim.de/content-hub/blog/empco-richtlinie-directive-verbraucher/(Note: Includes the announcement regarding the Bundestag’s decision of December 19, 2025)

3. Federal Court of Justice (BGH) ruling on “climate-neutral” – Press release from the Federal Court of Justice (BGH), June 27, 2024 – I ZR 98/23https://www.bundesgerichtshof.de/SharedDocs/Pressemitteilungen/DE/2024/2024138.html

Standards

4. SBTi Corporate Net-Zero Standard V1.3 (September 2025)Science Based Targets initiativehttps://sciencebasedtargets.org/net-zero(Full text as PDF: https://files.sciencebasedtargets.org/production/files/Net-Zero-Standard.pdf)

5. SBTi BVCM Report: “Above and Beyond” (February 2024)Science Based Targets initiativehttps://sciencebasedtargets.org/beyond-value-chain-mitigation(Full text: https://files.sciencebasedtargets.org/production/files/Above-and-Beyond-Report-on-BVCM.pdf)

6. ISO 14068-1:2023 – Climate neutrality (replaces PAS 2060 as of January 2025)International Organization for Standardizationhttps://www.iso.org/standard/43279.html(Explanation in German: https://www.sgs.com/de-de/services/verifizierung-nach-iso-14068-1-klimaschutzmanagement-ubergang-zu-netto-null-co2-neutralitat)

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