What is Carbon Neutrality and Why Businesses Must Embrace it before it is Too Late

What is Carbon Neutrality and Why it is Important to the Discourse on Sustainability

We often hear the term, Carbon Neutrality, bandied about in the popular press and in conversations with experts.

Further, we come across environmental activists urging businesses to embrace carbon neutrality and protesting against those businesses that are highly polluting.

So, what is carbon neutrality and why is it so important to the mainstream discourse to climate change?

To start with, Carbon Neutrality means that businesses do not end up polluting the atmosphere and the carbon that they emit is well within the permissible or for that matter, zero emissions norms.

In other words, there is no net increase in the amount of Carbon that is emitted by businesses in their factories and plants. So, what carbon neutrality essentially means is that there is a Zero Emissions or Zero Carbon that is let out into the atmosphere.

Given that Climate Change has become a Hot Button issue, it is more than ever important that businesses take steps to ensure that they do not contribute to global warming and climate change caused by excessive Carbon emissions. To wit, Carbon Neutrality is like awarding a Badge of Honour.

What are Carbon Credits and Why Markets can Help Achieve Net Zero Emissions

So, how do businesses go about ensuring that they become Carbon Neutral? To start with, they can make their production processes that much more “green” or in other words, they can clean up their processes to ensure that there are no harmful effluents in their emissions and liquid discharges into the nearby areas surrounding their plants.

In addition, Carbon Neutrality can also be achieved by purchasing what are known as Carbon Credits wherein businesses buy such credits from the market which can offset the emissions that they emit.

For instance, if a polluting firm wants to ensure that it is Carbon Neutral, apart from making its processes Clean, it can also buy Carbon Credits from the Open Market from a firm that is selling them.

Firms that sell Carbon Credits are usually those that have achieved Zero Emissions and hence, they monetize their Green Processes by selling credits to those that are polluters.

Through this mechanism, the Free Market ensures that polluting firms are incentivized either to reduce emissions or through open market purchases of credits that balance the emissions.

Say a firm emits 10 Tons of Carbon; it can buy Carbon Credits worth that amount to become Carbon Neutral.

Have We Reached a Point of No Return? Why Businesses Must Act on Climate Change

Having said that, the above methods are not the only way to become Carbon Neutral. The best method is to ensure that production processes are kept Clean and Green.

The lasting impact of carbon emissions is that it distorts the climate patterns and leads to extreme weather events such the one that we saw in Texas in the United States in recent weeks.

Worldwide, the extreme weather events are increasing and even in India, there have been Flash Floods and Landslides in the North and Excessive Rain precipitation in the South.

Therefore, the urgency to act on climate change is real and this is where businesses have to ensure that being the chief contributors of pollution, they become responsible stakeholders in the corporate and climate ecosystem. Moreover, the Window to Act on Climate Change is narrowing and it is only a matter of time before we reach the Point of No Return.

Therefore, it is our argument that businesses must embrace Carbon Neutrality before it is too late.

Already, governments worldwide are prodding and even pushing businesses to become Carbon Neutral and hence, it is time they become Net Zero emitters for the sake of future generations and their liveability.

What is Green Washing and Why We Cannot Dismiss Emissions as Externalities

On the other hand, there are those businesses that engage in what is known as Green Washing. This practice essentially means that businesses pretend to become environmentally responsible whereas in reality they are as bad at emissions and pollutants as the worst offender.

Moreover, though we had described buying Carbon Credits as an effective method of ensuring Carbon Neutrality, it is also a roundabout and Underhand way to deal with the situation.

Indeed, this is like culprits paying their way out of trouble. In addition, it is also incumbent upon Governmental stakeholders to enforce the rules and procedures related to responsible business practices.

Economic theory states that more often than not, businesses attempt to pass of Emissions as Externalities over which they have no control and over whom they are not responsible.

This must stop and economists and policymakers must avoid treating pollution as externalities that are outside the domain of polluting firms.

Apart from this, clearances and certifications must be accorded only when the authorities are fully satisfied that the said businesses become socially and environmentally responsible.

Further, world treaties such as the Paris Accord on Climate Change must be followed and enforced by governments to ensure Carbon Neutrality.

The Time to Transition is now

Last, a lot has been said than done on the topic of climate change and hence, there are many activists who now fear that it is too late to act.

However, we must treat this 21st Century as the Time of Transition between the Industrial Paradigm to the Digital Age model and hence, use the time before us to ensure survivability of the species and humankind.

The stakes could not have been higher and hence, it is our argument that businesses embrace Carbon Neutrality as soon as possible. To conclude, carbon-neutrality is an important milestone in the road to sustainability.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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