The UK's net-zero-by-2050 target is a statutory obligation under the Climate Change Act 2008. For business energy, a credible pathway requires reducing absolute consumption, procuring genuine zero-carbon supply, and addressing Scope 3 emissions over time. Buying REGOs without reducing consumption does not constitute net zero. ASA rules restrict green energy claims that cannot be substantiated.
Last reviewed: 12 May 2026
The Statutory Net-Zero Target and What It Means for Business
The UK's net-zero greenhouse gas emissions target by 2050 was enshrined in the Climate Change Act 2008 through the Climate Change Act 2008 (2050 Target Amendment) Order 2019, which amended the original 80% reduction target to a 100% net reduction relative to 1990 baseline levels. This is a statutory obligation on government, not directly on individual businesses. However, the pathway to achieving the national target requires substantial emissions reductions across the business and industrial sectors.
The Climate Change Committee (CCC) published the Sixth Carbon Budget in December 2020, setting the recommended emissions envelope for 2033 to 2037 consistent with net zero by 2050. The Sixth Carbon Budget pathway requires that non-domestic buildings substantially decarbonise heating, achieve near-full electrification of heat and process loads, and eliminate unabated fossil fuel combustion by the mid-2040s at the latest.
For individual businesses, the CCC's pathway translates into a requirement to reduce energy consumption, switch to low-carbon or zero-carbon energy sources, and address residual emissions through credible carbon removal. The CCC is explicit that carbon offsets are not a substitute for emissions reduction and should address only residual emissions that are genuinely difficult or currently impossible to eliminate.
Scope 1, 2, and 3 Emissions Explained
The Greenhouse Gas Protocol, which provides the internationally recognised framework for corporate emissions reporting, divides emissions into three scopes.
Scope 1 covers direct emissions from sources owned or controlled by the reporting business: combustion in boilers, furnaces, and company vehicles, as well as process emissions and fugitive refrigerant releases. For a business that heats its premises with a gas boiler and operates a petrol or diesel vehicle fleet, these are Scope 1 emissions.
Scope 2 covers indirect emissions from purchased electricity, heat, or steam. The emissions arise from the generation of the energy, not at the business premises. Under the GHG Protocol Scope 2 Guidance, businesses are required to report using both a location-based method (using grid average emissions factors published by DESNZ) and a market-based method (using contractual emissions factors from supply agreements, REGOs, or PPAs with matched certificates).
Scope 3 covers all other indirect emissions in the business's value chain: purchased goods and services, capital goods, business travel in non-owned vehicles, employee commuting, upstream fuel and energy activities, and customer use of sold products. For most businesses, Scope 3 is the largest emissions category by a significant margin. It is also the hardest to measure and reduce.
What Credible Business Net Zero Actually Requires
A credible business net-zero commitment requires absolute emissions reduction across Scope 1 and 2 in the near term, a pathway to addressing material Scope 3 categories, and the use of carbon removal only for residual emissions that cannot be eliminated. This is the standard applied by the Science Based Targets initiative (SBTi), the most widely recognised framework for corporate net-zero target setting.
The SBTi Corporate Net-Zero Standard requires businesses to reduce Scope 1 and 2 emissions by at least 90% from a baseline year, and to address Scope 3 where it represents more than 40% of total footprint. Residual emissions of up to 10% may be neutralised through permanent carbon removal, not through standard offset projects such as forestry or renewable energy certificates.
A business that buys green electricity tariffs without reducing consumption, purchases carbon offsets to claim net zero, or uses REGOs without making Scope 1 reductions is not on a credible net-zero pathway under any recognised framework. The CCC has been explicit that the national net-zero target requires actual emissions reduction, not accounting adjustments.
The Gap Between REGOs and Actual Emissions Reduction
Renewable Energy Guarantees of Origin (REGOs) are certificates issued by Ofgem to accredited renewable electricity generators, certifying that one MWh of electricity has been generated from a renewable source. Energy suppliers use REGOs to substantiate claims that a tariff is backed by renewable electricity.
The critical limitation of REGOs as a net-zero instrument is that purchasing a REGO does not cause additional renewable generation to occur, does not physically reduce the carbon intensity of the electricity the business consumes, and does not affect the amount of fossil fuel burned in generating the electricity actually drawn through the grid. REGOs are an accounting mechanism that allows renewable generation to be attributed to a buyer, not a direct emission reduction instrument.
Under the GHG Protocol Scope 2 Guidance, REGOs can be used to support a market-based Scope 2 emissions claim of zero for purchased electricity. However, the Protocol also requires a location-based figure to be reported alongside. The location-based figure, using the grid average emissions factor, reflects the actual carbon intensity of the electricity mix the business physically consumes. The difference between the location-based and market-based figures is a measure of the gap between accounting claims and physical reality.
ASA Green-Claim Rules for Energy Suppliers
The Advertising Standards Authority (ASA) applies the UK Code of Non-broadcast Advertising and Direct and Promotional Marketing (CAP Code) and the BCAP Code to marketing claims by energy suppliers. The ASA has adjudicated on multiple green energy claims by UK energy suppliers and has upheld complaints where claims of "100% renewable" or "zero carbon" electricity were based on REGO purchases without additional substantiation.
ASA guidance on environmental claims, developed in line with the Competition and Markets Authority's Green Claims Code, requires that claims are accurate, clear, and not likely to mislead. A claim that electricity is "100% renewable" is assessed on whether a reasonable consumer would understand the basis of the claim. Claims based solely on REGO matching without explaining the physical reality of grid electricity have been found misleading in ASA adjudications.
Businesses making green energy claims in their own marketing, either about their energy supply or their net-zero commitments, are subject to the same ASA standards and the CMA's Green Claims Code. Claims that cannot be substantiated with referenced evidence may be found misleading and result in enforcement action.
Science Based Targets and the SBTi Framework
The Science Based Targets initiative (SBTi) provides a framework for businesses to set emissions reduction targets consistent with climate science. SBTi targets are validated by the initiative against published criteria. The SBTi Corporate Net-Zero Standard, published in 2021, sets the requirements for net-zero target claims to be considered credible under the framework.
SBTi target setting involves establishing a base year emissions inventory, committing to near-term emissions reduction targets (typically a 42 to 46% reduction in Scope 1 and 2 by 2030), and setting a long-term net-zero target. Targets are submitted to the SBTi for validation and, once approved, are listed on the SBTi public target dashboard.
SBTi validation is voluntary for UK businesses unless required by supply chain customers or investors. However, it provides third-party credibility that self-declared net-zero commitments do not. For businesses seeking to support customer or investor sustainability requirements, SBTi validation is increasingly recognised as the benchmark for credible corporate climate commitments.
How we verified this
This article draws on the Climate Change Act 2008 and its 2019 amendment order as published on legislation.gov.uk, the CCC Sixth Carbon Budget published December 2020, the GHG Protocol Scope 2 Guidance, Ofgem REGO documentation, ASA adjudications and guidance on environmental marketing claims, and the SBTi Corporate Net-Zero Standard published documentation. All primary sources are publicly available at the URLs listed below.
Frequently asked questions
Editorial disclaimer: The following questions address common points of uncertainty about business net-zero obligations and energy procurement. They do not constitute legal, financial, or environmental compliance advice. Businesses should obtain independent professional advice specific to their sector and circumstances.
Is a UK business legally required to reach net zero?
The statutory net-zero obligation under the Climate Change Act 2008 (as amended in 2019) sits with the UK government, not with individual businesses. There is no direct legal obligation on individual private businesses to reach net zero by 2050. However, mandatory emissions reporting applies to quoted companies, large unquoted companies, and LLPs under Streamlined Energy and Carbon Reporting (SECR) regulations. Sector-specific policies and supply chain customer requirements are increasingly creating de facto obligations for businesses in certain sectors and supply chains.
Does buying a green energy tariff count toward net zero?
Buying a green energy tariff backed by REGOs allows a business to report zero market-based Scope 2 emissions from purchased electricity under the GHG Protocol. However, it does not reduce actual emissions from the electricity generation mix, does not constitute net zero across all scopes, and does not substitute for reducing Scope 1 emissions from gas boilers, vehicles, or process combustion. Under the SBTi Corporate Net-Zero Standard, 90% absolute emissions reductions across Scope 1 and 2 are required before any neutralisation claim can be made.
What is the difference between carbon neutral and net zero?
Carbon neutral typically means that a business has offset its emissions through external projects such that the net claim is zero, without necessarily reducing absolute emissions. Net zero under recognised frameworks such as the SBTi requires 90% or more absolute emissions reduction before any residual neutralisation through permanent carbon removal. The CCC and SBTi are explicit that carbon neutrality achieved primarily through offsets is not consistent with a credible net-zero pathway. The terms are not interchangeable, though both are used in business marketing and policy documents with varying rigour.
What are Science Based Targets and do I need them?
Science Based Targets (SBTs) are emissions reduction targets set in line with the scale of reductions required by climate science to limit global warming to 1.5 degrees Celsius. The SBTi validates and lists approved corporate targets. SBTi target setting is voluntary for UK businesses unless required by supply chain customers or investors. For businesses seeking recognised third-party validation of their climate commitments, SBTi validation is the most widely accepted standard. It involves a formal submission, validation process, and public listing of approved targets.
Can my business be investigated by the ASA for net-zero marketing claims?
Yes. The ASA applies the CAP Code and BCAP Code to environmental marketing claims by all businesses, not just energy suppliers. Claims about net zero, carbon neutrality, or renewable energy that cannot be substantiated may be found misleading. The CMA's Green Claims Code provides detailed guidance on what is required for an environmental claim to be accurate and not misleading. Businesses making public net-zero or green energy claims should ensure those claims are backed by verifiable evidence and comply with both ASA and CMA guidance.
Sources
- Climate Change Act 2008 - legislation.gov.uk
- CCC Sixth Carbon Budget - theccc.org.uk
- Ofgem REGO scheme
- ASA environmental claims guidance
For related reading on emissions reporting requirements, see SECR Reporting UK Guide and REGOs and Business Energy UK.
