Purchasing carbon offsets can be a good idea. Voluntary Carbon Markets (VCM) serve to enable the buying and selling of credits. When your business has cut its emissions down as much as possible, there are areas that may be virtually impossible to get to zero. So, if you're an average celebrity, first cut out the private jet before buying offsets and you could save upto 7 tons of CO2 annually. Then, to make up for the remaining emissions, you can offset by contributing to a different project which directly removes greenhouse gas from the atmosphere.
That can be as simple as an extensive tree-planting project (although the EU has taken a stance on this), or as complex as a technology company that pioneers technology to reduce emissions of a specific greenhouse gas in widespread factory machinery.
Residual are the bits left over after you've done everything else. They aren't the starting point.
Of all the problems with the idea, two stand out.
The practice can be complicated by bureaucracy and politics, making hard to know exactly how the money you put into offsetting your emissions is being used. Reforestation, may help, but will new trees planted be maintained? Especially if these are in a politically volatile country. This means they can negatively impact the organisations that bought them:
For example, Kit Kat, Gucci, easyJet and Jet Blue are moving away from offsetting-based claims, while Delta Air Lines faces a lawsuit over its $1bn carbon neutrality claim that plaintiffs say is “false and misleading” as it relies on offsets that do little to mitigate global heating
2. It can discourage real transformative change. While there are potential benefits from carbon offsetting, it doesn’t address the root of the issue. Why put the time and effort into engaging in sustainable practice and corporate responsibility when you can simply throw money at a problem instead?
The Guardian newspaper joined ran an investigation that highlighted 90% of rainforest offsets from certifier Verra, were largely worthless, often based on stopping the destruction of rainforests that were not threatened
Luckily, these high-profile cases are being noticed everywhere, not least of all by the ISSB. The new standards dictate that if you’re going to use carbon offsets, you need to be using them to cut down on residual emissions - emissions that you couldn’t have cut down on otherwise.
“We frame the use of carbon credits our companies might make as contributions above and beyond what they should be doing to decarbonise themselves”
Mark Kenber, Voluntary Carbon Markets Integrity Initiative
To be clear, having residual emissions is not unreasonable - your company might use technology that simply doesn’t have a less GHG-intensive option yet. But if you want to claim that you’re hitting your net zero targets, your transition plan and disclosures must explain there is no alternative other than offsets for some of those emissions until technology catches up.
While getting to zero may not be your immediate goal, you need a clear transition plan to decarbonisation. What should be a short-term goal is to identify how you can maximise your emissions cuts. Here are 5 steps you can take now - many will impact your finance team.
Getting an oversight of where your biggest impact will be is difficult, but with an increasing number of finance professionals being trained in carbon accounting, a heightened awareness of the climate crises and an increase in carbon accounting technology make it easier - without getting prematurely mixed up in the rapidly evolving world of “offsets”. To get started, book a planning workshop with Getting to Zero today.
FAQs on Carbon Offsetting
What are carbon offsets and how do they work? Carbon offsets are credits that represent the reduction, removal, or avoidance of one tonne of carbon dioxide (CO2) emissions. They are purchased to compensate for emissions produced elsewhere, typically by investing in projects that reduce greenhouse gas emissions, such as reforestation or renewable energy initiatives.
What are the potential drawbacks of relying on carbon offsets? Carbon offsetting schemes can face challenges related to bureaucracy, politics, and accountability. It can be difficult to ensure that the money invested in offset projects is used effectively and transparently, raising concerns about the integrity of offsetting initiatives. Additionally, relying solely on offsets may discourage genuine efforts to reduce emissions at the source, leading to a lack of transformative change in sustainability practices.
How do high-profile cases of carbon offsetting controversies impact businesses? Recent cases of carbon offsetting controversies, such as misleading claims and ineffective offset projects, have led to increased scrutiny and skepticism surrounding the practice. Businesses associated with problematic offsetting schemes may face reputational damage and legal challenges, highlighting the importance of due diligence when engaging in carbon offsetting activities.
What are the new standards regarding carbon offsets? The standards require companies using carbon offsets to focus on reducing residual emissions, which are emissions that cannot be eliminated through other means. This shift aims to ensure that offsetting initiatives contribute to genuine emissions reductions and align with broader decarbonization efforts.
How can businesses navigate the complexities of carbon offsetting while prioritizing genuine emissions reductions? Businesses can start by developing clear transition plans towards decarbonization, identifying areas where emissions reductions can be maximized. While carbon offsets may play a role in addressing residual emissions, businesses should prioritize sustainable practices and technologies that directly reduce emissions. Seeking guidance from experts and participating in workshops focused on sustainability planning can help businesses navigate the evolving landscape of carbon accounting and offsetting.
