Your Carbon Offsetting Questions Answered

Is Your Business Ready to Take the Next Step in Becoming Climate Neutral?

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This year, in the run up to the critical international climate summit in Paris in December, the world is confronting the urgent need to reduce carbon emissions and mitigate their impact. Many influential organizations, including the UN, are promoting the need to move to a climate neutral world using carbon offsetting to help tackle climate change quickly and effectively. Yet there is still a great deal of confusion about what carbon offsetting is, what it can deliver and where it sits in the hierarchy of actions to tackle climate change.

Here, Robert Stevens from ClimateCare, a recently certified B Corporation and winner of a Queen’s Award for Sustainable Development for its outstanding contribution to tackling climate change and alleviating poverty, responds to some of the common questions that surround carbon offsetting, to help you decide if a voluntary carbon offset program should be part of your business’s carbon management strategy.

ClimateCare’s Robert Stevens responds to some common questions about carbon offsetting and its role in tackling climate change. This Article was originally published on The Futures Centre on September 21st 2015.

Why should a company go ‘Climate Neutral’ and offset its residual emissions?

There is a growing call for businesses to go Climate Neutral by measuring, reducing and offsetting their emissions. Some of the world’s biggest companies – including Microsoft, Aviva, the adidas Group and Sony – are already showing leadership by becoming or pledging to become Climate Neutral, and are encouraging others to follow their lead.

Going Climate Neutral can deliver a range of business benefits  – from demonstrating environmental credentials and building customer confidence in your brand, to improving staff engagement with your broader sustainability programs. It can even deliver business growth opportunities – building resilience in supply chains, supporting growth in key markets and helping to launch new products and services.

As businesses start to talk about becoming net positive – delivering positive social and environmental impacts through their business operations – we believe it is essential that they first take full responsibility for their unavoidable negative impacts. For carbon emissions that means neutralizing the climate impact through carbon offsets – going Climate Neutral must become a hygiene factor.

Is carbon offsetting too complicated to be effective?

It’s true that behind the scenes there is a lot of complex methodology to ensure rigor and transparency, but the basic principle of carbon offsetting is very simple. This is how it works.

A project takes action to cut 1 ton of CO2. An independent authority verifies the reduction has taken place and issues a 1 ton “Emission Reduction’”. You purchase the Emission Reduction, which is retired on a public registry, so it cannot be used again. This process allows you to take responsibility for your own carbon emissions by funding a carbon-reduction project that could not take place without your investment.

You can see a selection of the types of projects that have been funded through carbon offsetting on the Markit registry here.

Can offsetting carbon emissions really tackle climate change?

Offsetting alone is clearly not going to tackle climate change. We must move to a low-carbon world as quickly as possible and governments, corporations, cities, regions and individuals, must all pay their part.

But even in the best-case scenario this transition will take time and in the meantime everyone will have a carbon footprint, regardless of how hard they try to reduce it.

Until we reach a zero-carbon world we need to do something about this unavoidable, residual carbon footprint. Paying to reduce an equivalent amount of carbon emissions through voluntary carbon offsetting is the most cost effective, fast and efficient way of doing this.

Unlike other environmental impacts such as water use, it doesn’t matter where in the world carbon is reduced. This means that money spent on offsetting can be channeled to projects that deliver the maximum carbon reduction in the shortest time.

How do you know your investment does indeed reduce emissions?

There are strict guidelines given by the United Nations and carbon offsetting is subject to some of the most robust measurement and verification processes in the climate and development space.

To earn carbon credits, the project developer must first demonstrate that emissions reductions created would not have happened without their project.

Carbon reductions are then regularly measured to an agreed methodology, independently verified and only then are carbon credits issued.

When you offset your carbon emissions these carbon credits are retired on a public registry, and cannot be used again – ensuring that your payment directly funds a known and verified carbon reduction.

This model of ‘payment by results’ , tried and tested in the carbon offsetting sector, is proven to drive efficiency and be low risk for the funder. As such it is now being used as a model to inform new ways of paying for sustainable development projects by the outcomes they deliver.

Isn’t carbon offsetting just a ‘get out of jail free’ card for businesses to carry on emitting greenhouse gases, rather than address their carbon footprint?

This is a criticism often leveled at carbon offsetting, but it doesn’t stand up for two reasons:

1. Businesses nearly always reduce first

In reality, nearly all businesses invest in reducing their in-house carbon footprint before considering a payment to offset what remains. Internal reduction activities frequently save money, while investing in carbon offsetting involves a financial outlay. Few businesses make this sort of investment without first getting their own house in order and being fully committed to operating sustainably.

Recent research shows that in 2013 the typical offset buyer cut almost 17% of their scope 1 (direct) emissions, while the typical non-offset buyer reduced scope 1 emissions by less than 5% in the same year.

2. The alternative is doing nothing

Even if a business has done all it can to reduce its emissions it will still have a carbon footprint. Paying to offset them is better for our environment than the alternative, which is to do nothing at all. Offsetting delivers real benefits for the environment and local communities. Research from ICROA suggests $664 of benefits are delivered for every ton of carbon offset.

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As a significant financial investment for a business, the annual cost can also help make a business case for future action to reduce emissions, by setting an internal carbon price for all business activities.

Isn’t carbon offsetting expensive? How is it possible to make a business case?

Over the last decade, voluntary demand for carbon offsets has reached 844 million tons, and as organizations increasingly factor in the risks of climate change to their business, the case for taking action to reduce carbon emissions is strengthening.

Offsetting carbon emissions is a quick and cost effective way to reduce global carbon emissions and probably costs much less than you think. Setting out a business case for your organization to offset emissions is similar to any other outsourcing decision – it pays to outsource emissions reductions where this is more cost effective or technically feasible than doing so in house.

Models can be used to help identify the point at which offsetting emissions becomes the most effective use of budget. And increasingly businesses [see the UN Global Compact’s Business Leadership Criteria on Carbon Pricing] are putting an internal price on carbon emissions, which is a great way to identify and channel investment to drive down greenhouse gas emissions in the most efficient way.

Our experience with clients who invest in carbon offsetting with ClimateCare is that their programs often deliver multiple business benefits that are not always immediately apparent at the outset – from engaging staff with environmental targets to driving new sales or creating brand value. Research from ICROA supports this, reporting that companies who offset see benefits that include employee engagement, reputation/brand image, market differentiation and efficiency.

And companies with a desire to deliver social impacts, for example against the new Sustainable Development Goals, find that offsetting through our Climate+Care programs is an extremely cost effective way to tackle poverty, improve health, empower women and children and generate employment. In fact, Aviva worked with ClimateCare to apply the London Benchmarking Group’s framework to their carbon offset portfolio and demonstrated that their investment in two carbon offset projects had not only offset carbon emissions, but improved the lives of 320,000 people.

Why are carbon reduction projects nearly all in the developing world?

International rules set out where carbon offset projects can take place – mostly in the developing world.

Supporting carbon reduction in the developing world has multiple benefits. It is often a cost-effective way to reduce global carbon emissions and it channels funding to projects that deliver social impact, sustainable development and help communities adapt to the effects of climate change.

This opens up the opportunity for businesses to tackle both environmental and social development challenges at the same time through their carbon-offset investment. At ClimateCare clients who offset emissions are increasingly choosing to do so through projects that both cut carbon and improve lives. This includes projects that provide safe drinking water to communities, so they no longer have to boil water, the provision of clean energy to rural communities, support for sustainable agriculture that improves yields and incomes or more efficient cookstoves that save families money on fuel bills and reduce their exposure to toxic fumes.

My company already takes action to reduce its carbon footprint. Surely the primary goal should be to cut emissions, not to offset them?

Every organization and individual has a carbon footprint. Even with the most determined efforts to cut emissions at source, we are all still responsible for some carbon dioxide and other greenhouse gases going into the atmosphere and causing global climate change.

We could choose to ignore this, and take no action to tackle the consequences of those unavoidable emissions, which might dwarf everything we’ve been able to cut, or we can take responsibility for them by ensuring that an equivalent amount of carbon is either absorbed or avoids being emitted elsewhere through carbon offsetting.

And if you want to achieve climate neutrality, offsetting the carbon emissions you can’t reduce is currently the only way to do so.

If you are going to offset emissions, think about investing your budget to fund programs that empower local communities, improve health and tackle poverty as well as reducing carbon emissions. That way you can demonstrate more value for people, the environment and your business.

Robert Stevens is ClimateCare’s Head of Partnerships and oversees our client relationship team from the UK office in Oxford. He also manages our bespoke services team developing tailored sustainability programs for businesses and orchestrating public/private partnerships to increase impact.

This post about carbon offsetting originally appeared on the ClimateCare website.

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