What is carbon offsetting and what does it really mean for businesses?

December 2, 2020

Written By Tess Fitzgerald

In 2018 the Streamlined Energy and Carbon Reporting (SECR) policy replaced the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The new format sets the foundations to monitor change, with the aim of helping drop emissions. In order for the 1.5 degree pathway to be met, global emissions need to be reduced by 45% by 2030 . This provides an opportunity for businesses to be as transparent with consumers as possible, however in many cases this has become a tactical marketing ploy. Reporting emissions is an incredibly powerful way of creating emission targets but the resulting mass of confusing terms and claims companies employ can get confusing for consumers. Carbon neutral, climate neutral, net zero, carbon negative…carbon positive? What do they actually mean?

To the everyday consumer, these claims appear to be a sufficient pledge of company efforts towards sustainability. However, it is time that we take a deeper look into what the reality of it all means, both for businesses and the consumer. Companies that publish their total annual GHG emissions quantify them in equivalent tonnes of CO2 (CO2e). The GHG Protocol breaks these emissions down into three different ‘scopes’, analysing their levels of impact. Scope 1 includes any direct emissions from sources such as fuel combustion, fugitive emissions, and company vehicles. Scope 2 looks at indirect emissions, such as those from the consumption of purchased electricity or heat. Scope 3 includes all other indirect GHG emissions, including but not limited to those caused by the extraction of raw materials, transportation, waste disposal, and other outsourced activities. However, companies are only obliged to disclose data for their Scope 1 and 2 emissions. Whilst this is a good step towards company transparency and places emphasis on reducing direct emissions, the problem lies in the fact that most of the time Scope 3 emissions account for the majority of a company’s GHG emissions. This can be very misleading for consumers who want to shop sustainably.

Sustainable shoppers are currently looking for ways to distinguish products based on their emissions. Although total company yearly emissions help, there is a specific product based emission standard called the GHG Protocol Product Standard. This certification is measured through analysing four different stages of the products life. The first is raw material acquisition, which looks at how much energy is used to obtain resources needed for manufacture, including waste and unusable material. The second is product manufacturing, which is usually the most energy consuming part of the process, and once again produces considerable waste. Next the product usage is analysed, for example a lightbulb and how much energy it will use. Finally, product disposal is considered, looking at how it will be either discarded or repurposed.

In any instance, a substantial amount of emissions will be produced in the product manufacturing process, so how can companies claim they are carbon neutral? In order to achieve a net neutral certification, companies must ‘offset’ their emissions. This means that their total Co2e emission output must be balanced by sequestering the same equivalent of carbon, to create a net output of zero. There are several approaches a business can take to try and achieve this. Most importantly, they should find ways to reduce their emissions first-hand as much as possible, by taking measures such as using renewable power or recycled materials. This will decrease their GHG emission output significantly across all three scopes, and is a significant step in working towards cutting emissions. Cutting emissions at the source is often cheaper in the long term and is much less likely to generate copious amounts of indirect emissions which will need to be offset.

Whilst effective, this will not be enough to make a product or company carbon neutral, so companies have the option to invest in carbon offsetting techniques. The most common of these includes planting trees, as implemented by Andrex, the toilet tissue company. Their slogan promoted their work of planting three trees for every one used in production to offset the carbon emissions produced. Other company offsetting techniques include buying carbon credits associated with efforts of peat bog restoration, investment in renewable infrastructure and even refrigerant disposal. This involves not actively partaking in these offsetting efforts themselves, but by purchasing ‘credit’ through donating to different projects, in order to balance out their equivalent emissions. This is a lot easier for smaller companies who do not have the capacity or resources to fund their own offsetting projects and allows for the development of specialist missions which are likely to be more effective.

There is no doubt that these sorts of projects are extremely beneficial in the process of restoring the environment through funding sequestration projects. The problem is that arguably this option makes it too easy for companies to buy their way out, instead of actually working towards decreasing their Scope 1 GHG emissions. Furthermore, these sorts of projects do not instantly take carbon out of the atmosphere. Carbon sequestration through tree absorption takes years until the carbon credits actually equal the trees’ intake of carbon. If companies do not focus their efforts to primarily reduce emissions and wait a number of years to offset emissions, parts of India and Bangladesh will already be underwater. Too late then.

The ability to buy carbon credits is not just limited to businesses, and has become one of the biggest issues with the Kyoto Protocol agreement. By allowing larger more polluting countries the option to buy credits off smaller less industrialised countries, they are not limiting their actual output and has no impact whatsoever on curtailing cultural habits of overconsumption of resources. Many large corporations now pass this responsibility on to the consumer, with several travel agencies offering consumers the option to offset their journey. Increasing consumer awareness of their carbon footprint is a crucial step towards improving global attitudes to consumption and sustainability, but we must push for corporations to tackle emission problems head on, electing for more sustainable business strategies in the initial stages of production.

A current buzz word in the sustainability sector is transparency. If companies are being transparent about their reduction targets and specifying what projects they are investing in to become carbon neutral, this is an ethical way to deliver sustainable etiquette. We encourage all readers to send companies emails asking for evidence based reports or information about how these claims or targets are being met. If compliant with a number of standards, reports have to be publicly available. They are heavy reading but are very worthwhile getting to know a company’s operations. That is true transparency.

by Tess Fitzgerald

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