Introduction
Businesses are under increasing pressure to be environmentally responsible. One way that companies can do this is by adopting a sustainability strategy that includes carbon offsetting. Carbon offsetting is a mechanism that allows companies to compensate for their greenhouse gas emissions by funding projects that avoid or remove emissions outside of their value chain.
Summary
- Carbon offsetting is a way for companies to pay to reduce or remove emissions they cause.
- It can be a crucial tool for companies to minimize their impact while they work on reducing emissions.
- Offsetting is based on the principle of ‘you pollute, you pay’.
- There are many different carbon offset projects available, so companies can choose projects that aligns with their values and preferences.
The building blocks of sound sustainability strategy
As we wrote in a previous knowledge article, a sound sustainability strategy is one that is comprehensive and integrated into all aspects of a company's operations. It should include the following elements:
- Measure footprint: the first step is to accurately assess your company's carbon footprint by calculating the amount of greenhouse gases it emits annually. This involves analyzing energy consumption, transportation, waste management, and other operations. You can use our free tool to calculate your company carbon footprint if you haven’t done so already.
- Target setting: establish ambitious yet achievable emission reduction targets aligned with your business goals and the Paris Agreement's goals of limiting global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels.
- Reduction: implement sustainable practices and invest to reduce your carbon emissions as much as possible. This may involve switching to renewable energy sources, optimizing energy consumption, and take mitigation measures in your supply chain. To get started, read our knowledge article in which we share quick wins to reduce your carbon footprint.
- Funding climate projects: offset unavoidable emissions by supporting projects that actively remove carbon dioxide from the atmosphere. These projects can range from planting trees and restoring forests to investing in renewable energy infrastructure.
- Communicate: proactively share your sustainability efforts with stakeholders, including customers, employees, and investors. Transparency and open communication build trust and attract environmentally conscious buyers and investors.
Explained: what is carbon offsetting?
Carbon offsetting is a mechanism that allows companies support climate projects that either avoid or remove carbon emissions outside of their value chain. This can be done by funding projects such as renewable energy projects or forestry projects. When a company offsets its emissions, it is essentially purchasing credits that represent the reduction or removal of one ton of carbon dioxide equivalent (CO2e). These credits can be bought on the voluntary carbon market.
To learn more about what carbon offsetting is, you can read our knowledge article about carbon offsets, in which we give a more in depth explanation of offsetting.
The importance of offsetting for companies
It is important to point out that offsetting is not the solution to the climate problem. At the same time, it is a crucial piece of the puzzle and one of multiple tools in our arsenal to minimize impact. There are five main reasons why offsetting is important for companies:
- Before being able to offset, companies need to quantify their emissions, which is a critical first step in identifying areas for reduction and further action.
- Offsetting introduces a financial cost associated with emissions (and effectively an internal carbon price), incentivizing companies to prioritize emission reduction efforts.
- By offsetting, companies can contribute to repairing the damage caused by their emissions, aligning their actions with their environmental responsibilities. Offsetting is therefore based on the principle of ‘you pollute, you pay’.
- Offsetting supports the development of innovative technologies and sustainable practices for carbon reduction and removal, promoting long-term environmental solutions.
- Offsetting, when done responsibly and transparently, offers a scalable and effective mechanism to mobilize global climate finance. So far, the carbon market has been one of the most efficient tools to mobilize funds to scale this type of climate action.
In addition, companies that are seen as being environmentally responsible can gain a competitive advantage and attract more customers. Offsetting can be a way for companies to demonstrate their commitment to sustainability.
And finally, in some cases, offsetting can actually be more effective from an impact and cost standpoint than reducing emissions directly. If for example there is a choice to be made between electrifying your entire car fleet or to invest into a high-quality carbon project, the impact on a carbon, biodiversity and social-economic level may be higher if you choose for offsetting.
Companies that already offset emissions
Many large companies already offset their emissions. There's a myth that when it comes to carbon offsetting, it is reputationally safer to do nothing than to do something. But this is not true. 8 of the 10 world's most valuable brands – who understand their customers intimately and protect their brands fiercely – already use carbon credits, or have pledged to do so. These companies are Amazon, Apple, Google, Microsoft, Samsung Electronics, Tesla and Coca-Cola.
Some of the most well-known examples include:
- Amazon has committed to reaching net-zero emissions by 2040. The company is offsetting its emissions by funding renewable energy projects and forestry projects.
- Google has committed to reducing its emissions by 75% by 2030 and achieving carbon neutrality by 2040. The company is offsetting its remaining emissions by funding renewable energy projects and forestry projects.
- Coca-Cola has committed to reducing its emissions by 25% by 2030 and achieving net-zero emissions by 2050. The company is offsetting its emissions by funding renewable energy projects and forestry projects.
Conclusion
Carbon offsetting is one of multiple tools for companies that are committed to sustainability to make impact and take responsibility for their emissions. A sound sustainability strategy would include both measures to reduce emissions as well as a plan to pay for the damage that is caused today. Offsetting is, in other words, based on the principle of ‘you pollute, you pay’. As there are many different carbon offset projects available, companies can choose projects that align with their values and preferences. To conclude, if you’re your organization is serious about sustainability and taking climate action, it would make sense both from a strategy and impact perspective to include carbon offsetting in your roadmap.
Are you interested in carbon offsetting? Feel free to reach out to us!
