Beyond carbon offsets: shifting business focus to long-term environmental impact

New research has shown that carbon credits not an effective or reliable means of decarbonising a business and have minimal climate affect.

The term carbon offset and carbon credit are used interchangeably, although they differ slightly in their meanings. Broadly, carbon offsets refer to a reduction in greenhouse gas emissions – or an increase in carbon storage, used to compensate for emissions occurring elsewhere. Similarly, a carbon credit is a transferable instrument certified by bodies or governments to represent one metric tonne of CO2, that a purchaser can claim to reduce their emissions across another area of their supply chain. Simply put, offsetting is a way of paying to reduce emissions or absorb CO2 to compensate for your emissions.

At first glance, this approach is seen as an appealing and effective means of mitigating emissions. It seemingly allows us to continue producing at our current rate, without adverse effects on the environment. For this reason, carbon offsets have long been touted as a solution to mitigate the carbon footprints of individuals and companies. Yet, upon further investigation, carbon offsetting and the purchasing of carbon credits is not the clean-cut, single solution they are commonly praised to be.

The reality of offsetting

In reality, carbon offset programs lack transparency and effectiveness, and can even be fraudulently sold, making it difficult to generate the funding needed to prevent further climate catastrophe. According to the Stanford review, there is a growing body of evidence that demonstrates that land- and forest-based carbon offsets have brought about “little to no substantive emissions reductions and minimal climate affect”.

The primary issue with carbon offsets is the lost cost associated with purchasing carbon credits. Carbon credits are often priced at a mere fraction of their true cost. Despite the low cost to consumers, the promise of offsetting comes at a great cost to the environment. The true price of carbon is estimated to be in the range of £200-400 tons/CO2, meanwhile the UK government prices it as £52.56 – with many credits sold as low as £5-10. The latest IPCC report suggests the true cost of carbon could be as much as £5,000 by 2030. These undervalued offsetting schemes provide the opportunity for companies to avoid taking responsibility for their actions, making fossil fuels more palatable to increasingly sustainability-conscious consumers.

Investigations by The Guardian reported countless fraudulent sales of worthless carbon credits – one case showed that more than 90% of a major provider’s rainforest offset credits did not result in carbon reduction, with another analysis indicating that 94% of credits had no benefit to the climate. These have been termed ‘phantom credits’ because they do not represent genuine carbon reductions. The lack of transparency in the carbon offset market makes it challenging for companies and individuals to know the true impact of their offsetting programs.

Similarly, focusing solely on carbon offsetting can cause businesses to lose sight of wider net zero and sustainability agendas. Only 16% of global climate funding needs are currently being met, meaning the race to net zero and the UN Sustainable Development Goals is falling behind. Paradoxically, the purchasing of carbon credits contributes to a false sense of assurance that our mitigation strategies are working to improve climate change.

Instead of purchasing carbon credits to resume status quo, this capital could be used to innovate long-term solutions that benefit the planet and people. By shifting a company’s focus away from misguided offsetting funds to long-term sustainability impact, there is a greater opportunity to align company values with global environmental goals and regulations.

How can companies meaningfully contribute to addressing climate change?

The alternative to purchasing carbon credits to offset emissions is derived from a fundamental shift of focus. Instead of seeking to become carbon neutral, companies should be asking “how can we maximise our positive impact on the environment?” There are several ways to approach this:

Rather than relying on cheap carbon credits to offset emissions, it is more effective to invest in carbon removal technologies. While planting trees or supporting related projects may seem like a viable solution, it can take up to 20 years for a tree to mature and effectively offset emissions. In contrast, carbon removal technologies offer a more immediate solution by actively removing carbon from the atmosphere. This distinction highlights the importance of investing in innovative technologies that can provide long-term solutions to the urgent issue of climate change.

Another approach is to invest in tangible and measurable environmental initiatives that create meaningful solutions and align with a company’s values and purpose. Rather than taking a single-solution approach to rising environmental, social, and governance (ESG) agendas and regulations, businesses need to take a more holistic view by looking beyond carbon removal and addressing other pressing issues such as biodiversity loss, plastic waste, food security, and agricultural production. Businesses need to avoid the “carbon tunnel vision” mindset, which limits their perspective and leaves them vulnerable to future changes in regulation and standards, risking future capital gains and failing to meet global net zero and sustainable development targets.

To help individuals, families, and businesses invest in measurable environmental initiatives, that add value to the company and the environment, the Itriom Marketplace was created. The marketplace offers potential investment opportunities that produce targeted, impactful environmental, social, and sustainable change. By tackling the world’s most pressing problems and adding tangible, measurable, and sustainable impact outcomes, we can accelerate change by closing the global funding gap and bringing the Sustainable Development Goals and net zero targets closer to fruition.

In summary:

In conclusion, carbon offsetting is not the effective solution it is often praised to be. It is not an effective means to decarbonise a business’s outputs, is misleading and often is fraudulently sold. The low cost of carbon credits creates a problem by allowing companies to use offsets to avoid taking responsibility for their actions. By shifting the focus to generating positive environmental and social impact, companies have a greater opportunity to align their environmental goals with global policy and targets and to contribute to finding innovative long-term solutions to climate change.

About the author:

Georgina Murrin is a ESG Analyst in Itriom’s London Office.

About Itriom

Itriom is the global impact platform helping leading families shape a better world.  Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter.  Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in Leadership, Geostrategy, and Sustainability benefit clients by developing strategies to engage and support the Next Generation in building a lasting legacy of which families can be proud. 

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Alizah Beg

ESG Consultant

Alizah is an ESG Consultant and researcher. She supports Itriom developing sustainability related products and services, helping our clients identify potential opportunities for creating positive environmental, social and sustainable impact.

Georgina Murrin

ESG Analyst

Georgie is an ESG Analyst and researcher. She researches trends, develops insights and reports, and writes insight articles on sustainability and ESG related topics to ensure Itriom’s clients are up to date on the latest policy, progress and initiatives to inform the platform and help our clients maximise their positive impact.

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