The New Year's resolutions for 2022 have just been made. Time to also tackle your company's offset strategy. We explain what matters when it comes to CO₂ offsetting.
The terms CO₂ compensation or carbon offsetting are on everyone's lips. Their goal is to achieve climate neutrality. To do this, a company purchases emission credits to offset its CO₂ footprint. This shows its employees and customers that it is committed to a more sustainable future and is taking responsibility for its emissions.
However, the concept of CO₂ offsetting is often misused. The topic is indeed complex. Reputable and poor providers of emission credits often cannot be distinguished at first glance. We have therefore summarised what you need to know to avoid pitfalls and to define a meaningful emissions offsetting strategy for your company.
What does carbon offsetting mean?
The term carbon offsetting comes up whenever the definition of a sustainability strategy is concerned. The certification organisation Gold Standard defines a 'carbon offset' or 'carbon credit' as a 'certified reduction or removal of one tonne of carbon dioxide equivalent (tCO2e) from the atmosphere'.
But what is the point of offsetting – isn't it just an excuse for companies to pollute the environment even more with a clear conscience by paying for it? The answer is a clear no – at least when CO₂ offsetting is used correctly. You can read more about what exactly that means below.
On top of that, most climate protection projects don't only have an impact on the environment. They also help to achieve the 17 Sustainable Development Goals developed by the United Nations.
Reducing emissions must be the priority
Companies should only offset emissions once they have done everything they can to reduce their CO₂ footprint. This is also the clear message from the Science Based Targets initiative. It supports companies in setting emission reduction targets that align with those of the Paris Agreement. In its guidelines, the organisation states that emission credits should only be used to neutralise residual emissions (emissions that companies cannot reduce due to technical limitations) or to finance climate protection measures that go beyond emission reduction targets. Accordingly, one could speak of 'climate contributions' instead of 'carbon offsetting', as suggested by another organisation, the Net Zero Initiative.
The term 'compensation' isn't quite accurate
Buying emission credits doesn't immediately offset your CO₂ footprint, because: your greenhouse gas emissions go directly into the atmosphere. Offset projects, however, take years before emissions can be avoided or CO₂ can be captured. And yet: by purchasing emission credits, you offset your carbon emissions and also contribute to global climate neutrality.
What types of carbon offsets are there?
You now know the concept of carbon offsetting. Even so, it isn't easy to navigate the multitude of offset projects on the market. To give you a better overview, let's take a closer look at the terms carbon emissions and carbon sinks.
In 2020, we generated 38 billion tonnes of CO₂ worldwide. These emissions come from the use of fossil fuels and from changes in land use – for example, through transport, agriculture, buildings or energy generation. Around 40% of these emissions are absorbed by natural carbon sinks. There are two types: vegetation and the oceans. The remaining 60% of emissions stay in the atmosphere. They intensify the greenhouse effect, which is responsible for climate change.
Source: https://drawdown.org/drawdown-framework
Source: https://drawdown.org/drawdown-framework
There are two types of offset projects: emission avoidance projects reduce the emissions released by human activity (see the left side of the graphic). Carbon removal projects, on the other hand, increase the amount of emissions absorbed by natural carbon sinks. They therefore limit the amount remaining in the atmosphere (see the right side of the graphic).
Emission avoidance projects
These offset projects reduce the CO₂ emissions caused by human activity. These include reducing emissions from deforestation and forest degradation (REDD+), energy efficiency and switching to alternative fuels, or improving land and waste management. Most of the available offset projects fall into this category.
Carbon removal projects
They increase the amount of carbon captured by carbon sinks. Simply put: these projects remove carbon dioxide directly from the atmosphere. This category includes biological sequestration, in which carbon is bound in the soil (e.g. through reforestation). With the 'Direct Air Capture' method, however, CO₂ is extracted directly from the air. And with 'Capture and Storage', it doesn't even reach the atmosphere in the first place, but is transported into underground storage.
Source: https://physicsworld.com/a/carbon-removal-requires-multiple-technologies/
Source: https://physicsworld.com/a/carbon-removal-requires-multiple-technologies/
How to choose reputable offset projects
You now know why and when you should offset your company's emissions and are familiar with the different types of offset projects. Now you'll learn how to select suitable projects for your company.
To do so, we'll show you which criteria the projects should meet and how to avoid funding greenwashing projects. Because these are not only bad for the environment, but also damage your company's credibility.
The following list summarises what you should consider before purchasing emission credits. It draws on the Oxford Principles for Net Zero Aligned Carbon Offsetting, the Gold Standard evaluation criteria and the BeZero rating system. According to these, an emission credit should meet the following criteria:
1. Real: The amount of avoided emissions or removed carbon is based on realistic baseline assumptions. This avoids excessive or double counting. This criterion ensures that the amount of avoided or removed CO₂ emissions is not overestimated.
2. Additional: The emissions would not have been avoided or removed without the project.
3. Permanent: In some cases, carbon storage can be reversed. This is the case, for example, with reforestation projects when trees and forests are damaged. This criterion is therefore particularly important if the project is located in an area exposed to political instability or high climate change risks.
4. Independently verified: The project data and impacts are reviewed by a third party and the verification process is transparent. This third party can be a certification body. The most common standards are the Gold Standard, the Verified Carbon Standard (VCS) and the Climate Action Reserve (CAR). All credits issued under such a standard are regularly verified by third parties.
When selecting a project, make sure it meets as many of these points as possible. Ideally, it should also align with your company's corporate and social responsibility goals.
How do you set an offsetting strategy for your company?
Now you know the conditions and pitfalls that companies should consider when defining an offsetting strategy. You can now implement the following measures to offset your remaining emissions through 2021 (and beyond).