Firms and carbon neutrality objectives: is offsetting really enough?

Faced with the climate emergency, more and more firms are committing to carbon neutrality aims. But what does this mean exactly? What is the difference between offsetting greenhouse gas emissions and actually contributing to the common climate effort? Which strategy should a company go for?

A few facts

  • The term carbon neutrality suggests a balance between greenhouse gas emissions into the atmosphere and their absorption by greenhouse gas sinks. As ADEME points out, this term only makes sense at the global level. Indeed, a company self-declaring itself carbon neutral is highly likely to be accused of greenwashing.
  • For firms, it is essential to reduce greenhouse gas emissions as much as possible to offset the remaining emissions. The Net Zero Initiative was initiated in June 2018 and led by Carbone 4 in collaboration with a dozen pioneering companies. Among other things, the project has published a guide for organisations wishing to effectively contribute to carbon neutrality.
  • A “carbon contribution” strategy should be preferred to a “carbon offsetting” strategy. Indeed, offsetting is no longer sufficient as of the climate emergency. Firms must show full commitment, with the aim of massively reducing their emissions.

What is carbon neutrality? 

Carbon neutrality is defined as a balance between anthropogenic carbon emissions and their absorption by greenhouse gas sinks. In order to achieve “zero net emissions“, greenhouse gas emissions must be offset by carbon capture and storage (CCS).  

By signing the Paris Agreement in 2015, participating countries committed to reducing their greenhouse gas emissions. The aim is to limit global warming to 2°C over the 21st century and, if possible, to 1.5°C. This is the threshold that the Intergovernmental Panel on Climate Change (IPCC) considers necessary.

Therefore, as a considerable challenge is posed for human societies, they must make major collective efforts, such as the ones given below:

  • A drastic decrease in greenhouse gas emissions. Yet, despite the recent implementation of policies aimed against global warming, emissions still continue to increase.  
  • An increase in natural carbon sinks (with afforestation and reforestation) along with a larger implementation of artificial “technological” or “anthropogenic” carbon sinks. Indeed, natural sinks are estimated to capture between 9.5 and 11 gigatonnes of CO2 per year, i.e. only a third of annual current global emissions. The rest accumulates in the atmosphere and further contributes to global warming.

To counter climate change, rapid and profound changes in lifestyles, consumption and production patterns are crucial. In recent years, the term carbon neutrality has been increasingly used, especially in the private sector.

The term “carbon neutrality” should be used carefully

Can we really talk about “carbon neutral” companies? The ADEME (French Environment Agency) is very clear on this subject: “The objective of carbon neutrality only really makes sense on a global scale”.

A firm’s carbon neutrality is a highly debatable concept. Indeed, in order to contribute to carbon neutrality, companies use a three-step “Measure, Reduce and Offset” methodology that has many theoretical and practical limitations.

First of all, claims of carbon neutrality by firms are often very limited, as they do not encompass their full carbon footprint. For example, Google claims to be a carbon neutral firm, but this claim only covers the energy used by Google’s employees (i.e. mainly electricity for data centres).

However, Google’s revenues come from advertisements sent to the billions of people who use their services worldwide. To this extent, the Internet and user mobile devices emit great amounts of CO2!

In other words, Google’s activity is indirectly responsible for these CO2 emissions, so it cannot be considered as carbon neutral. To be carbon neutral, the billions of Google users would have to use solely green energy, which can only be achieved by massive collective effort.

Besides that, carbon neutrality aims encourage firms to offset rather than to actually reduce their greenhouse gas emissions.

This is because it is much harder and often more costly in the short term for a company to rethink an entire production chain than to “cancel out” greenhouse gases through immediate offsetting actions. Therein lies the problem with carbon offsetting.

 

What is carbon offsetting? 

Carbon offsetting means cancelling out one’s own greenhouse gas emissions through initiatives such as reducing other emissions or capturing and storing carbon. 

Initiated by the Kyoto Protocol in 1997, carbon offsetting is presented as one of the tools available to achieve carbon neutrality in the fight against global warming.

It is based on the universality of CO2 principle, which stipulates that the action of greenhouse gases is global. Wherever CO2 is emitted, it has the same effect on the climate. Likewise, reducing emissions in one place or another has the same benefit for the planet. 

As such, CO2 emissions can theoretically be offset by reducing emissions or capturing them in any location.

Renewable energy projects can be installed in a carbon offsetting approach (by installing renewable energy production sources for example), as well as reforestation and land management policies, for example. 

Involved firms then acquire “carbon units” from a certified organisation corresponding to the volume of avoided or sequestered CO2. One carbon unit is generally equivalent to one tonne of CO2 avoided.

Please note that carbon offsetting is governed by strict rules and reference standards, such as the Gold Standard developed by WWF.

 

Why is carbon offsetting not enough? 

Despite its benefits, carbon offsetting is highly criticised. Indeed, carbon offsetting allows companies to clear their image and to conceal what should be their true goal: decreasing greenhouse gas emissions. Offsetting is not enough to achieve the 2°C goal, let alone the 1.5°C goal.

Indeed, the approach that aims for arithmetic carbon neutrality (i.e. achieved through carbon offsetting) may allow firms to comfort themselves in their current model and to not question their sources of greenhouse gas emissions. All companies must take action if these objectives are to be achieved.

The relevance of carbon offsetting projects, such as the ones set up by the state of California, may also be questioned. Carbon offsets generated by forests to counteract greenhouse gas emissions from California’s big polluters are getting exhausted rapidly due to increasing wildfires. Offsetting projects can sometimes become net carbon emitters. This may be the case when planted forests burn down due to climate change.

Firms risk being accused of ‘greenwashing’ when using carbon offsetting to justify the systematic use of the term ‘neutrality’. Moreover, this can be a misleading message preventing consumers from identifying the firms that are truly committed.

 

What does carbon contribution really mean then? 

To address the above inconsistencies, Carbone 4 developed the Net Zero initiative in 2018. It aims to support companies in their low-carbon transition by proposing a common language and framework for action.

 The framework suggests abandoning offsetting, considered counterproductive, and replacing it with “contribution“. While offsetting implies that a company can achieve carbon neutrality alone (by buying enough carbon credits), the term ‘contribution’ recognises that carbon neutrality is a collective effort. Above all, this requires emission reduction.

The Net Zero initiative therefore sets out a sustainable action plan to help companies maximise their contribution to global carbon neutrality by:

  • Reducing their direct and indirect carbon footprint;
  • Avoiding and helping reduce the emissions of others by selling carbon-free products and services;
  • Contributing to the creation of carbon sinks in and out of the value chain. 

 

Why should you prefer carbon contribution to carbon compensation? 

The Net Zero initiative is the first step towards harmonising the terms and concepts used, and towards ambitious and effective climate action by the private sector. It gives companies the impetus to focus on necessary actions: the reduction in greenhouse gas emissions.

In order to act on the residual emissions that remain, companies can complement their commitment by helping other agents reduce their own carbon emissions.

Carbon contribution encourages firms to trigger action all along the value chain. By embedding the action in such a logic, companies help achieve the goal of global carbon neutrality.

 

Conclusion

Companies should not only offset their greenhouse gas emissions to cancel out their carbon footprint, but they should first and foremost reduce their own footprint to truly contribute to the global climate effort. 

If you want to start reducing your carbon footprint in a pragmatic and impactful way, contact us!