Carbon offsets: A stop-gap climate change solution for your company
In November, world leaders convened in Egypt for COP 27, also known as The 2022 United Nations Climate Changes Conference. The results were mixed at best.
While wealthy countries finally committed to providing poor countries with financial assistance for devastation caused by climate change, no progress was made on formal plans to reduce global carbon emissions. Most alarmingly, a previous resolution to cause emissions to peak by 2025 was taken out, shocking many environmentalists.
António Guterres, secretary general of the UN, put it best: “Our planet is still in the emergency room. We need to drastically reduce emissions now – and this is an issue this Cop did not address . The world still needs a giant leap on climate ambition.”
With world leaders failing to act, you may be wondering what to do next. I believe that the answer to solving climate change rests with businesses. This includes innovating to create breakthrough technologies; overhauling how goods are sourced, produced, and distributed with the environment top-of-mind; and lowering organizational carbon footprints.
Why your company needs a carbon offset program
The lowest-hanging fruit is to address your company’s carbon footprint by offsetting carbon emissions. Although it's not a permanent solution, carbon offsets help to close the gap earlier and fund carbon-sequestering or carbon-avoidant projects that can help mitigate the impact of a business in the interim (between when it declares its net-zero plan and when it reaches net zero).
To be sure, the gold standard is for a company to enact low-carbon or zero-carbon solutions. However, these are extremely expensive and time-intensive to implement primarily because they are so new and expansive. Consider, for example, the barriers to entry for a food distributor to upgrade its entire fleet to zero-emissions vehicles. Not only is that difficult from an asset management perspective (typically, assets are replaced over longer time horizons), but electric semis are extremely expensive because the battery technology is still emerging and there is little competition in the market.
Across the board, cost is the ultimate barrier for organizations achieving net-zero carbon emissions. This is for several reasons: innovation is relatively slow and extremely expensive; there is no competition to drive down prices; and a lot of low-carbon tech is not being produced at scale, which also drives down costs.
The simple truth is that we cannot transition to net zero fast enough. Carbon offsets allow us to be more realistic about transition timelines and contribute positively towards decarbonization when reputable and certified programs are used. Until costs for organizational climate change solutions are driven down either by policy, competition, or a combination of the two, carbon offsets are the affordable alternative for businesses.
Examples of corporate carbon offset programs
Carbon offsets work by funding greenhouse gas (GHG) emissions outside the company’s value change. Some of the world’s largest companies have implemented carbon offset programs as they work towards low or zero carbon emissions. This includes Alphabet, Delta Airlines, Disney, General Motors, and Unilever.
Notably, Microsoft purchases primarily avoidant offsets – in my opinion, the best kind because they avoid emissions altogether. They’re also taking a different approach in that they're not just offsetting on an annual basis; they're offsetting the carbon emissions their company has made since 1975.
Disney implemented an internal carbon tax early on and used the proceeds to fund all climate-positive projects, including offsets. This aligns with the best practice that offsets should be just one part of your solution portfolio to address climate change. To date, Disney’s investments in carbon offsets have reduced greenhouse gas emissions “equivalent to removing 900,000 cars from the road ”.
Selecting the right carbon offsets program
Typically, most people think “carbon offsets” simply means planting a lot of trees. However, using this singular approach to carbon offsets has recently come under scrutiny — and understandably so. Reforestation and land restoration do play many vital roles, especially in the case of reforesting wildfire lands and areas that have been otherwise deforested, which is where they are impactful. In addition to decarbonization, they also serve essential roles in fostering biodiversity, protecting wildlife, and reducing flood risk.
However, reforestation and land restoration must be balanced alongside other carbon-reducing activities and other forms of more expedient carbon sequestration.
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Companies that want to do carbon offsets thoughtfully should do the following:
These are the criteria I would consider when selecting offsets responsibly.
Additional benefits of carbon offsets for your company
Implementing a carbon offset program is undoubtedly crucial to organizational risk reduction, particularly regarding your company’s reputation. Yet a robust offset program can also do wonders in highlighting areas where internal investment and innovation are needed.
When you determine how many offsets you need to purchase, you identify the most carbon-intense areas of the business. With a commitment to purchase offsets for your firm, suddenly, there is a cost associated with being carbon inefficient.
That means that conversations around efficiency innovation suddenly shift away from asking for net-new investment to a reallocation of earmarked funds.
Why you need to start with data
It can feel daunting to begin implementing a carbon offset program at your company. It is imperative to start with a sound, data-powered measurement strategy as the foundation for your new offset program, and your carbon reduction programs overall. Specifically, you should have a clear understanding of the following:
1. Energy Consumption Data: Companies can measure their emissions by tracking the amount of energy they consume and the sources of that energy. This can be done by collecting data on the amount of fuel used in any given period and using emission factors to calculate the amount of emissions produced.
2. Production Output Data: Companies can measure their emissions by tracking the amount of output from their production processes. This can include the amount of waste produced, the amount of energy used, and any other products or materials produced.
3. Process Emissions Data: Companies can measure their emissions by tracking the amount of emissions released from specific processes. This can include emissions from burning fuel, such as from a furnace or boiler, or from chemical processes, such as from a manufacturing plant.
4. Facility Emissions Data: Companies can measure their emissions by tracking the total amount of emissions released from their facility. This can include emissions from any processes, equipment, or materials used in the facility.
5. GHG Inventory: Companies can measure their emissions by tracking their greenhouse gas (GHG) emissions inventory. This can include emissions from any processes, equipment, or materials used in the facility, as well as emissions from any transportation, waste, or other activities.
At Kin + Carta, we can help your company with that measurement by implementing Microsoft’s Cloud for Sustainability. In 2022, we were named the Sustainability Changemaker of the Year in the United States. One of our biggest priorities is helping companies like yours achieve their sustainability goals through technology.
To set up a conversation with our experts, message me. My colleagues and I are here to help you address climate change and make a positive impact in our rapidly changing world.