Is carbon offsetting really a sustainable net-zero solution?

Carbon offsetting continues to stir debate in the world of sustainability. The process involves investing in environmental schemes that set out to reduce greenhouse gas (GHG) emissions elsewhere in the world, therefore allowing a company to compensate for its own release of carbon into the atmosphere. Recently, carbon offsetting has come under scrutiny due to the controversial nature of this ‘counterbalancing’ premise; we are increasingly being urged to consider whether it’s actually just another form of greenwashing.

The practice of carbon offsetting involves companies purchasing ‘carbon credits’ from project developers like Green Mountain Energy, which are then used to fund different carbon offsetting projects. one credit = the equivalent of one tonne of carbon dioxide. There are three main categories of offsetting projects:

• Carbon removal projects, aiming to remove emissions already in the atmosphere (e.g. afforestation or direct air carbon capture).

• Avoidance projects which aim to avoid the release of emissions (e.g. nature-based conservation schemes to prevent forest destruction).
• Reduction projects which aim to reduce the amount of emissions released (e.g. circular waste management programmes).

With over 25,000 registered carbon projects available, companies that are unable to cut out all emissions can still strive to meet their goal of carbon neutrality.

However, the contribution of carbon credits is minor compared to the global-scale of change needed to reduce carbon emissions. As a result, the practice has been criticised as a greenwashing technique that allows companies to pay-off their actions and continue releasing harmful emissions into the atmosphere. Let’s take a look at some top companies whose carbon offsetting practices can give us more insight into the realities of its impact.

Offsetting schemes and the drive for net-zero

According to a report by Ecosystem Marketplace, companies who purchase carbon credits are more likely to make an effort to reduce their emissions than businesses not taking part in the practice of offsetting. The report concluded that buyers of carbon credits were 1.8 times more likely to be pursuing a goal of ‘decarbonisation’, and three times more likely to include Scope 3 emissions in their climate targets. It seems that the act of investing in sustainability projects beyond a company’s borders is a great motivator for addressing climate change concerns head on.

“When implemented effectively, high-quality carbon credits can add value to an organisation’s climate and sustainability strategy and provide quantifiable evidence of their commitment to supporting the transition to a low carbon future and a just transition,” says James Ramsay, Director of Sustainability Solutions at ENGIE Impact.

One large corporation renowned for its carbon offsetting contributions is Google’s parent company, Alphabet. In 2020 the company claimed to be the first large corporation to achieve a lifetime net-zero carbon footprint, thanks to the purchasing of high-quality carbon offsets that allowed Alphabet to eliminate Google’s entire carbon legacy (even prior to emissions before becoming carbon neutral in 2007). Now, Alphabet is planning to operate on 24/7 carbon-free energy in all data centres and campuses across the world by 2030. 

However, in 2022 Alphabet came under scrutiny for the vagueness of its annual environmental report, which ambiguously stated: “We plan to invest in nature-based and technology-based solutions to neutralise our remaining emissions.” In response, capital management group Green Century Funds proposed that Alphabet should revisit its carbon offsets disclosure policy in order to give investors clearer insight into the company’s environmental strategies.

“Green Century, and I expect many, many investors, value insight into how Alphabet is managing its climate risk.  I believe embracing transparency will only help it select offsets wisely and avoid the greenwashing label,” said Green Century Funds President, Leslie Samuelrich.

Green Century Funds Shareholder Advocate, Andrea Ranger, added: “Becoming a leader in carbon offsets seems like a natural step forward [for Alphabet]. I think our proposal was a wake up call for Alphabet. Investors like us are analysing corporate climate commitments very closely, and we want to see that claims of emissions reductions using offsets are actually true.”

Another prominent carbon offsetting leader is JetBlue. In 2020 the company became the US’ first major airline company to achieve its goal of becoming carbon neutral on all domestic flights. Today, the company website offers customers the opportunity to purchase their own carbon credits and thereby ‘cancel the emissions from your flight’. Most importantly, the page has access to further information about ‘where offsets go’ and ‘is offsetting enough?’.

However, in December 2022 JetBlue stated that it would no longer use carbon offsetting for domestic flights, and would instead focus on funding industry-wide environmental projects such as the development of sustainable aviation fuel (SAF). Although JetBlue claims to “still strongly believe there is a role for high-quality carbon offsetting solutions”, it has decided to “reallocate its offsetting spending into operational investments that align with its science-based target”: finding a sustainable solution to the reduction of air travel emissions.

Carbon offsetting – sustainable or greenwashing?

In September 2023 one of the leading environmental certification schemes, Carbon Trust, stopped awarding companies a ‘carbon neutral’ label if that status was based on the practice of offsetting.

“Consumers want more clarity, better explanations, clearer claims and more evidence. We have looked at best practices around the world to help our customers make sure they are ready for future regulations. That’s the driver behind dropping the carbon neutral labelling,” says John Newton, Carbon Trust Director, in discussion with the Guardian.

In the same month, the Guardian released an investigation undertaken alongside transnational corporate watchdog Corporate Accountability. They found that 78% of the top 50 emission offset projects were categorised as ‘likely junk’. Since then, multiple reporters on climate change have spoken out about the controversial or even ‘useless’ nature of carbon credit projects.

Climate journalism specialist Carbon Brief recently condemned the harmful social effects of carbon offsetting, referring to cases where Indigenous peoples in the Republic of the Congo and the Brazilian, Colombian and Peruvian Amazon have been forcibly removed from their homelands due to forestation projects. They suggest that the distance between companies and the projects they are funding allows for a dangerous sense of detachment from the reality of carbon offsetting practices.

Consequently, huge companies like Shell, Nestlé and Gucci have pulled out of investments into offsetting projects. When criticised for ‘watering down’ their climate ambitions, these major firms simply pointed to Carbon Trust’s statement that carbon credits are not actually an effective way to reduce global heating.

Newton adds: “Generally, companies are quite cautious and nervous about the impacts of offsets. But they were certainly bought with good intentions. The people we’re working with definitely didn’t go out there thinking these are controversial. I think there was a lot of confidence in the fact that we’re doing the right thing because they come from credible organisations.”

Although carbon offsetting seems like a good idea at first glance, it’s vital that companies undertake in-depth research into the on-site realities of the projects their carbon credits are paying for. Unless it’s evident that these investments are having a positive impact on the environment and surrounding societies, then corporations large and small should consider whether they’re using the practice of carbon offsetting as a force for good, or as an excuse to wipe their carbon-producing conscience clean.