Emissions offsetting for companies

To comply with the Paris Agreement and to have a realistic chance to reduce temperature rise to below 1.5C, global CO2 emissions will need to reach “net-zero” – where the overall sum of emissions minus possible emissions removals is zero – by 2050. Such reductions will require decisive and drastic worldwide action by national and local governments, along with businesses and civil society.

It is highly likely that legal requirements for companies to reduce emissions will become more and more stringent, while customers are favoring companies that have climate neutrality goals and are actively limiting their carbon footprint.

Public and private entities will need to use every tool at their disposal to achieve these emission reduction goals. Since for most companies a reduction of all emissions from operation and supply chain is nearly impossible, an “emissions residual” of hard to decarbonize areas of the business will remain. Carbon offsets are currently the only available tool to neutralize these emissions and reach net zero. If this is done responsibly it will accelerate action to avert dangerous climate change.

Companies and public entities, however, need to be aware of the risks associated with offsets, in particular a likely possible supply crunch in the not so distant future and a price hike that might lead to devastating cost overruns for the offsetter.

To credibly offset, companies should follow the guidelines that have been published by academic institutions in recent years, such as the Oxford Principles of Carbon Offsetting:

  • Cut emissions, use high quality offsets, and regularly revise offsetting strategy as best practice evolves
  • Prioritize reducing your own emissions – Minimize the need for offsets in the first place
  • Ensure environmental integrity – Use offsets that are verifiable and correctly accounted for and have a low risk of non-additionality, reversal, and creating negative unintended consequences for people and the environment
  • Maintain transparency – Disclose current emissions, accounting practices, targets to reach net zero, and the type of offsets you employ
  • Shift to long-lived storage
  • Target a gradual shift to carbon removals instead of emission avoidances as the market for removals scales and matures
  • Support the development of net zero aligned offsetting