Global brands’ carbon offset problem | WARC | The Feed

Global brands’ carbon offset problem

Many major brands have identified offsetting as a quick route to low emissions or even carbon neutrality, but a new study shows that such swift and relatively cheap solutions don’t really work, and don’t replace the profound changes businesses must make to achieve true carbon neutrality.

What are carbon offsets or credits?

When there’s a problem to be addressed, it’s more than likely that a business or even an industry will emerge to correct it. A mixture of accounting creativity and clever marketing, the carbon-offset industry is now worth north of $2bn.

Carbon offsets are effectively packages of support that allow a business to fund environmentally friendly projects to the tune of their own carbon outputs, thereby theoretically negating carbon from their balance sheets and allowing the business to claim a significant reduction or even neutrality.

Do they work?

A new analysis from Bloomberg Green, which also does some good naming and shaming of those buying bogus credits, finds that most purchases of carbon credits have favoured low-quality variants – the cheapest – and are often tied to renewable energy projects.

While that may sound good, the trouble is that an offset (which for the green projects are meant to allay the higher costs they face versus non-renewable or non-green projects) has next to no benefit when renewable energy is already far cheaper than coal or gas.

Bloomberg reveals that around 40% of the transactions analysed for 2021 went to these cheap and largely useless carbon offsets. In order for them to have any value, they have to cost money because they must be verifiable and have to be measured on effectiveness, not their cost efficiency. Funding effective (usually expensive, cutting-edge) carbon-reducing projects is hard.

It is on this basis that Salesforce recently created a centralised marketplace for carbon credits with a layer of centralised measurement to give peace of mind. Other services are also emerging to help businesses move their carbon-offsetting practices to the much tougher task of reducing the business’s own emissions across their supply chain.  

This all looks very familiar

Those with experience of securitisation through collateralised debt obligations in finance, or the murky digital ad supply chain in marketing may notice that something similar is going on.

According to Bloomberg’s analysis, 47% of transactions studied didn’t have enough information to link them back to a buyer. It is, effectively, an opaque market when buyers and sellers need it to be.

The trouble is that this confirms many people’s – often correct – perception that they can’t trust what most brands tell them about their carbon footprint. Greenpeace goes so far as to call it greenwashing, and the extensive use of low-quality credits is likely to become more scrutinised and more embarrassing.

What to do

Ad Net Zero is a good resource to understand where carbon credits should fit into a reduction plan. Effectively, they should only be used if they are totally unavoidable and should only seek to offset 10% of a business’s baseline emissions. The rest of those reductions should come from within the supply chain.

Sourced from Bloomberg, WARC