Carbon offset for business is huge current news. Environmental sustainability is on the important to C-suites from all industries. consequently, companies are looking at all possible avenues to decrease their carbon footprint.
The problem is huge the number of net-zero commitments increase and businesses are under pressure to fulfill their promises.
Carbon offset for businesses is one option you might be thinking about however you might be left with a few questions like:
What is carbon offset?
Why do businesses make use of carbon offsets?
How much does it cost to operate? Does it really help in moving your business towards being carbon neutrality?
This article will address these concerns and many more.
What is Carbon Offsetting for Business?
What does carbon offset mean in the business world? Carbon offsetting (sometimes called “carbon credits”) is the method of neutralizing the amount of carbon dioxide emissions that an individual or company emits in a particular area or during its business. Corporate carbon offset covers the organization aspect of this.
The trend is gaining traction. at the time of writing 163 companies of that part of the Fortune Global 500 had publicly committed to achieving targets related to climate change and carbon neutrality being the most frequent of these, as cited by companies 91.
Some carbon offsets are used in order in order to satisfy obligations regarding emission or environmental performances. Certain carbon offset markets come by the voluntary purchase of carbon credits. This is vital according to McKinsey observes, not only since carbon credits that are purchased through voluntary purchase can increase the amount offset by carbon however, they are also important because:
“Voluntary carbon credits provide private finance to climate-action projects that might not otherwise be able to get off the ground. They alsoaid in the investment and innovations needed to lower the price of new technologies for climate change.” In addition, they are aiding to “facilitate the transfer of capital towards those in Global South, where there is the greatest opportunities for economically viable nature-based emissions reduction projects.”
Carbon offsetting for businesses appears to meet a variety of criteria and then. But it’s not always an easy fix, neither is the framework designed to allow it to achieve its goals. Bloomberg estimates that, of the 18 oil majors that have currently zero net-zero goals, 3.3 billion metric tons of emissions per year will have to be eliminated to achieve their targets, almost 18 times more than the total number of carbon offsets that will be issued in 2020.
Although your goals may not be as challenging, they could seem equally daunting.
How Do Corporate Carbon Offsetting Function?
If carbon offset is something that your company is contemplating, you’ll be interested in knowing the way it works and what it will mean in the real world. What is the process for carbon offsets in businesses actually function? Does a company really reduce the carbon emissions of its operations?
The carbon offset program for business (and in fact any carbon offset) program operates on the assumption that carbon dioxide absorption by the atmosphere could be offset by carbon dioxide released elsewhere.
Based on this, companies can offset carbon with the help of investing into and setting up initiatives that decrease or store carbon in order to offset the carbon dioxide they generate elsewhere. Carbon credits are used to refer to carbon offset can be described as an exchange of carbon emissions.
What is this like in real life? The kinds of projects that are utilized to offset carbon emissions in businesses are:
Tree planting
Forest preservation
Renewable energy sources, like solar or wind farms
Energy efficiency initiatives, such as insulation of the premises of a business and introducing an electrical vehicle fleet
Why do companies use carbon Offset?
What are the main reasons for corporate carbon offsets? There are many compelling motives:
Increasingly, organizations in all sectors recognize that environmentally-focused strategies are the “right thing to do” as part of a broader ethical and ESG-oriented culture.
They also face public pressure to increase the quality of their ESG performance. 2022 is expected to be an “golden period” of activist investors, with low ESG performance being one of the key requirements to “mark corporations as targets” for activists.
This is not all, however, ESG performance is becoming more transparent as disclosure requirements become more stringent and the use of reporting results to assess and evaluate the capabilities of your business as an investor, business partner, and supplier.
Imagine that your company produces an enormous amount of carbon. In that scenario corporate carbon offset could be the only viable option to make significant reductions in carbon emissions at least in the short-term.
What is the cost to offset carbon?
A more positive and natural approach could seem like one of the Holy Grail for many organizations however, within the ethical aspects companies still have financial obligations. If you are a CFO or his team the next natural question is: how much costs will this be? What is the cost for companies on carbon offsets?
At present, offsetting corporate carbon emissions is about $3-5 per tCO2e (that is the equivalent of $3-5 per ton carbon dioxide equivalent).
You can learn more on the carbon.credit website.
However an analysis of June 2021 from University College London (UCL) suggests that this figure could increase to $20-50/tCO2e in 2030 and more than $50/tCO2e by 2050. This is the people responsible for carbon neutralizing projects are properly paid and incentivized.
Does corporate carbon offset work?
Another crucial aspect to consider. If the procedure is found not to work, companies aren’t making any progress with carbon offset. As with all new processes there’s been some doubt about carbon offset. The evidence that offset emissions can be beneficial even if it doesn’t resolve the issue that greenhouse gas emissions pose is undisputed.
The BBC is the British broadcasting and news corporation and broadcaster, says that even though “numerous skeptical individuals” have claimed that carbon offset is “ineffective or even unmoral” and agrees that “they are definitely an ineffective instrument,” it also concludes that “they certainly can make a difference.”
When examining whether carbon offset can be effective, it’s crucial to realize that it’s not the perfect solution for climate change. Experts are in agreement that it’s an important step towards the journey towards net zero. Whatever the best intentions or the rigors of plans for reducing emissions of an organisation nearly all companies will end up with an environmental footprint that they have to be offset.
Therefore, while carbon offsets for corporations is not the sole answer but it is an essential element of the solution. Companies no longer have to ask what they should do, but rather how to offset their carbon footprints.
The Next Step to carbon-neutral operations
Climate change is hugely important to everyone not just to support “optics,” or reporting or even the balance sheet, but for our own survival as a planetthat businesses must employ every weapon they have in their arsenals to combat the issue.
Although carbon offset for business isn’t a magic solution for companies who want to increase the quality of their ESG standing, it’s an effective and reliable tool to incorporate into your toolkit and can make a significant impact on the carbon footprint of your business.
Carbon offset for business can result in tangible improvements to your ESG performance when incorporated into an approach that is structured and prioritizes:
Understanding and measuring the drivers of your company’s carbon footprint
Making steps to limit carbon emissions
Completing any emissions you are unable to reduce your own emissions
We hope that this article has provided you with a better understanding of the theories behind carbon offset for businesses and the practicalities involved in setting up a carbon offsetting strategy.