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October 17, 2024
Find out more about the SBTi’s position and what it means for your company
“Carbon offsets may be an effective investment when used to complement a holistic, long-term sustainability strategy.”
Want to know more about the SBTi’s approach to carbon offsetting mechanisms such as Environmental Attribute Certificates (EACs) and carbon credits? Read on to explore the pros and cons of carbon offsetting for your sustainability strategy.
Understanding the SBTi’s stance on carbon offsets
Validation of your science-based targets (SBTs) by the Science-Based Targets initiative (SBTi) ensures that your sustainability efforts align with the latest climate science. As discussed in our previous article, this enables a more effective climate strategy and can facilitate regulatory compliance. However, it’s crucial to consider the SBTi’s position on carbon offsetting to ensure your sustainability strategy is future-proof.
What are carbon offsets?
Reducing greenhouse gas (GHG) emissions is often done at the source – in other words, reducing emissions from industrial processes, raw material extraction, employee commuting and so on. But what about industries where emissions are harder to abate, such as steel or chemicals? In some cases, carbon offsetting may offer an interim solution.
Carbon offsets allow companies to compensate for their GHG emissions by investing in projects that reduce or remove an equivalent amount of CO2 – measured in terms of carbon dioxide equivalents (CO2e) – from the atmosphere.
There are two potential carbon removal pathways: nature-based solutions, such as reforestation; and technology-based solutions, such as renewable energy initiatives or carbon capture and storage. For example, a company in a hard-to-abate industry, such as coal mining, could invest in a wind farm to offset some of the emissions it produces.
What does the SBTi say about carbon offsets?
The SBTi has tended to take a cautious approach to carbon offsets. Instead, it encourages companies to focus on direct emissions reductions in their value chains (Scope 1, 2 and 3 emissions). Where offsets are used, the SBTi stresses that they should play a role in neutralising emissions that are hard to eliminate in the long term, rather than being used to meet short-term emissions reduction targets moreover, a strong preference for removals is highlighted.
Does the SBTi allow carbon offsets?
However, in April 2024, the SBTi hinted at possible changes to its guidelines for reducing Scope 3 emissions specifically. They shared that they were considering allowing the use of EACs for this purpose, although they later clarified that no formal changes had been made to their guidelines and that their focus remained on direct reductions.
The SBTi’s caution can be explained by the controversy surrounding the validity of carbon offsets. Indeed, they have been criticised as examples of greenwashing. There have also been cases where offsetting mechanisms such as carbon credits have been deemed ‘worthless’ after investigation.1
In response, there have been efforts to standardise and improve the credibility of carbon offsets, such as the Climate Community and Biodiversity Standard. However, it remains important for companies to consider their benefits and drawbacks before integrating carbon offsets into their sustainability strategy.
What are the benefits of carbon offsets?
For sectors such as aviation and manufacturing, carbon offsets represent one of the few practical solutions to address emissions in the short term while new technologies are being developed.
In less carbon-intensive sectors, carbon offsets remain one of the most practical ways for companies to support climate mitigation efforts without reducing their own emissions. For example, if an organisation already has a net-zero carbon footprint, offsets can be an attractive way to continue a commitment to continuous sustainability improvement.
Done right, carbon offsetting projects can also be a powerful lever for sustainable development. For example, reforestation projects don’t just allow companies to indirectly reduce their emissions; they can also benefit local communities by improving air quality, creating jobs and restoring surrounding ecosystems.
What are the downsides of carbon offsets?
One of the biggest concerns about carbon offsets is that companies may use them as a smokescreen for inaction. Even when used with good intentions, the scarcity of consistent standards and verification can mean that companies aren’t having the positive impact they intended.
It’s also important to note that by thinking about their sustainability strategy only in terms of carbon emissions and offsetting, companies can lose sight of other aspects of sustainability. These may include their reliance on finite material sources or the impact of their activities on biodiversity and communities.
How can carbon offsets be used effectively?
According to the SBTi’s standards, priority must be given to direct removals with proven permanence first (for example from reforestation projects) and then on emissions avoidance (through RE projects with bundled units such as RECs) – so using carbon offsets as a substitute for direct reductions will rarely be an efficient use of your resources. Instead, carbon offsets can be an effective investment when used to complement a holistic, long-term sustainability strategy.
Wondering if carbon offsets are right for you? A sustainability consultant can help you decide whether they’re a worthwhile use of your time and investment, and support you in selecting the offset mechanisms that will deliver the greatest benefits.
To find out more about carbon offsets and whether they could be an effective choice for your organisation’s sustainability strategy, contact our experts today.
