How offsetting forms a vital component of a comprehensive business carbon management strategy
The historic agreement reached by 195 countries in Paris in 2015 demonstrated – for the first time – a collective determination to reduce the global emissions of greenhouse gases. Many governments are now set on a course to cut carbon and policies and measures are already in place in major economies of the world including the US, Europe and China.
Businesses – large and small – are becoming increasingly alert to the growing cost and regulatory burden associated with their emissions. In response, they are putting in place carbon management strategies which seize opportunities to simultaneously drive their own efficiency and operational performance.
Greater efficiency and energy saving in the form of ‘Reduce and Replace’ are fundamental components of the BP Target Neutral service. We help our business customers identify areas where they can focus efforts to reduce energy and carbon emissions, cut business costs and promote the reputation and profitability of their product or service.
There are many changes companies can make to their internal processes, facilities, and behaviours to reduce their carbon emissions. Most of the actions required to ‘reduce and replace’ lie within the direct control of day to day business decision-making. In other words, they are all part of good business practice.
However, some elements of carbon management – the ‘high hanging fruit’ – currently lie beyond the reach of many businesses. Reducing these emissions completely may involve prohibitive cost or capital requirements or encounter significant technological barriers. That is why carbon ‘neutralising’ or ‘offsetting’ forms a third, critical component of the carbon management strategy which BP Target Neutral offers to (BP’s) customers.
Carbon offsets enable businesses to take full responsibility for their residual carbon emissions while also providing a critical source of finance for renewable energy and other emissions-reducing and resource conservation projects around the world.
Tackling rising carbon levels using carbon offsetting is not new. It was first adopted at the Kyoto Treaty conference in Japan in 1997 and over the past twenty years, the design, operation, and administration of offsetting schemes have been developed and improved.
Today, carbon credits generated by voluntary offsetting schemes are subject to rigorous industry standards which provide a methodology framework, independent verification process and registry to ensure emissions reductions are real, additional (i.e. that they would not have happened without the project), permanent and unique.
Every offsetting project in the BP Target Neutral portfolio complies with standards that guarantee their environmental integrity and credibility.
It is why the United Nations has endorsed carbon offsetting as “a valid way to reduce carbon emissions quickly and cost effectively… in order to help speed up and scale up the transformation to climate neutrality1.”
In response, companies, governments, and individuals have been able to invest with confidence and collectively have voluntarily spent nearly $4.5 billion2 over the past decade to purchase nearly 1 billion carbon offsets from projects that reduce, avoid or sequester greenhouse gases.
Some critics suggest that offsetting distracts from taking responsibility for directly ‘reducing and replacing’ CO2 arising from business and other activities. However, a recent study3 reported that those companies choosing to use carbon offsets were found more likely to be involved in direct emissions reductions activities.
These included making their buildings and processes more energy efficient, installing low carbon energy, switching to cleaner transportation, designing more sustainable products, and engaging customers and employees around behaviour change.
Companies that didn’t purchase offsets did these things too, but at a consistently lower rate.
Overall, carbon offset buyers were found to have purchased about one quarter as many offsets as the emissions they reduced directly3. In other words, offsetting increased these companies’ collective carbon mitigation impact by 25%.
Moreover, this complementary relationship between reduce/replace and offset/neutralise is much more than a zero-sum game. This is because the benefits of offsetting go further than just reducing or avoiding the emitting of carbon.
A study by Imperial College London4, surveyed 59 offsetting projects and analysed their impact in creating jobs, protecting the environment, and generating new economic activity.
They found that the purchasing of carbon credits created a host of additional benefits. These ranged from creating jobs and incomes, conserving local ecologies, improving access to clean water and health care, to enhancing skills acquisition and promoting gender equality.
The research estimates that when a business offsets one tonne of its CO2 footprint it generates an additional £530 ($664) in benefits to the communities where carbon reduction projects are based. Although this value will differ depending on the projects participating in the research study, it still demonstrated that with the cost of purchasing a tonne of carbon offset typically below €45 currently, the wider economic, environmental, and social impacts of using offsets are considerable. In BP Target Neutral we map these additional benefits against the UN’s Sustainable Development Goals, using this ‘international language’ to highlight the additional benefits beyond carbon reduction.
These benefits also extend to those businesses who decide to make offsetting part of their carbon management strategy. Imperial College found that businesses investing in carbon offsets also report benefits such as enhanced brand image, engaged employees and market differentiation for their product or service.
The findings chime with a growing expectation by consumers, customers and staff that businesses should be able to demonstrate their commitment to the climate challenge, reducing their environmental impact and supporting communities in a multitude of different ways.
Carbon offsetting – as part of a carbon management strategy which has ‘reduce and replace’ at its core – offers businesses the opportunity to do this. It enables them to cost-effectively reach the ‘high hanging fruit’ of carbon emissions that are beyond their business’s economic or technical competence.
They complement rather than displace ‘reduce and replace’ activities to produce a more comprehensive approach to carbon management.They provide an immediate opportunity to accelerate the business response to an urgent need to reduce greenhouse gases which lies at the heart of the objectives of the Paris agreement.
Research has shown that they bring a host of wider environmental, economic and social benefits to communities in other parts of the world. And that they can help enhance and differentiate brand reputation for a company’s products and services.
The evidence shows that, after twenty years, carbon offsetting has come of age and forms a third vital component in establishing an effective carbon management strategy for business today.
- “Christiana Figueres, Executive Secretary, UNFCCC, COP 21 climate talks in Paris.”
- 2015 Ecosystem Marketplace Report using data from the Carbon Disclosure Project
- Kountouris, Y., Makuch, Z., Tan Loh, E.F. (2014) ‘Quantification and Evaluation of the Voluntary Carbon Market’s Co-benefits’, Imperial College London University, June 2014.