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Why Your Organization Should Carbon Offset

Carbon offset for business is huge trend right now. Environmental impacts are at the forefront of C-suites across all industries; because of this, businesses are looking at all possible avenues to decrease their carbon footprint.

The issue is important Net-zero commitments are a common occurrence and companies are under pressure to fulfill their promises.

Carbon offset for businesses is one of the options you might be thinking about however you might be left with a few questions including:

What can carbon offsets do?
What are the reasons why companies choose to make use of carbon offsets?
How much does it cost to operate? Does it actually contribute to moving your company towards becoming carbon neutrality?

We will explore these questions 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 addresses the administrative aspect of this.

It’s also gaining momentum; in October of 2020 163 companies in within the Fortune Global 500 had publicly committed to achieving targets related to climate change and carbon neutrality being the most popular of these, and cited by the 91 companies.

Certain carbon emissions are offset to comply with regulations; or to fulfill obligations related to emission as well as environmental efficiency. Some carbon offset markets are created by the voluntary purchase of carbon credits. This is crucial according to McKinsey observes, not only since carbon credits that are purchased through voluntary purchase can increase the amount of offset carbon and offset, but also because:

“Voluntary carbon credits provide private funding to climate action projects that otherwise would not begin to take off [andhelp to encourage investment in the innovations needed to lower the costs of developing technologies for climate change.” Additionally, they assist in aiding to “facilitate the mobilisation of capital towards in the Global South, where there is the highest opportunities for economically viable nature-based emissions reduction projects.”

Carbon offsetting for businesses is a good idea, as it ticks many boxes and then. But it’s not always an easy fix, also, the framework isn’t designed to allow it to achieve its goals. Bloomberg estimates that, of the 18 major oil companies with 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 they will issue in 2020.

Although your goals may not be as challenging, they could seem equally daunting.

How does Corporate Carbon Offsetting work?

If carbon offset is something that your company is thinking about, you’ll be interested in knowing the way it works and what it means in real life. What does carbon offset for businesses actually perform? Does a company really reduce their carbon footprint?

Carbon offsetting for businesses (and actually any carbon offset) program is based by assuming that carbon dioxide absorption by the atmosphere could offset carbon dioxide emissions elsewhere.

In this way, businesses can offset carbon through investing and creating initiatives that can reduce carbon emissions or even store it in order to offset the carbon dioxide they release elsewhere. A term like carbon credit, used to refer to carbon offset is a way to express this notion of the concept of a quid pro quo carbon credit exchange for carbon emissions.

What is this like in actuality? The kinds of projects that could be utilized for carbon offsets in business are:

Tree planting
Forest preservation
Renewable energy projects, for example, solar farms or wind farms
Energy efficiency initiatives, such as building a wall around the office and introducing an electrical vehicle fleet

Why do companies use carbon Offset?

What are the main reasons for corporate carbon offsets? There are a myriad of compelling reasons:

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 projected to be the “golden period” of activist investors, with the poor ESG performance being one of the key requirements to “mark corporations as targets” for activists.
In addition, ESG performance is now more transparent and disclosure requirements becoming more strict and the reporting of results being used to assess and judge the capabilities of your business as an investor, business partner and supplier.
Imagine that your company produces substantial amounts of carbon. In this case corporate carbon offsets can be the only viable option to reduce significant carbon emissions at least in the short-term.

What is the cost To offset carbon?

A more positive and natural approach might seem like an option that could be the Holy Grail for many organizations However, in terms of ethical concerns there are still financial obligations. If you are a CFO or the team the next natural question is: how much is the cost? What are the costs companies pay on carbon offsets?

At present, offsetting corporate carbon emissions can cost around $3-5 per tCO2e (that is the equivalent of $3-5 per ton carbon dioxide equivalent).

However an analysis of June 2021 from University College London (UCL) suggests that this figure could increase to $20-50/tCO2e by 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 issue. If the method is proven not to work, businesses won’t be able to achieve anything with carbon offset. Like everything else that’s new it has received an element of doubt regarding carbon offset. However, the evidence that offset emissions can be beneficial but not completely solve the problem in greenhouse gases is evident.

The BBC is an 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 a completely flawed instrument,” it also concludes that “they certainly can make a difference.”

To determine if carbon offset can be effective, it’s crucial to realize that it’s not an all-purpose solution to climate change. However, experts are in agreement that it’s an important step towards the road to net-zero. Whatever the best intentions or the rigors of plans for reducing emissions of an organisation nearly all companies will end up with the carbon footprint that they must to be offset.

Therefore, while carbon offsets for corporations is not the sole answer however it is an essential element of the solution. Companies no longer have to ask what they should do, but rather how to reduce their carbon emission.

Make the Next Step towards carbon-neutral operations

Climate change is an enormous necessity for everyone not just to support “optics,” or reporting or even the balance sheet, but for our own existence as a species -organisations must make use of every tool they have in their arsenals to combat the issue.

Although carbon offset for business isn’t an all-purpose solution for businesses who want to increase the quality of their ESG standing, it’s an effective and well-tested tool that you must add to your toolbox. It can make a significant impact on the carbon footprint of your business.

Carbon offset for business will result in significant improvements in your ESG performance when it is part of an organized approach that focuses on:

Monitoring and understanding the driving forces of your company’s carbon footprint
Doing your best to reduce carbon emissions
Completing any emissions you are unable to reduce by yourself

We hope that this article has provided you with an understanding of the theories behind carbon offsetting in business, and the practicalities involved in the implementation of a carbon offset for business strategy.