Carbon Offsets:
A Necessary Half-Measure?

There are better ways for companies to help the planet than carbon offsetting—directly reducing emissions and cutting back CO2-related activities are far better—but purchasing carbon credits and investing in outside programs that reduce greenhouse gases remain a critical component of business travel sustainability programs, and will remain so for the foreseeable future.

“The core component of any corporate sustainability plan should be setting a net zero target [cutting greenhouse gas emissions to as close to zero as possible], assessing their footprint and then putting in place a carbon-reduction plan to meet that goal,” said Thrust Carbon director of product Kit Brennan “These plans take time, so careful highly verified offsetting is a useful tool to reduce the negative effects of CO2 while that transition takes place.” 

_{Making Offsets Meaningful}

Business travel industry players see programs to reduce and offset carbon emissions working hand-in-hand. According to GBTA’s 2022 State of Sustainability in the Global Business Travel Sector report, 70 percent of industry respondents said that offsetting emissions by investing in environmental projects should be encouraged or mandated as part of a green travel program—an approval rating similar to reduction strategies like prioritizing travel routes with the smallest CO2 footprint and prioritizing flights that use sustainable aviation fuels.

“In terms of business travel, we think offsetting is a responsible part of any business travel program, but it must be tied with a meaningful strategy for reducing emissions to get to net zero,” Brennan said. “Carbon-avoidance offsets will get a business to carbon neutral, but not net zero,” which he said, “will only be achieved through carbon reductions in the travel program, and carbon-reduction style offsetting.”

“If not used as part of a carbon reduction scheme, offsets simply are a way to excuse bad behavior,” said Alyson Genovese, global head of corporate responsibility at S&P Global.

_{What’s the difference?}

Carbon offsetting takes two fundamental forms: carbon avoidance offsets, which include funding new renewable energy programs like solar farms or providing efficient cookstoves to rural communities to replace coal or wood stoves; and carbon reduction offsets, such as the development and use of SAFs, direct capture of airborne carbon emissions, “and—some might argue—tree planting,” said Brennan.

Carbon credits are similar to carbon offsets: under a cap-and-trade carbon credit program, companies can trade carbon credits to meet mandatory emissions requirements; in the U.S., only California has mandated a carbon marketplace. Carbon offset programs, on the other hand, are a voluntary initiative undertaken by companies as part of a broader sustainability policy.

McKinsey & Co. expert associate partner on net zero initiatives Jop Weterings told BTN voluntary carbon-reduction programs helped remove 173 million pounds of CO2 from the atmosphere last year. “That sounds like a lot, but it’s less than one half of a percent of global emissions,” he said. Still, that number was up 53 percent over 2020, and such programs are expected to increase tenfold by 2030.

For every company there’s a different motivation. “Some just want to do the right thing on climate action. Others realize there’s a real risk in the business chain. Investors expect alignment with net zero. There are consumer expectations among the younger generation especially. And good talent wants purpose-led employers, especially in a tight labor market,” said Weterlings.

_{Watch Out for Greenwashing}

‘Greenwashing’—fudging the numbers to make sustainability efforts to look more impactful than they really are—remains a serious problem in the world of carbon offsetting, both among suppliers and purchasers. Poor quality control feeds public perception that carbon offset programs lack legitimacy, amplifying the need for regulation of the marketplace, said Brennan.

“There are heaps of high-quality projects that deliver meaningful reductions and are accelerating decarbonization in low-income parts of the world, but I think the general member of the public thinks of offsets as a scam,” he said. 

However, “For every dubious tree planting project, there are many ‘boring’ highly-verified solar, biomass, wind and methane projects” that corporate travel programs can tap to provide a bridge to internal emissions reduction targets. 

“In general, the simpler ‘less sexy’ offset methods are the hardest to apply dubious accounting to—the effect of a solar panel or wind farm is quite straightforward to calculate for example,” said Brennan. “The most important thing is making sure there is a high-quality verifier behind the program, such as GoldStandard or Verra.” 

SCS Global Services is another well-regarded player in the carbon offset verification services market. The Environmental Defense Fund, World Wildlife Fund, and Oeko-Institut also collaborated on a tool (available at https://carboncreditquality.org/) to assess carbon credit quality, initially focusing on three popular types of carbon-reduction programs: landfill gas utilization, efficient cookstoves and afforestation and reforestation projects.

_{One Company’s Offsetting Journey}

S&P Global has been able to achieve 100 percent carbon offsetting of its travel program by working with Natural Capital Partners, which connects companies with vetted programs in the voluntary carbon market. The financial information and analytics firm has coupled reductions in its travel budget with carbon offset programs like preserving Amazon rainforest, solar-powered water programs in India and clean cooking initiatives in China. 

“National Capital Partners gives us a portfolio of programs to choose from,” said director of global travel and meetings Ann Dery. The company also planted 35,000 trees—one for each employee—when it merged with IHS Markit in February 2022. “There are so many scams out there when it comes to offset programs.” said Dery.

“While carbon-reduction offsets are superior, they’re nascent technologies and it’s not really feasible to completely get a businesses emissions to zero using them at this time due to low availability and therefore prohibitive cost,” Brennan said. “So the best businesses are analyzing their footprint to reduce their emissions, phasing in reduction-style offsets of 10 to 20 years, and using avoidance-style offsets to do something about their footprint in the meantime.”

That suitably describes S&P Global, which has set a hard deadline of 2040 to achieve net zero while continuing to reduce and offset its emissions. 

Dery predicted the supply chain “will eventually rely less heavily on carbon offset programs as more companies require preferred vendors to commit to science-based targets and fixed dates to achieve net zero. Corporate responsibility coupled with government intervention will push organizations to reduce their carbon footprint over time,” she said. 

“Carbon offsets will be here for the near future,” Dery said, adding that achieving widespread net zero for U.S. corporate travel likely will require more government and regulatory intervention, as has been the case in Europe. “If we leave it up to corporate responsibility, change will be quite slow,” she said. 

_{Minimizing Offsets, Maximizing Success}

Once companies integrate carbon reduction into their sustainability program, the ultimate goal should be to wean off carbon avoidance programs.

Scott Gillespie, founder and CEO of travel management and justification consulting firm tClara, said the perception that offset programs are an effective strategy much change in order for companies to shift focus towards carbon reduction.

“The company’s sustainability officer needs to communicate to travelers that carbon offsetting has no significant impact in the short term,” said Gillespie. “The only practical way to reduce carbon emissions in the short term is to reduce travel. The goal must be to eliminate low-value trips.”

S&P Global’s Genovese suggested that rising costs may make purchasing offsets less attractive. “Instead, the money can be used to decarbonize operations or working with supply chains [to achieve] actual emissions reductions,” she said.

Ultimately, said Brennan, “Offsetting is important component to a sustainability program, but must always be secondary to reduction. If we want to prevent a climate disaster, every business will need to reach net zero by 2050,” he said. “Net zero can only be achieved with reductions, so that will leave no place for avoidance-style offsets. Reduction-style offsets will always be necessary for unavoidable emissions.”