Feb 3, 2023

What is carbon offsetting for companies?

Carbon offsetting for companies and how your business can make it part of your ESG and science-based strategy.

Kia Eg
Kia EgB2C Growth & Marketing manager
What is carbon offsetting for companies?

If climate action is part of your company’s environmental, social and governance (ESG) strategy, or key to its corporate social responsibility (CSR) commitments, you will have heard of carbon offsetting. But will carbon offsetting as a form of climate compensation really meet your sustainability objectives and have a positive impact on the environment?

What is carbon offsetting?

Carbon offsetting is a way of compensating for your carbon emissions by funding an equivalent or greater carbon dioxide saving elsewhere. For companies, this often means investing in environmental projects as part of a wider ESG strategy, which may include carbon capture and carbon sequestration.

First, it is important to calculate your company’s emissions and make every effort to reduce its carbon footprint. It is not realistic to have no emissions at all, so carbon offsetting can play an important role in achieving net zero.

It’s also important to remember that a science-based approach must include emissions. It is no longer credible to offset emissions without also having a reduction strategy in place. Making these changes in your own company will have the greatest impact.

Essentially, carbon offsetting allows your company to compensate for unavoidable carbon emissions and any negative impacts your business has on the climate. When it comes to choosing an offsetting solution, there are plenty of options.

Carbon offsetting as a company

More and more companies are beginning to understand that climate change is much more than a natural threat. It has significant economic consequences that affect all businesses to some extent, which is why it’s so important to engage and take action.

The strongest argument for carbon offsetting is the positive effect it can have on the environment. Companies also choose carbon offsetting programmes to:

  • meet laws and regulations
  • form part of ESG strategy, policy and goals
  • attract clients, customers and employees
  • prepare for future changes to regulations and requirements

While some companies feel compelled to take action and reduce their carbon footprint on environmental grounds, there are always other benefits to this kind of climate compensation. Genuine action on climate and biodiversity sets companies apart from the crowd. It has a positive effect on customer affinity and attracts talent to help businesses grow, especially useful in a competitive job market.

There is also a very strong chance that your company will be obliged to report on its environmental impact. In the UK Environment Act 2021, it is now mandatory for all planning permissions to deliver at least 10% biodiversity net gain from November 2023. Additional reporting requirements under the Task Force for Climate Related Financial Disclosure framework are being introduced in the UK for all companies with over 500 employees.

How to start carbon offsetting

Your first step before you embark on a carbon offsetting programme is to measure your current impact. Once you’ve calculated your emissions and are able to better understand where you are causing most harm to the climate, you can start to make informed decisions about your ESG strategy.

When you know more about your emissions, you first need to work to reduce them as much as possible. Here’s a simple three-step process to keep in mind.

  1. Measure your carbon footprint
  2. Reduce your carbon emissions
  3. Offset your historical emissions or any that remain

If you start carbon offsetting without taking responsibility for your own emissions, others may see it as an excuse to continue polluting. If things go really badly, you could even be accused of greenwashing.

However, you can avoid this problem by choosing an offsetting programme that has meaningful climate impact. Get in touch with our team here at EcoTree and we can share our own nature-based solutions that will benefit your business. We can also recommend some fantastic carbon calculation services.

Types of carbon offsetting

Traditional carbon offsetting

Traditional carbon offsetting involves reducing future or ongoing emissions. For example, by expanding wind power or replacing household ovens with coal in developing countries. Any action should reduce carbon emissions measured against what things would look like had the offsetting not been implemented.

Carbon offsetting nature-based solutions

There are alternatives to traditional carbon offsetting that involve removing existing carbon dioxide from the atmosphere. Trees and forests are a fantastic nature-based solution, as they are one of the world's largest and best natural carbon sinks.

In fact, today trees are one of the most efficient methods of capturing and storing carbon dioxide. No existing technical solutions are as effective as trees, but we need more forests to meet the challenges our planet faces.

Forests also provide the biological diversity and natural habitats where plant and animal life can thrive. That’s why it is so important to support sustainable forestry, which has a tangible effect on climate change and natural ecosystems.

Our approach to forest management at EcoTree is that mixed species, continuous coverage forests benefit nature, biodiversity and sustainable resources.

Criticism of climate compensation

One of the biggest concerns with carbon offsetting is the idea that it gives companies an excuse to continue with their emissions. And it is certainly true that some companies pay to be part of an offsetting programme without reducing their own emissions at all.

Basically, it's about being transparent and designing an ESG strategy that makes a real difference. You need to find solutions that both reduce and offset emissions, and choose partners and projects that have a measurable impact.

Ask the following questions when you’re making decisions.

  • Does the offsetting programme reduce emissions in the way it says it will and how is that impact calculated?
  • Is the offsetting programme independently verified and certified?
  • Will the solution have a long-term or permanent positive impact?
  • Might the solution have possible side effects, such as any negative impact on the local population where projects are carried out?
  • Does the programme contribute to sustainable development?

Communicate company carbon offsetting initiatives

Sustainability and climate issues are something that more and more people care about, especially young people.

  • 4 out of 5 people say they are likely to choose a brand with a positive approach to environmental sustainability (SmartestEnergy)
  • In 2018, young voters in Sweden (18–29 years old) said environment and climate change was their most important election issue (Novus)
  • 76% of people born in the 1990s think that social responsibility is important when choosing an employer (Stepstone)

When communicating your company’s carbon offsetting and other sustainability work, you need to be clear and transparent. It’s important to explain exactly what impact your company is having and be accurate at all times.

If you can’t verify your claims, you risk being accused of greenwashing or even violating certain marketing laws. In recent years, companies such as Brewdog and HSBC have made misleading claims and found themselves subject to criticism with plenty of damage done to their brands.

For that reason, it is important to find partners and projects that stick to what they promise and come with independent certifications and verified methodology.

There have been several high-profile cases where companies have been reported for greenwashing and making misleading environmental claims in their advertising. Fines can be expensive, but so can the loss of trust from customers and clients.

That’s why if you decide to make carbon offsetting part of your ESG strategy, it’s vital that you take it seriously, do your research and choose the right solution.

Voluntary and regulated carbon markets

You may have heard of two concepts that often come up when talking about carbon offsetting: the voluntary and regulated carbon markets. It’s useful to learn more about and understand the difference.

The voluntary carbon market (VCM) is where companies and organisations offset their carbon emissions by choice. They make a decision to take climate action typically as part of a wider ESG strategy or to meet their CSR commitments.

The regulated carbon market (RCM) is where any carbon offsetting is bound by specific regulations and laws, such as the Kyoto Protocol and the Paris Agreement. Companies and organisations offset their carbon through the RCM to specifically meet predefined regulatory requirements.

Choose a nature-based solution with EcoTree

If you’re looking for a partner to help you deal with your residual carbon emissions and reach your science-based targets, our team at EcoTree can help. Read more about the EcoTree concept behind everything we do.

Sustainable forestry

Our nature-based solutions include giving companies the opportunity to own trees in sustainable forests. The trees act as carbon sinks and capture carbon dioxide while our forestry team works hard to nurture biodiversity and natural habitats.

Buy trees through EcoTree

Biodiversity conservation

Protecting biodiversity is one of our greatest environmental challenges. Your business can contribute to a range of biodiversity conservation projects that support natural habitats, which include agroforestry projects in the UK.

Support biodiversity projects

Contact our team

Our friendly team is always available to answer your questions and make sure you choose the right nature-based solution for your company.

Use our contact form to get in touch

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