The counterweight

30th September 2015


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Carbon offsetting remains popular among some companies, though it is changing. Wendy Buckley reports

Carbon offsetting has divided opinion on its merits to combat climate change because it does not necessarily require offsetters to reduce their own emissions. However, significant changes in recent years in terms of carbon measurement and offsetting have made the process more robust. These include improved regulation and standards, such as mandatory greenhouse-gas reporting and the introduction of PAS 2060, the specification to demonstrate carbon neutrality. At the same time, the market price of carbon offsets has fallen significantly.

Change of focus

Carbon offsetting is far from a new concept and, over the past 10 years, more businesses have claimed they are carbon-neutral. The process of buying carbon credits either at home or overseas to compensate for an organisation's emissions from its own operations (see panel, below) has come far since the activity was regarded as "pseudo-charitable".

Recently, a more sober and - literally - measured approach has been adopted, while high-profile companies such as Microsoft, Aviva, Jaguar Land Rover, Marks & Spencer and Sky have been offsetting their emissions for years. The UK government also uses the mechanism to offset its travel emissions under its "greening government" commitments.

Broadcaster Sky has been offsetting its entire carbon emissions since 2006. Fiona Ball, head of responsible business, says few organisations were committed to offsetting then and Sky wanted to show leadership on climate change. "We had already been through a process of measurement and internal carbon reduction - we wouldn't have done the offsetting without these elements firmly in place," she says.

Initially, Sky's offsetting focused on supporting renewable energy projects, but its choice has moved to ventures with high levels of social benefits, including a rainforest protection project in Brazil.

Deutsche Post DHL Group, the world's biggest logistics company, has also been a major offsetter since 2006. Daniela Spiessmann, senior expert, GoGreen, at the group, says DHL developed its climate-neutral product offering in 2005, initially for parcels. This enables customers to participate in the company's voluntary emissions trading scheme to offset emissions that cannot be avoided. DHL purchases carbon credits from specialist providers which spend the revenue on climate protection projects. So, for DHL carbon offsetting provides a market opportunity and helps clients to fulfil their own commitments. The scheme also complements the company's GoGreen environmental protection programme to improve carbon efficiency.

Like Sky, offsetting at DHL focuses on supporting projects with considerable social impact, with the firm favouring projects that have achieved a gold standard rating in south and central America, Africa, the Middle East and Asia. To attain this standard a project must meet strict criteria, among them contributing evidence of reductions in carbon and local participation. They must also be verified by the UN.

The focus on social projects is relatively new. In the past, and particularly when the price of carbon was high, offsetters such as Sky favoured cost-effective renewable energy projects. But as an organisation's understanding of offsetting increased, a trend has emerged to select projects to which the business has a connection. This may be a region of the world or it may be related to the subject matter. For example, waste management companies have a natural synergy with projects in developing countries to reclaim landfill gas; and an IT and telecommunications company in the UK with subsidiaries in India has selected rural community projects, such as rolling out energy-efficient cookstoves.

Portman Travel offers its clients carbon offsetting on the emissions caused by their journeys. Adrian Parkes, chief commercial officer, says: "Our offsetting is part of our integrated 'Responsibly Portman' corporate social responsibility programme. We choose projects in developing regions that benefit communities and resonate with our customers."

He advises businesses considering offsetting to avoid doing it on a whim. "First, decide on your business's objectives and drivers. Is the organisation planning to offset for legislative reasons or as part of its marketing strategy? Or is it to reduce costs? Then build a long-term sustainability programme around it."

Own backyard

A frequent complaint among offsetters is the inability to select projects in countries that are party to the Kyoto protocol. Under carbon offsetting rules, credits from the voluntary market are generated only from countries that do not have commitments in place to reduce their emissions under the international climate agreement. In theory, it is possible to generate joint implementation (JI) carbon credits. JI allows annex B parties under the protocol, such as the pre-enlargement EU-15, to earn emission reduction units (ERUs) from a project in another annex B country. However, JIs are rare because they tend to be costly.

Some organisations are taking an alternative approach and investing in more locally based community energy projects. They either source the projects themselves or use an intermediary. Renewables projects, such as solar panels or small-scale wind power, are popular. This approach has been used by British Airways. Jonathon Counsell, group head of sustainability, says: "We chose to support community energy-based projects in the UK, which is funded on an opt-in basis by our customers when they book their flights. We had previously done traditional offsetting, but we responded to customer feedback and currently the UK is a better fit with our clients."

Value for money?

Most organisations using offsetting would say it helps raise brand recognition, but does it also provide a good return on investment?

Greenhouse Graphics, a Hampshire-based graphics and printing business, offsets emissions from its paper products and understands the value of it. "Offsetting is synergistic with what we do and our impact," says managing director Ian Crossley. "We assess the carbon content of our individual projects, which we report to our customers. As a carbon-neutral offering is central to our values, we provide the offsetting at no additional charge, choosing UK tree-planting projects.

"We only do this after we have a thorough internal process in place for measurement and reduction."

Offsetting works for companies like Greenhouse Graphics because there is a robust quantitative understanding of the carbon saved and a full audit trail. The downside is cost, given the layer of administration needed to develop a project and audit it.

As environmental management merges into sustainability, the demand for carbon offset projects with higher social benefits seems set to increase. Will businesses favour social quality over quantity and buy less offsets or increase their budget to buy the same quantity of offsets? Time will tell.


How carbon offsetting works

  1. Project in a non-Kyoto country applies to generate offsets.
  2. Validation of project - accepted only if there is no other
    source of funding.
  3. Carbon credits issued after the project delivers carbon reductions.
  4. Carbon credits are sold on regulated international markets.
  5. Offsetters purchase the offsets and have them "retired" in their organisation's name.

To offset, an organisation must first know what its carbon footprint is. Fortunately, organisations have become more experienced and confident in measuring emissions, partly due to compliance processes such as the UK's carbon reduction commitment energy efficiency scheme and mandatory greenhouse-gas reporting.

Carbon conversion factors are updated and published annually by Defra. So, as long as an organisation has quality data, it should be able to assess its footprint accurately.

Carbon offsetting organisations, such as broadcaster Sky, have their emissions verified frequently and independently. This not only provides confidence for its compliance reporting, but adds credibility to its carbon offsetting claims. To cover the margin of error, many offsetters include a "buffer" of an extra 5-10% on top of their carbon footprint.


PAS2060

In 2008, BSI launched the publicly available specification (PAS2060) to provide an understanding of what "carbon neutral" means. It requires organisations to:

  • Measure their annual footprint to recognised methodology.
  • Produce a carbon management plan - including a set of target metrics.
  • Offset emissions using internationally recognised standard projects, such as certified emission reductions (CERs), gold standard verified emission reductions (VERs) or verified carbon standard (VCS).
  • Complete a qualifying explanatory statement (QES) and make it publicly available.

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