Seeking refuge in the carbon offset market: the first or last option?
The creation of a common marketplace, universal policies, practices, and frameworks have become integral in coordinating efforts, setting standards, raising awareness, and funding projects and programmes aimed at fighting and finding solutions to global issues and crises. The race to Net Zero and the global decarbonisation strategy has not been an exception to this as climate disclosure index (see. TCFD etc), standard setters (see. GRI, ISSB, etc), nature-based solutions, and carbon offset markets are playing critical roles to accelerating efforts to combat the climate crisis.
The carbon offset market is a marketplace where companies voluntarily purchase carbon credits to offset their carbon footprints on the environment. The rationale for this emanates from reasons including accelerating global action towards carbon reduction, companies not knowing where to kick start their climate strategy, and lacking the expertise and resources to combat their climate impact, to augment their ambitious climate goals of carbon reduction. These purchases over the years have been used to fund nature-based carbon removal technologies and other climate-based interventions as a proxy function by the market for companies. Evidence suggests a considerable impact of the offset market in carbon reduction with the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimating that carbon credit demand could reach a valuation of about $50 billion by 2030.
That notwithstanding, the carbon market has been marred by some controversies, including the recent Verra investigative outcome, which revealed that more than 90% of its verified carbon standard for rainforest carbon offsets sold did not match the levels of carbon reduction guarantees. Others have argued that offsets reduce incentives for companies to be responsible and actively work at reducing their carbon emissions, while bigger corporations use this platform to pay their way out by displacing or shirking their duties as responsible corporate citizenships. Whatever the position is, the novelty of the carbon offset market and its impact on climate change is incontestable. In negating the latter opposing argument, the presence of a carbon offset market, irrespective of its impact or controversy, must not be applied as a proxy to companies’ ownership of their internal contribution to carbon reduction and negation. Corporate organizations, in developing and reiterating their commitment to their organization’s carbon reduction strategy, must aspire towards a forward-looking and inside-out rather than an outside-in approach to decarbonisation. Thus, companies aiming at building a reputation that communicates their climate stance and commitment to their stakeholder community must resort to the carbon offset market as the last option on their carbon reduction checklist and rather develop internal structures and practice to support carbon reduction actions. Apart from the grand theoretical ambitions on paper, companies can consider these practical steps in their decarbonisation roadmap.
Pro-Environmental Behaviour (PEB)
Pro-environmental behaviour promotion is one of the easiest and most inclusive ways of getting the whole employee community active in adopting behaviours and practices geared towards reducing their individual impact on the environment. Behaviours range from energy conservation awareness, labeling of waste bins to encourage waste separation for recycling, cycling to work schemes, and posting sustainability signage and messages, amongst others. As basic and traditional as this may sound, owing to its over popularity in almost every company today, encouraging employee-to-employee accountability and conversation is critical to developing a climate-conscious culture in the organization, which serves as a bedrock for creativity and inclusion.
Net-Zero Human Resource (HR) Strategy
To deal with the skills, expertise and experience gap which constrain companies from developing and accelerating their carbon reduction strategies, the HR function becomes imperative in recruitment by way of attracting and retaining talents. Using the resource dependency theory, for example, the HR function can show some dynamism in attracting versatile employees who possess knowledge of climate-related matters as an essential and not just a desirable skill. Climate-related knowledge and proficiency will underline the constituent of the in-demand and future skill of work tomorrow and companies proactively considering this will be at the forefront and have a competitive advantage in the market. The HR function can also encourage voluntary learning and incentivise employees who would want to job-rotate and develop their competencies, receive external mentorship and attend programmes that would enrich their learning experience for the benefit of the company.
Climate-based Spending vs. Investment
Climate-based spending instead of climate-based investment has been the bane of greenwashing, woke washing, and bluewashing. Industry and stakeholder pressure currently are pushing companies under duress to be accountable for their carbon emissions. While the posture of spending seeks to meet the short-term goal and make an out-of-pressure impression to the stakeholder community, an investment approach affords the companies the structured and systematic approach of measuring their carbon footprint to inform the investment decision and approach for the companies' carbon emissions reduction and management. Regardless of how slow the investment approach may seem, the yields and progress are more visible, verifiable, and long-term than the approach to spending.
Scope 3 Emissions Reduction Strategy
Carbon reduction or mitigation strategy without disclosure for Scope 3 emissions which accounts for over 90% of indirect emissions, is just scratching the surface of the issue. As this disclosure scope accounts for business activities related to the companies’ operations, organizations can develop a net-zero procurement and supply chain strategy that enshrines supplier net-zero policy and practices assessment, environmental performance, and emissions disclosure as part of their supplier selection and evaluation protocol in their operational processes. This will ensure that companies build a collective strategy and synergy with their business stakeholders in delivering their carbon reduction ambition and goals.
The place of the carbon offset market in the decarbonisation agenda cannot be overemphasized as I personally subscribe to it as providing a basket for corporate financing of carbon reduction-related activities, projects, technologies, and compensation schemes, especially for affected zones in developing countries. Companies’ commitment to Net Zero should not focus on building a huge part of their strategy on carbon offset purchases as the prime option but rather develop internal structures, investment protocols, and culture within the organization that embeds core carbon reduction values and processes in their operations.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
About the author
Enoch Opare Mintah is a Ph.D. candidate at Kingston University London and an Associate Lecturer of Governance at the University of Lincoln, UK. His research interest and expertise revolve around ESG disclosures, Sustainability Reporting, Corporate Social Responsibility, Education for Sustainable Development, and Citizenship Education.