Inside OVO’s ‘True Net-Zero’ strategy: ‘Moving forwards, not backwards’ from offsetting

Last month, OVO published its ‘Plan Zero’ strategy report, committing to restricting its employment of carbon offsetting to only 10% of its overall emissions. This allowance applies solely to exceptional scenarios where reducing or avoiding emissions is not viable.

While diverging from conventional offsetting approaches, the company plans to direct its investments towards energy efficiency services and products, in a bid to eradicate carbon emissions at their origin.

This strategic shift primarily focuses on homes and transportation as a key component of its ‘Path to Zero’ initiative.

“A major driver [in the shift] was to ensure we’re as transparent as possible,” Owen Anderson, OVO’s head of sustainability tells edie.

Anderson stresses that achieving a truly accessible net-zero status for all necessitates actions aimed at curbing emissions from their origin.

“Transparency in carbon accounting is critical to reforming our energy system into a truly sustainable one. In order to achieve True Net-Zero for everybody, we need to do more to stop carbon at its source,” he adds.

Controversies enveloping carbon offset markets

Carbon offsetting projects have long remained a subject of controversy within the realm of environmental initiatives.

While these projects intend to mitigate carbon emissions by investing in endeavours that purportedly absorb or reduce an equivalent amount of carbon elsewhere, their efficacy and integrity have faced significant scrutiny.

A recent study by UC Berkeley and Carbon Market Watch highlighted a significant gap in the effectiveness of carbon prevention and removal efforts in various forest projects. The study determined that only one in every 13 credits truly delivers a net benefit in terms of climate impact and community benefits.

Anderson underscores that the rationale behind participating in carbon offsetting is diminishing, stating firmly, “the business case for carbon offsetting is waning”.

“Although there are positive social, environmental and economic benefits to the projects used to offset carbon, the science behind the actual sequestration of carbon, is not as straightforward as once thought,” explains Anderson.

Nonetheless, industry players persist in their efforts to improve the transparency and integrity of offset markets continuously.

In June, two prominent international programs aimed at enhancing the condition of carbon markets, the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI), announced a new collective pledge to bolster confidence in the market.

Moreover, last month, the VCMI unveiled additional guidance for corporates seeking to purchase high-integrity carbon credits that deliver actual climate benefits.

The evolving landscape of carbon offsetting

Despite OVO’s shift in approach towards carbon offsetting, recent studies have presented a new angle on corporations involved in the voluntary carbon market (VCM).

Rather than using carbon credits solely to evade accountability, these companies are surpassing their counterparts in crucial aspects of climate action.

These insights stem from a report published by Ecosystem Marketplace, an initiative led by the non-profit organisation Forest Trends, drawing upon CDP Climate Change data from 2022.

According to the report, 59% of VCM participants reported a yearly reduction in emissions. This decline is linked to reduced emissions and/or increased use of renewable energy. In contrast, only 33% of non-participating businesses noted a comparable decrease.

However, Anderson argues that realising ‘True Net-Zero’ involves ceasing dependence on offsetting, increasing renewable energy on the grid and electrifying heating and transportation.

It bears noting that the joint commitment from ICVCM and VCMI also stresses prioritising decarbonisation throughout the value chain via investments in clean energy, efficiency upgrades and innovative transport, and then using high-integrity credits as a supportive mechanism.

Nevertheless, regarding the potential for OVO to re-enter the evolving voluntary carbon markets, Anderson states, “Not when it comes to offsetting our carbon before we reduce our emissions.”

“We’re moving forwards not backwards,” he adds.

Alternate approaches to mitigating carbon footprints

The energy giant is steering towards strategies centred on reducing carbon emissions at their source.

The company believes that households will be pivotal to a clean energy grid in the future. As part of this vision, OVO is actively involved in initiatives that incentivise and reward customers for lowering or adjusting their energy consumption, leading to substantial cost savings.

“Why pay coal power stations to stay on and meet demand when you can pay customers to reduce or shift demand,” says Anderson.

Customers with electric vehicles (EVs) have already reaped savings of £3m compared to traditional fuel counterparts.

The strategy emphasises making the net-zero transition affordable, alleviating pressure on customers’ wallets through reduced upfront costs.

Additionally, OVO has committed to educating its customers on the distinction between carbon offsetting and direct emissions reduction.

Earlier this year, OVO conducted research into better carbon accountancy, including a review of Renewable Energy Guarantee of Origin Certificates (REGOs) and abated carbon emission methodologies, in a bid to increase understanding and transparency.

OVO worked with Cornwall Insight, commissioning its researchers to investigate whether REGOs are delivering the growth in renewable electricity generation and the emissions reductions benefits that consumers perceive them to.

To conclusion was that REGOs are no longer increasing the amount of green energy on the grid and, as related costs increase, these are passed onto consumers at a time when prices are already sky-high.

Based on the result, the company declared that it would stop investing in REGO certificates.

Exploring the journey ahead

As OVO transitions away from carbon offsets and REGOs, the company is redirecting its focus towards reducing emissions and investing in projects that genuinely protect the environment.

“We need to focus on reducing emissions and investing in projects that protect the natural environment, rather than relying on offsetting projects,” says Anderson.

While advocating for more accurate and transparent carbon accounting in these endeavors, Anderson underscores the significance of continued investment.

“Although we should account for the carbon in these projects in a more accurate and transparent way, we should not waiver from investing in them,” he adds.

OVO’s strategic vision, as articulated by Anderson, revolves around striking an optimal equilibrium—simultaneously investing in positive social and environmental causes while ensuring absolute reductions in carbon emissions.