Three-quarters of businesses do not want to increase carbon offsetting to reach net-zero targets

Corporate buyers are urged to prioritise measurable emissions reductions within their own value chains.

The Science Based Targets initiative (SBTi) stated last month that it will soon publish updated guidance on how companies can use ‘environmental attribute certificates’ including carbon credits to account for the delivery of their climate goals, specifically those relating to Scope 3 (indirect) emissions.

This approach has been fiercely debated within the corporate sustainability space and has reportedly caused a rift within the SBTi itself. Following a statement from the SBTi, more than 30 of the technical and scientific advisory groups urged it to immediately retract a statement indicating that it could allow businesses to use carbon offsetting to a greater extent.

The SBTi has reiterated that no standards or guidance are yet to be changed on the matter of offsets and wouldn’t without public consultation.

Businesses though, are already concerned about the potential impact that increasing the utilisation of carbon offsetting could have on corporate net-zero targets.

In April, edie surveyed more than 180 businesses, ranging from small SMEs to large-scale multinationals with more than 1,000 staff members. More than half (54%) of survey respondents were UK-based.

The survey results, published this week, found that the majority of businesses are against any calls to increase the allowance of offsetting – formally called “Environmental Attribute Certificates” by the SBTi. A total of 75% of respondents do not believe that the usage of offsets should be increased under official guidance.

Potential changes are set to come about through work to update the Net-Zero Standard, which first launched in late 2021 and requires companies to pledge to reduce their absolute emissions across all scopes by 90% by 2050 at the latest. Credits are currently permitted to be used to address no more than 10% of Scope 3 emissions.

edie’s survey – results of which are fully available in our latest Sustainable Business Tracker – found that a little of half (53%) have science-based targets in place, with a further 18% currently developing such targets. Of the companies that have set science-based targets, 58% have had them validated by the SBTi and 11% have submitted them and are awaiting approval.

The vast majority (88%) of companies that have had targets validated by the SBTi are targeting net-zero by 2040-2050, while only 12% of companies targeting net-zero by 2034 or earlier have had their targets validated.

The results also show that there is consistency in attitudes towards offsetting regardless of how early a corporation is trying to reach net-zero.

edie’s survey found that businesses with a net-zero target set for 2040 or later were just as likely to view offsetting as an “integral” part of the plan compared to those targeting 2035 or earlier (both at 43%). However, 89% of businesses with net-zero targets set for 2040 and beyond agree that offsets should only be used for unavoidable emissions, compared to 82% for those with 2035 targets.

Almost half (47%) of businesses with earlier net-zero targets are already utilising carbon offsets, compared to one-third (34%) of businesses with later deadlines for net-zero. However, 86% of respondents believe that offsetting should only be used for “unavoidable emissions”, meaning businesses are overwhelmingly focused on decarbonisation first.

Change on the horizon?

Carbon credits have always been a contentious issue in the corporate sustainability sphere.

Last month, environmental NGOs warned that no corporate climate strategies can be classed as ‘high integrity’, due to an over-reliance on carbon offsets. The 2024 edition of the Corporate Climate Responsibility Monitor found that many firms are betting on man-made carbon capture technologies, for example, which are not yet commercially mature, or purchasing carbon offsets above and beyond covering their ‘residual’ emissions.

Others are reluctant to enter the carbon markets due to concerns about credibility. The We Mean Business Coalition (WMBC) found that most businesses (78%) not already purchasing carbon offsets, or planning to do so, would not consider entering the market. Their main concerns arose from worries that projects would not deliver the carbon benefits promised, thus exposing them to reputational risk and the risk of missing their commitments.

Indeed, some businesses have turned away from offsetting altogether. Global carpet tile manufacturer Interface has announced a decision to stop investing in carbon offsetting projects and initiatives to prioritise direct carbon reductions and carbon storage solutions, for example.

It is worth noting that a lot of work is going into improving the transparency and credibility of these markets.

Several organisations are working to develop and proliferate clear, consistent offsetting frameworks for corporate carbon credit purchasers and standards to increase integrity for credit producers and traders. They include the Voluntary Carbon Markets Integrity Initiative (VCMI) and the Integrity Council for the Voluntary Carbon Market, which last summer pledged to work collaboratively.

For the time being though, businesses are reluctant to invest in carbon credit projects. edie’s survey found that 60% of businesses believe that the carbon credits market is “currently too risky to invest in”.

edie Members can access the latest Sustainable Business Tracker, featuring a deep-dive on science-based targets and carbon offsetting. Click here to access the Business Tracker report.