Carbon credits and offsetting are big topics for businesses trying to cut down on emissions. Here’s a simple guide to the latest news and why it’s important for your company.
Why Businesses are paying attention
Cutting emissions is crucial for reducing risks and future-proofing businesses. But with different regulations everywhere, it’s not always clear what counts as real climate action. The Science-Based Targets initiative (SBTi), which helps companies set science-based climate goals, is currently rethinking the role of carbon credits. This has caused some confusion and debate about how companies can meet their goals effectively.
What’s the SBTi’s Net-Zero Standard?
Since 2021, the SBTi has required businesses to cut their emissions by 90%, including those from their supply chains (known as Scope 3 emissions). These Scope 3 emissions are tricky because they make up about three-quarters of a company’s total climate impact. Many businesses are looking to SBTi for help, but recent proposals to expand the use of carbon credits have raised questions about their reliability.
What’s the deal with Carbon Credits?
Recent SBTi reports show that only 12-33% of carbon credits actually do what they claim. Problems include giving too many credits for projects, investing in things that would happen anyway, and shifting emissions around rather than reducing them. There are also concerns about social impacts, like human rights issues in some projects.
What should Businesses do?
Even with these challenges, there are still ways for companies to make a big impact:
- Measure and Share Emissions: Start by tracking and publicly sharing your emissions, including Scope 3.
- Focus on Big Impact Areas: Find and prioritise the biggest sources of emissions.
- Set Clear Targets: Set goals and create policies to reduce these emissions.
- Take Action: Implement plans to cut emissions and take responsibility for those beyond your immediate focus.
- Show Results: Measure how well your actions are working and communicate this.
Investing in projects like renewable energy or sustainable farming—which don’t count towards your carbon totals but help the environment—is also recommended.
The bigger picture
Focusing on reducing emissions within your value chain is the best way to tackle climate change. Companies should not only work on their direct emissions but also invest in sustainable solutions and support global environmental goals.
The debate over Scope 3 targets is not just about whether carbon credits are good or bad. It’s about finding easier ways and better frameworks to target and reduce the highest-impact emissions. While reducing emissions within the company is crucial, investing in projects outside the company to protect nature and support clean energy in developing countries is also important.
What’s Next?
As the SBTi updates its guidelines, it’s essential to find practical and effective solutions. Companies should look for new finance options and support a trustworthy carbon market that ensures carbon credits genuinely benefit the climate, nature, and local communities.
Stay tuned and keep up with the latest updates. By understanding these changes and adopting strong strategies, businesses can play a crucial role in creating a more sustainable future.
The Difference between Carbon Credits and Carbon offsets:
Carbon Credits
- What they are: Permits that let companies emit a certain amount of carbon dioxide (CO2).
- How they work: In systems where the government sets a limit on emissions, companies get or buy these credits to stay under that limit.
- Purpose: To reduce overall emissions by making it cost more to pollute, encouraging companies to be greener.
Carbon Offsets
- What they are: Reductions in CO2 emissions used to balance out emissions made somewhere else.
- How they work: When you buy an offset, you fund projects like planting trees or building wind farms that reduce CO2.
- Purpose: To compensate for emissions you can’t avoid, aiming to be carbon-neutral.
Key Differences
- Regulation: Carbon credits are often required by law, while carbon offsets are usually voluntary.
- Function: Credits limit total emissions by setting a cap, whereas offsets balance out emissions by reducing CO2 elsewhere.
- Usage: Credits are mostly used by big companies in regulated markets; offsets can be used by anyone wanting to offset their carbon footprint.
Both tools help fight climate change by reducing overall emissions and supporting green projects.