Here's What Marketers Should Know About Carbon Offsets

Late last summer, television host and comedian John Oliver used this metaphor to describe carbon offsets: "[It's] like winning a Kid's Choice Award. It doesn't really mean much, but it will help you temporarily look a little bit greener." A kid covered in Nickelodeon's trademark green slime then appeared on the screen next to Oliver—resulting in a burst of laughter from his in-studio audience. "When you buy an offset so you can pollute more, and that offset is bullshit, you're now actively making things worse," Oliver said. That August 2022 episode of Last Week Tonight highlights one of the major controversies around the voluntary carbon market—that the registries certifying carbon credits are unreliable due to double counting and lack of verification, undermining their true climate impact. This Nonprofit Aims to Inspire Radical Climate Action—and Normalize Getting Arrested for It Academic studies and investigations from news outlets like The Guardian have also highlighted problems with carbon offsetting schemes, demonstrating that many projects used for offsetting don't actually remove or avoid as much CO2 as they claim. At the same time, climate scientists have been clear that there's no way to reach net zero greenhouse gas emissions by 2050 without using carbon mitigation strategies like those funded through offsets. As more companies require offsets to meet net-zero goals by 2050, the voluntary carbon offsets market is projected to grow 25% annually over the next five years. Defenders of offsets say that variability is in the nature of markets, and that they need investment and regulation in order to mature. That leaves brands—especially those frantically working toward ambitious carbon neutrality goals—stuck in the middle. What is a carbon credit? In the same way that the global economy needs carbon mitigation strategies to reach net zero, the vast majority of companies will still generate some unavoidable greenhouse gases even after switching to renewable energy sources and cutting unnecessary emissions. Carbon markets allow companies to offset that unavoidable pollution by funding climate projects—ideally, those that would otherwise be financially unviable or unattractive—that avoid emissions or remove greenhouse gases from the environment. Certifiable projects take a lot of different forms, including things like building wind and solar capacity, protecting climate-critical forests from deforestation, funding sustainable development projects, capturing methane gas from coal mines or even collecting gas from landfills. Carbon registries like the American Carbon Registry, Climate Action Reserve, The Gold Standard and Verra certify projects that have a climate benefit. Once carbon projects are certified by a registry, credits representing those projects are then traded on carbon markets, where the prices are determined between buyers and sellers. Where things can go wrong Each carbon credit is meant to represent roughly one ton of CO2 avoided or removed from the atmosphere. Companies claiming "net-zero emissions" or "carbon neutrality" must buy enough credits to offset the amount of carbon emissions they generate each year. Selling one credit to two buyers, known as double counting, can happen due to bad actors in the market, accounting errors or faulty technology. "You have to have auditability, traceability, measurability, but you also have to make sure it hasn't been sold twice," explained Alexis Normand, founder and CEO of Greenly. Normand argues that offsetting schemes must rely more heavily on solutions that remove carbon now through carbon capture and sequestration or direct air capture from factories. "The accounting of offsetting projects itself is sometimes a bit dubious," Normand said. "You're saying you're carbon neutral now for avoidance that's going to happen in the next 10 years." Ramya Ravishankar, general counsel at sustainability intelligence platform HowGood, expressed similar concerns, noting that offsets can "[reduce] the burden on companies to actually take on sustainability initiatives more head-on." The complexities of carbon markets Similar to a financial market, the entire system of carbon markets and carbon credits is based on probabilistic modeling, noted Austin Whitman, co-founder and CEO of Climate Neutral. Due to the nature of that modeling, it's unrealistic to expect that each carbon credit is equal to exactly one ton of CO2 emissions. It's also unrealistic to assume that any one registry or certification is representative of the whole system of markets—which is still developing. The market for carbon credits also remains unregulated, Whitman said. "You have some players who have an incentive to over-project, which means that projects have a tendency to underperform," he explained. Still, there are a lot of good projects out there that don't get as much attention, he said. As the market grows and faces potential regulation, the goal is for the system to become more reliable. Still, there's a long way to go. Currently, all the available carbon credits in the world only make up a tiny fraction of the total emissions generated, Normand said. "We need this to scale," he said. "It needs to go from 0.1% to 10% of global emissions." What's a marketer to do? For marketers, the main question is how companies should communicate around these efforts—regardless of where they are in the process. But opinions vary on what claims companies should make. Climate Neutral helps clients measure, reduce and offset their scope 1, 2 and 3 emissions with reputable carbon credits, awarding compliant companies with a sun-shaped logo that can be used in marketing and on packaging. The goal is to train consumers to look for that Climate Neutral logo when making purchasing decisions, understanding that it denotes a better choice for the planet. Brands like Reformation, CLIF Kids and Cotopaxi are certified through Climate Neutral. Getting Brands to Commit to Net-Zero Carbon Emissions Carbon offsetting "should be done in a way that makes sure that the equations balance out," Whitman said. "You just have to be honest about what the whole transaction involves." But Normand, who runs the carbon management platform Greenly, advises clients against claiming carbon neutrality. Activists—especially in Europe—are taking aim at companies making net zero claims, he said, making those terms counterproductive when communicating with consumers. "Communicate on your disclosure, communicate on your action plan," he said. "Explain what you are doing to get to net zero. Do mention that you are financing some offsets but don't claim that you are neutral, because the guys who are really taking this topic seriously are going to be mad at you."

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Kathryn Lundstrom

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Kathryn Lundstrom