As part of my occasional series on increased "Carbon Clarity", I’d like to suggest an approach that may help understand how carbon offsets work.
I've noted many times before that companies and organisations are going beyond compliance to measure and reduce their greenhouse gas emissions, so let’s start with the organisation’s carbon footprint.
While even the most basic carbon management initiative will include a plan for tackling emissions from the company’s own operations and their purchased energy (Scopes 1 and 2), the main carbon footprint standards don’t explicitly require organisations to measure emissions from suppliers, partners, customers and staff. One – dangerous – way to reduce Scope 1 and 2 emissions is to simply outsource those emission-intensive activities to a third party. A firm could sell off its delivery fleet and hire a courier company to make deliveries on its behalf. You can make a causal link between the organisation and these emissions, but they’re caused – and controlled – by someone else.
However, companies that ignore their Scope 3 emissions are missing an important opportunity to engage their stakeholders, or worse, are potentially exposing themselves to reputational risks. in the example above, the firm that hired the delivery company isn’t reducing emissions, it is simply shifting the burden to someone else. Best practice is to take responsibility for those outsource emissions. My company Carbon Clear is not alone in making this argument: the BSI’s PAS 2060 carbon neutrality standard requires organizations to include their Scope 3 emissions whenever possible, and the latest revisions to the GHG Protocol are also focused on ways to include more of these third-party emissions.
What happens when a company works to reduce their Scope 3 emissions? Generally speaking, they are promising to devote resources to measuring and reducing part of someone else’s Scope 1 and 2 carbon footprint. They can then take credit for helping make those reductions happen.
This sounds a lot like the definition of carbon offsetting. An offset is a purchased reduction from outside the organisation’s boundaries, used to count against the organisation’s own footprint. In both cases, the company is paying for a reduction from a source beyond their immediate control.
To be clear, carbon offsets are not exactly the same as Scope 3 emission reductions. The original emissions from, for example, a factory in India were not included in the organisation’s carbon footprint (unless the organisation happens to own or purchase supplies from that factory). The purchased reductions from switching fuel sources at that factory therefore would not count as a reduction within the Scope 3 footprint; while the reductions are real and would not have happened without that payment, they're outside the footprint.
Nevertheless, the effect on the environment and the message the company sends to stakeholders are the same. Both offsets and Scope 3 measures are “outsourced” emission reductions. The company has leveraged resources to make real, measurable cuts outside its organisational boundaries. As a result, the company has made a greater impact in the fight against climate change than it could have with a more inward-focused approach to reducing carbon.