New business challenges focus on reaching a crucial goal: Net Zero, which refers to the balance between the greenhouse gases (GHG) that are produced and those that are removed from the atmosphere. Achieving this balance is essential to mitigate the future effects of climate change.
To achieve this, organizations must combine emission reduction with offsetting, although reduction should always be prioritized before resorting to offsetting. Offsetting refers to the act of balancing emissions released into the atmosphere that cannot be avoided with carbon reductions or captures that occur outside the companies and are developed by a third party.
Carbon offsets are carried out through carbon credits, which represent verifiable and measurable emission reductions obtained through climate action projects, such as community development, ecosystem protection, or the installation of efficient technologies.
However, carbon offsetting is sometimes considered “greenwashing”, although this is not true if organizations use carbon credits for the purpose for which they were designed: to mitigate emissions that are truly unavoidable and not as an excuse to maintain their usual practices or to “buy” a solution to an emissions problem.
See also our blog post: 3 keys to avoiding greenwashing and socialwashing
At CarbonBox, we help companies follow a mitigation hierarchy, a key tool for minimizing the environmental impacts of human activities. The first step is to identify the GHG emissions that can be avoided from the planning stage of projects or business activities, ensuring that these are not included in the emissions inventory. The second step is to analyze the emissions that can be reduced through improvements in operations, changes in equipment, or changes in suppliers. Only after exhausting these options is offsetting of unavoidable emissions used.
Currently, companies face major challenges when acquiring carbon credits in the Voluntary Carbon Market, as it has presented flaws that have undermined its credibility. In many cases, these credits do not guarantee real emission reductions or captures due to inadequate design or the difficulty of verifying offset projects. In addition, there is the risk of “double counting,” where a credit is recorded more than once, which weakens the integrity of the system, and the additionality of some projects has also been questioned, that is, whether they really would have happened without the financing from carbon credits, which casts doubt on their true impact.
These shortcomings have generated skepticism about whether carbon credits really contribute to mitigating climate change or whether they simply allow companies to continue with polluting practices behind a facade of sustainability.
This is why, once a company has decided to incorporate offset projects into its net zero strategy, companies must carry out due diligence to choose high-quality projects that fulfill their promise and contribute to a truly neutral carbon balance.
What is due diligence?
Carbon credit due diligence consists of assessing the quality, integrity, and credibility of the carbon credits to be purchased to ensure that they effectively contribute to curbing climate change. Due diligence helps guarantee that carbon credits are of high quality, verifying that they are scientifically sound, environmentally and socially responsible, financially viable, and that no double counting has occurred.
What is a high-quality carbon credit?
Due to the lack of regulation and government oversight, several organizations have opted to propose criteria for defining the quality of a carbon credit. One of the most complete and thorough sets of criteria is the Core Carbon Principles developed by the Integrity Council for the Voluntary Carbon Market, an independent body that oversees the voluntary carbon market. Its main objective is to establish and enforce universally recognized standards that define high-quality carbon credits at a global level.
The Core Carbon Principles propose 10 principles that serve as criteria for assessing the quality of carbon credits. Their development was based on drawing information from accredited sources such as the IPCC, the United Nations Framework Convention on Climate Change (UNFCCC), the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), among others; and on consultation with multiple market actors such as carbon credit programs, NGOs, Indigenous peoples, policymakers, academics, buyers, and investors.
The 10 principles are divided into 3 broad areas:
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Governance: covers aspects related to the management and development processes of credits, including the tracking of mitigation activities, transparency in the open publication of all mitigation activities and accreditation processes, and robustness in third-party verification processes.
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Emissions impact: focuses mainly on establishing verification and transparency practices that align with industry standards for carbon credit programs. It includes compliance with basic requirements such as: additionality, scientific and technical soundness in the quantification of reductions, the permanence over time of the reductions or removals, and the avoidance of double counting in the issuance, retirement, or use of credits.
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Sustainable Development: aims to ensure that carbon credits adhere to the guidance, tools, and procedures for complying with social and environmental safeguards*. In addition, they aim to avoid practices that hinder progress toward achieving net zero GHG emissions by 2050.
See also our blog post: Carbon credits: what you need to know if you are thinking of acquiring them
As carbon credits become fundamental in companies’ climate strategies, it is useful to consider quality offset projects and partners as key suppliers in value chains. Just as companies carry out the identification of risks and opportunities when selecting suppliers, it is crucial to apply that same rigor when choosing offset partners. Carrying out meticulous due diligence and being willing to invest in high-quality projects will ensure that corporate climate strategies not only advance climate goals but also have a positive and lasting impact on carbon markets and on global sustainability in general.
At CarbonBox, we are committed to helping companies mitigate their carbon footprint and reach net zero; we combine advanced technology and expertise to facilitate carbon management for companies, events, and products. Our mission is to make it easier for companies not only to reach their sustainability goals, but to do so in a way that genuinely contributes to a greener future.Request a meeting to discover how we can help you move toward a real and meaningful Net Zero.
*They establish minimum standards to prevent environmental and social harm from the development of an activity (Global Environment Facility, 2018)