The Sylvera report – which analysed data from 100 of the largest companies across a number of industries – found that high-quality carbon offsets are an indicator of real climate action, crucial for limiting global warming in line with the Paris Agreement.
Many of the common arguments used to undermine carbon offsets suggest that they provide big business with a license to pollute, and as a result delay “true” climate action. There has historically been little evidence to support these arguments and now the latest research shows that in fact, the opposite to be true.
Companies that purchase carbon offsets do more for climate
Sylvera’s research used data collected over a nine-year period between 2013 and 2022 sampling over 100 companies in sectors such as finance, energy, technology, healthcare, and aviation among others. It used data on Scope 1 and 2 emissions, as well as information on each company’s carbon credit purchases.
On average, companies were reducing their emissions by around 5% per year. Companies that used carbon offsets in their sustainability portfolio had an above-average decarbonisation rate. What’s more, the analysis showed that companies which invested in carbon offsets had almost double the rate of emission reductions compared to those who did not purchase carbon offsets.
In fact, companies that bought carbon offsets are cutting their Scope 1 and Scope 2 emissions by 6.2% per year. Companies that did not use carbon offsets in their sustainability strategy cut their emissions by only 3.4% annually.
Though different industries saw varying rates of decarbonisation, the data suggests that corporate investment in high-integrity carbon offsets indicates a genuine and actionable commitment to reducing GHG emissions. Or to put in another way, purchasing carbon offsets does not delay climate action, it accelerates it.
Companies who buy offsets do more internal decarbonisation, not less. This latest research shows they do as much as 80% more internal reductions in some cases than corporations who don’t buy offsets.
Mandatory corporate disclosures can speed up decarbonisation
Sylvera’s research highlights the important catalysing effect carbon offsets can have as part of a businesses’ sustainability strategy. This is good news for the planet, and for stakeholders and investors, who increasingly favour sustainable and climate conscious businesses – a momentum that is likely to continue as net zero deadlines draw closer.
However it is important to remember that carbon offsets must be used alongside other actions to cut internal emissions and emissions from suppliers. This has always been the intended purpose of the Voluntary Carbon Market (VCM), to provide a reliable mechanism to offset any unavoidable emissions as part of a broader emissions drawdown plan.
Sylvera highlighted this in their report, with one of its key conclusions being the need for mandatory, standardised reporting of climate data to give investors, consumers and all stakeholders transparency on what a companies’ climate plan is, and how it is being executed.
Today, there are a number of methodologies for climate and sustainability reporting, though there is a lack of mandatory, standardised, and comparable frameworks for data across sectors and countries. This represents a significant challenge in race to decarbonise.
The answer lies in mandatory, public reporting that allows 100% transparently for anyone to track corporate climate action accurately, make judgements based on their ranking and hold them accountable for poor performance.
These types of corporate disclosures are the foundation of an effective and competitive VCM, as well as helping to recognise and assess progress towards decarbonising entire industries.
Future-proofing the Voluntary Carbon Market
Much work has been done to improve the process of evaluating and comparing carbon offsets themselves.
As carbon markets evolve, they continue to become more sophisticated. This means more, and better quality data on how effective different programmes are and how to compare different types of carbon offsets like-for-like.
As a result, it will be far easier for companies to understand which offsets have the greatest impact, and purchase only the highest-quality carbon offsets available. Moreover, there are ongoing improvements to the VCM through integrity initiatives aim to measure individual claims about corporate climate activities and curb unverified net zero claims.
All these actions will help future-proof carbon markets, creating robust, accessible evaluation tools. But one thing is clear: though there is scope for improvement, high integrity carbon offsets are an essential part of effective climate strategies from businesses of all sizes.
Choosing to offset with high-quality carbon offsets is an indicator of commitment to reducing emissions using every available tool. To be successful on the road to net zero, carbon offsets are a tool that will be in every company’s arsenal.
