Greenwashing, “phantom” carbon offsets, and risks to business reputation

Carbon offsetting by corporates to meet their environmental commitments is quite the divisive subject.

There are some who strongly believe in the value of carbon offsets as part of a corporate’s overall Net Zero strategy. There are others that are incredibly critical of the concept, believing corporates are using them as a “get out of jail free card” to avoid doing the real hard and expensive work of actually reducing carbon emissions.

Both views are right depending on the context and what other action is being taken. Carbon offsets need to be part of a corporate’s Net Zero strategy as, to be rather blunt, eradicating emissions completely from global supply chains and real estate portfolios will take a long time. There is no quick fix. That’s the reality we all face. Even if you are the Usain Bolt of tech innovation and have millions in the bank to dedicate solely to achieving carbon neutrality, it is still going to take your business years to get to a true Net Zero.

Sprint though, we all must, and whilst we are all hurtling with fervent urgency to achieve this obliteration of carbon emissions, it is absolutely vital all businesses explore every avenue available to them to accelerate the process. One of which is carbon offsetting.

Which brings me onto the second issue which is there simply are not enough high-quality trusted credits on the market. The demand to buy them is certainly there. You’ll be hard pressed to find anyone who will argue that demand for carbon credits is going to go down not up. The issue here is supply in terms of both volumes and quality of what is on the market. From what I have seen, many are of poor quality, outdated and opaque, making it difficult for corporates to understand what it is they are buying and if they are investing in something which is making a real positive impact on the environment.

As a consequence, more and more corporates risk being blind-sided having thought they had done the right thing, only to discover they had bought “phantom” or “hot air” credits, as they are starting to be called in the media. Creating potential PR disasters which can and need to be avoided.

Media scrutiny will escalate substantially as more and more businesses make bold claims and invest in forest-backed carbon credits. All which they proudly celebrate in their earnings press releases. Or use to highlight their ESG credentials in their marketing collateral.

As is often the case in emerging markets and nascent financial instruments, the risks in making bad investment decisions are higher. Particularly if they are unregulated with no agreed standard governance framework setting clear parameters around pricing and performance.

Not only that, but they are also already starting to emerge as very real financial and reputational threats. CEOs, CFOs, CROs all need to pay urgent attention.

Only last week, it was reported that following an investigation by NGO Carbon Market Watch, millions of bogus carbon credits designed to curb deforestation were allegedly sold to a Colombian fossil fuel company as a substitute for paying the country’s carbon tax.

This follows hot on the heels on the investigation by Greenpeace and The Guardian who, in May 2021, stated that carbon offsets bought by major airlines such as British Airways, Easyjet and Delta, may not be fit for purpose. They claim that the “reduced deforestation offsetting schemes used to justify eye-catching promises of carbon neutrality and guilt-free flying cannot prove they have produced enough carbon savings to justify these bold claims.”

It is rather disgraceful, actually, to see the extent of greenwashing, double counting and antiquated data used. This needs to change. It has to change.

The path to net zero is complicated. Political, operational, technological. You name it, there is an obstacle we all need to overcome.

It is going to take some serious tenacity, collaboration and innovation to get us all where we desperately need to be. Before it is too late.


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Louisa Bartoszek

Co-Founder and Chief Business Officer of Treehouse. A London-based ESG-focused fintech. Trying to reverse climate change. One tree at a time 🌳