What to consider when looking at carbon offsets
The recent New Zealand government legislation making climate-related disclosures mandatory for large organisations is expected to have a knock-on effect to businesses of all sizes – including SMEs who supply or plan to supply larger businesses.
As New Zealand works towards a goal of 41% reductions by 2030, more and more businesses are taking voluntary steps to reduce their carbon emissions. This is because:
- There are increasing expectations that the business sector will lead on the response to climate change.
- New Zealand has a national reduction target and is increasingly directing actions through law and policy. This will eventually translate into strong incentives (and in some cases mandates) for businesses to reduce emissions.
Many businesses are going beyond carbon emission reductions by adopting Net Zero emissions policies as part of their sustainability strategy.
This means that in addition to reducing emissions over time, they purchase carbon offsets to compensate for unavoidable emissions.
Offsetting is an increasingly common component of a sustainability strategy. However, there are a few things you need to keep in mind if you’re going to realize the full benefits and avoid some of the pitfalls.
Considerations for offsetting
1. Gaining credibility with customers
Buyers are increasingly seeking out companies that are proactive around decarbonisation. Adopting a Net Zero emissions policy and taking emissions reduction seriously as part of a comprehensive sustainability strategy are strong signals to consumers that you care about their wellbeing beyond the scope of your products and services.
B2C companies
Few consumers are going to stand in the supermarket aisle scrolling through your website on their phone to look for a sustainability page.
To solve this problem, various entities have created product badges or certificates. We are now all familiar with Fair-Trade products. Organisations have adapted this to provide “carbon-free” badges. You need to ask yourself:
- Are you certifying a “product” or an “organisation”- there are often options for both, but the requirements for each can vary.
- Where are your products sold and is a particular badge more recognised? Badges are effectively a “brand” that the consumer needs to understand at glance. There is limited value in selling a product into an international market with a badge that primarily domestic.
One suggestion is to consult with your distribution and channel partners. They may have specific requirements or knowledge of consumer preferences.
Another is to ask your customers. What are their expectations and how are they making decisions?
B2B companies
For B2B businesses, it’s a little different. B2B buyers will do their research online, which means having a sustainability policy clearly set out on a B2B website is essential. If you can include carbon offsetting as part of that policy, you have a meaningful, concise, and evidence-backed cornerstone for the rest of your policy to lean on.
Especially in procurement situations, you should expect more review of environmental credentials. You may be expected to detail your sustainability actions in addition to badges or certifications. Increasingly, customers expect to see comprehensive plan of action in addition to offsetting and carbon reduction activities.
It’s a good idea to:
- Keep an active sustainability page with regular updates on your decarbonization activities.
- Have a written (or bulletpointed) sustainability strategy that sits within your broader business strategy.
- Within this be clear about the role played by offsets. You don’t want to be perceived to be reliant on offsets for the longer term.
2. Avoid the perception of Greenwashing
There have been some criticisms around carbon offsets. Some view offsetting as businesses buying their way out of their obligations.
That’s why it’s important to regulate just how significant your use of carbon offsetting is, and not rely on it as the only vehicle for decarbonisation. You are working hard to reduce emissions first and foremost with offsets as the backstop.
Talk openly and honestly about the challenges in reducing emissions – don’t shy away from this difficult conversation. It will give credibility to offsetting.
3. Aligning with your brand values
There are a wide variety of carbon offset projects – from emerging market development initiatives through to deployments of new types of technology. With this variety comes the opportunity to align a project with your brand values.
The idea is to use your carbon offsetting to boost brand awareness of your organisation by working with like-minded people and projects; it’s a great marketing opportunity.
4. Considering alternatives to carbon offsetting
An alternative to offsetting is insetting – or finding opportunities to reduce emission in the value chain of your business.
Insetting has its own challenges, such a finding the specific reduction opportunities and crafting the story around these initiatives.
The big advantage of insetting is that it’s effectively investing in the operational efficiency of your business. Opportunities to reduce carbon often have a positive ROI. In other words, carbon can be a lens for spotting performance improvement opportunities. In-setting effectively prioritizes the opportunities with a greater carbon impact.
What are your options for sourcing carbon offsets?
Kiwi offset options include:
International options
How ESP can get you started with carbon offsetting and insetting
The first step towards offsetting or any net zero emissions goals is to accurately measure your current carbon footprint. ESP supports many companies to measure and report GHG emissions and we can provide you with an accurate number of your current emissions.
As we don’t broker offsets, we can provide an unbiased opinion on what is best for your circumstances. We can provide an analysis of your options given your circumstances and level of ambition.
Given offsets are intended to be a stopgap measure, we can also support your future decarbonisation efforts. ESP has helped businesses avoid over 61,000 tons of carbon emissions and save $81 million on energy and utilities.
Come talk to use about what we can do for you.
Book a meeting with us today, and we’ll help you optimise carbon offsetting as a key element of your decarbonisation journey.
