Carbon Neutrality: Myth or Reality?


The idea of corporate carbon neutrality dates back to the mid 1990s, but it wasn’t until relatively recently that a critical mass of companies began making high profile commitments to carbon neutrality.

But what, if anything, do these commitments, and subsequent actions, actually accomplish?

A claim of carbon neutrality should indicate two things. First, that an entity has taken the step of estimating its “carbon footprint”. Second, that it has committed to reducing the emissions related to its operations and/or purchasing sufficient emission reductions (i.e., offsets) so as to fully counterbalance its carbon footprint. Generally, companies that become carbon neutral introduce greater efficiencies in their operations and offset whatever components of their footprint they cannot reduce directly at source. This strategy is most always favoured because undertaking efficiency improvements and reducing emissions as much as possible internally provides the framework for working towards carbon neutrality. Given that such improvements tend to lead to reductions in costs, they therefore ensure that any money spent on offsetting is dedicated sparingly and strategically.

A company’s footprint is not at all intuitive (what else in our lives is denominated in tons of invisible gas?) and the process of calculating it is an important step in a company’s education about what activities contribute to GHG emissions in general, and the impact on the environment of its particular operations. As the foundation for a company’s claim of carbon neutrality, it is critical that its footprint be done properly, both in terms of the depth (e.g. were appropriate methodologies used) and the breadth (e.g. were all the relevant sources of emissions evaluated) of the analysis. With soaring global energy prices, footprints can highlight undiscovered opportunities, many of which not only reduce emissions, but also increase efficiency and cut costs.

Activities that serve to reduce emissions within a company’s control (i.e., at source) tend to serve as the backbone of any solid claim to carbon neutrality. Without even attempting to reduce one’s emissions, the rest of the carbon neutrality equation – offsetting -- can seem hollow, or even shortsighted. However, not every company may have the resources to do the equivalent of double-glazing an entire house in one go, and thus may prefer to offset the entire amount, or perhaps double-glaze the first floor this year and decide whether to finish the job later once they have evaluated the benefits. Either way, a company’s choice to neutralize their carbon emissions should follow a good understanding of the benefits and limitations of internal actions to reduce their footprint.

The fact that the carbon markets make the last part of the carbon neutrality equation potentially very easy exposes the entire idea of neutrality to unfair criticism. The truth is that in order to achieve true carbon neutrality, some offsetting will be necessary. Moreover, offsetting is rather complicated and carries significant risks, both financial and reputational. A large company that is serious about its carbon neutrality commitment will need to review several offset providers and scores of investment alternatives before settling on the structure and provider that delivers a product it can trust and best suits its needs. In the process, companies that approach this the right way will learn a great deal about what makes for a high quality emission reduction

Emission Reductions, or Verified Emission Reductions (VERs) as they are most commonly known in the voluntary carbon market, are generated from greenhouse gas emission reduction projects located anywhere in the world. Just as emissions from any source on earth contribute to the average global concentration in the atmosphere, so reductions from anywhere also decrease the average global concentration, so long as they can be proven to be real, verifiable and permanent.

But whether projects generate real, verifiable and permanent GHG emission reductions depends on various factors that need to be weighed carefully. Generally, such projects displace more fossil fuel intensive activities or reduce the direct release of GHGs into the atmosphere. For example, a pig farmer in the Philippines can reduce emissions and generate VERs by trapping the methane released from his pig waste and using it to generate electricity, which also reduces his need for electricity from the grid and thus from fossil fuel based power. By selling VERs to companies wishing to offset their emissions in the developed world, he generates income in addition to his power-cost savings, which helps to make his project economically viable. The sale of offsets from this project promotes the development of alternative sources of energy where they otherwise would be too expensive to implement. Still, despite the obvious claims of such a project to generate real emission reductions, they need to be fully vetted in order for them to count towards a claim of carbon neutrality.

Carbon neutrality is not a myth, so long as it is part of a long-term carbon strategy with a commitment to reduce emissions. And even if a company has not explicitly taken these steps towards direct abatement of emissions, the fact that it has committed to pay for offsets should lead to a search for the less expensive long-run alternatives that are available internally. But as soon as offsets are used, companies claiming carbon neutrality need to ensure that they are real and permanent. Done properly, carbon neutrality should be incentivising both internal actions to reduce greenhouse gas emissions and projects that are serving to foster a low-carbon economy in the future. To achieve this, claims of carbon neutrality should be as transparent as possible, both in terms of the footprint that is being neutralized (i.e., how it was calculated) and what actions are undertaken to neutralize the emissions. Carbon neutrality is not just about offsets; it is about changing a mindset and the way we do business. Ultimately, all of these elements will help to define the future of business in a low-carbon economy.

To find out more about how to achieve carbon neutrality the ‘right way’, including case studies from a wide range of industries, sign up to EcoSecurities’ free webinar Carbon Neutrality: Myth or Reality’ on June 18th at 15.30pm (GMT).