Shell has become the latest major company to step back from offsetting amid concerns about the integrity of carbon credits, with the EU finalising a law to ban offset-based carbon neutral claims.
A crisis of confidence in carbon offsetting started earlier this year following an investigation into the industry by The Guardian. Offsetting bodies disputed the findings, but in September The Guardian returned with new analysis concluding that nearly 80% of the 50 top-selling carbon offset projects were “likely junk”.
Purchasing carbon credits remains hugely popular among businesses, but the ongoing saga has prompted many major companies to rethink their approach. Shell is one of the latest to reveal it is moving away from purchasing offsets, joining other household names like Gucci, Leon and Nestlé.
Shell has said it still supports carbon offsets in principle, but has stepped back from a target to invest up to $100 million per year in carbon credits by 2030.
Greenwashing risks
Carbon credits are designed to help organisations make an immediate difference to the climate while they work on reducing their own emissions directly. They are also a vital source of investment for conservation and restoration projects around the world.
However, regulators are increasingly worried about the potential for greenwashing, particularly around terms such as ‘carbon neutral’ or ‘climate neutral’, which usually just involve purchasing offsets.
The UK’s Carbon Trust recently scrapped its longstanding carbon neutral standard after acknowledging that offset-based green claims could be misleading. Other organisations are swapping carbon neutral with alternative terms like ‘funding climate action’.
Carbon neutral claims ‘must stop’
In the EU, lawmakers are finalising new rules which could ban claims like ‘carbon neutral’ completely from 2026. A new law which is currently working its way through the final stages of legislation will effectively prohibit green claims that are based on offsets.
“The European Union is taking leadership in combating greenwashing,” said Lindsey Otis, policy expert at NGO Carbon Market Watch. “Carbon neutrality claims have been shown to be unintelligible to consumers, and they must stop. [The agreement] marks the end of outlandish and baseless advertisements that tell European consumers that they can take carbon neutral flights, wear carbon neutral clothes, and eat carbon neutral food.”
To learn more about the basics of offsetting and how to use carbon credits effectively, read our business guide to carbon offsetting.
