As concerns grow around the quality of the carbon credits behind many carbon neutral claims, businesses are being encouraged to focus instead on claims about contributing to climate action.
Claims that an organisation or product is ‘carbon neutral’ on the basis of purchasing enough carbon credits to offset its carbon footprint is a common practice used by thousands of companies worldwide.
However, the term is quickly losing its appeal due to the wider debate around greenwashing and the credibility of using cheap carbon offsets.
FIFA, the Swiss-based governing body for world football, recently became the latest high profile organisation to be disciplined for spurious offset-based carbon neutral claims, after it promoted the 2022 World Cup in Qatar as a carbon neutral event. The Swiss advertising regulator has since ruled that FIFA’s claim “created the false and misleading impression that [it] had already achieved climate neutrality”.
At the UN’s COP27 climate summit in November 2022, countries agreed for the first time to develop a new type of carbon credit to provide an alternative to carbon neutral claims. Rather than conventional credits that allow the buyer to claim it is offsetting its emissions, new ‘contribution’ credits will instead focus on the buyer’s contribution to climate action in a given country.
In essence, it encourages buyers to make an ‘impact’ claim rather than an offset claim. The buyer takes the credit for its contribution to climate action beyond its own value chain, while the carbon savings count towards the climate target of the country where the project is based.
A new Claims Code of Practice, launched in June by the Voluntary Carbon Market Integrity Initiative (VCMI), an international non-profit aiming to improve the integrity of voluntary carbon offsets, shows the market is beginning to move in this direction.
To comply with the Code, carbon credits must not be counted as emission reductions or compensations towards meeting the buyer’s decarbonisation targets. Instead, the purchases represent a “contribution to both the company’s climate goals and global efforts to mitigate climate change”.
In keeping with this change, one of the leading players in the carbon credit market, South Pole, has recently launched a new climate claim and label called ‘Funding Climate Action’ as an alternative to carbon neutrality. The company believes this offers a pathway for businesses to take credit for their efforts to support climate action beyond their own value chain, without the risk of greenwashing.
Commenting on the developments, Lindsay Otis, policy expert at NGO Carbon Market Watch, said: “Offsetting is on the way out in many countries around the world. The door has to be unequivocally slammed shut in the face of ‘carbon neutrality’ claims.”
The NGO’s policy lead, Gilles Dufrasne, added: “Carbon credits can be a way of channelling finance to climate action. [But] it remains important for buyers to do their due diligence before buying carbon credits and to avoid using them to exaggerate their climate action.
“Ultimately, the purchase of credits should be seen as one of multiple options to finance climate action. It is not the sole, and likely not even the best. Carbon credits are themselves not a silver bullet and companies should also invest in climate action through other means.”