**This article was written in collaboration with our offsetting partner ClimateSeed.
Let’s do a quick recap on carbon offsetting first.
According to IPCC, carbon offsetting is any activity that compensates for the emissions of CO2 or other greenhouse gasses (measured in CO2-eq) by providing an emission reduction elsewhere.
Companies can purchase carbon credits* to compensate and neutralize their own residual emissions- next to their reduction strategy. These residual emissions include the emissions you haven’t reduced yet and the emissions you really can’t control (uncontrollable residual emissions). Your purchased carbon credits then finance- and support projects around the world that capture or avoid CO2 emissions.
But how many of your emissions should you offset?
The short answer: You reduce 100% of your carbon footprint with reduction efforts + offset 100% of your carbon footprint on top.
But you need to follow these steps first.
*One carbon credit permits the emission of a mass equal to one ton of carbon dioxide.
Carbon offsetting: a process divided into two phases
Carbon offsetting is a process that’s divided into two phases:
Phase 1: Measure, Analyze & Reduce your carbon footprint
Offsetting doesn’t help if you don’t know if- and how it makes a difference in your carbon footprint.
Step 1: Always measure your company’s or products’ carbon footprint.
Step 2: Identify your biggest impact hotspots in your carbon footprint results. Where does your biggest impact come from?
Step 3: Create and implement an emissions reduction strategy with clear targets and measures that aim to reduce your overall emissions to zero. In your reduction strategy, using offsetting as a reduction measure should only be used to neutralize your final uncontrollable emissions (SBTi states this can only be a maximum of 5-10% of your complete carbon footprint).
Phase 2: Strategize & Offset residual emissions
Step 4. Analyze your residual emissions in your scope 1 (direct emissions), 2, and 3 (indirect emissions). Residual emissions are the emissions you haven’t reduced (yet) or can’t control.
Step 5. Define the short-and long term carbon offsetting strategy + targets for these residual emissions.
Step 6. Look for offsetting projects that fit your business. And buy carbon credits based on your targets.
Step 7. Communicate your efforts transparently.
To answer how much we can offset, we focus on steps 1-5.
Step 1. Measure your company’s carbon footprint
A carbon footprint is the total amount of greenhouse gasses (GHG) emitted into the atmosphere by a company’s activities- over a certain time period.
Now- a carbon footprint can be measured with Life Cycle Assessment (LCA) tools. Such as our own footprinting tools Helix and Mobius. An LCA is a scientific method that calculates the environmental footprint of your company or product(s).
One of LCA’s 15+ impact results is ‘climate change’. It groups all greenhouse gas emissions into one outcome, expressed in kg CO2-eq: the carbon footprint. The GHG Protocol divides these company emissions into three scopes.
Scope 1: Direct emissions from your organization’s owned- or controlled sources. E.g., company vehicle emissions.
Scope 2: Indirect emissions from purchased energy sources. E.g., your organization’s consumed electricity or cooling.
Scope 3: All other indirect emissions within your value chain (upstream supply chain & downstream emissions e.g. customers). E.g., waste disposal, transportation, and supplied goods. Scope 3 can account for up to 90% (!!) of your total impact. It’s, therefore, crucial to include scope 3 in your measurements and reduction strategy.
Step 2. Identify your biggest impact hotspots
This complete overview of your scopes shows you where the biggest impact hotspots in your value chain lie.
Impact hotspots allow you to focus your reduction efforts, define your most efficient reduction measures, and set reduction targets. They simply offer the biggest impact reduction potential.
For example, if one of your biggest impact hotspots is the purchased products in your upstream supply chain- this is a good reduction opportunity. Sourcing alternative suppliers with sustainable products would be a good reduction measure.
Step 3. Create a reduction strategy based on impact hotspots
Once your impact hotspots are clear, map out the corresponding reduction measures – and set your short and long-term reduction targets. You can set these targets according to the Science-Based Targets initiative (SBTi) or IPCC, both follow the Paris Agreement.
The Goal of these targets: Limit Global Warming to well below 2°C and pursue efforts to limit it to 1.5°C. By reducing our emissions by 55% by 2050 and 100% by 2050.
Example: How BMW applied Science-based Targets in their reduction strategy (link)
Step 4. Analyze your residual emissions (100%)
What are residual emissions?
Simply put; your residual emissions are 100% of your initial carbon footprint. There are two types of residual emissions. First, you have the residual emissions you haven’t reduced yet with your reduction efforts- because reduction takes time. Second, you have the residual emissions you can’t even avoid with your emission reduction strategy- your uncontrollable residual emissions.
You see, reaching zero emissions by reduction measures alone is possible on paper. But in reality, you will always have uncontrollable residual emissions you can’t avoid.
Examples of uncontrollable residual emissions are:
- You now purchase green wind energy. But indirectly, the production of the necessary windmills also has an impact on our environment.
- You still need specific equipment to perform your business operations, such as laptops. These can be sourced as green as possible, but are difficult to replace completely.
- Even if you reduce your company’s travel-related emissions to zero, you would still have remaining ‘digital’ emissions induced by online conferencing (internet use) needed to meet with international colleagues and partners.
These two types of residual emissions require two different offset approaches.
Step 5. Define a short-and long term carbon offsetting strategy to offset 100%
Using carbon offsetting for compensation & neutralization
Carbon offsetting can be used for two purposes in your offsetting strategy: Compensation & neutralization. But what do these two things mean?
You don’t reduce emissions immediately. Companies often monitor emissions quarterly or annually to track the results of their reduction efforts. To fill the gap between implementing measures and gaining results– offsetting comes in as compensation for these residual emissions.
Say your company’s initial carbon footprint is 100 tonnes of CO2-eq. You would offset this exact number (100% of your footprint) and buy 100 carbon credits. Quarterly or annually, the amount you offset will decrease as your reduction efforts start to have results. E.g. you reduce your emissions by 15% the next year, which means you then offset 85 tonnes of CO2-eq.
By compensating for the emissions you haven’t reduced yet, you help your company, the planet & society. Many offset projects support local communities in developing countries as well, which are the people who will be affected the most by climate change. Enabling others to transition towards net-zero too as well = climate positive. Triple win.
Carbon offsetting can’t replace emissions reduction efforts. So, to get to ‘zero emissions’, offsetting can only account for neutralizing your uncontrollable residual emissions. Neutralization is, therefore, the last step in your carbon offsetting strategy.
How many emissions you have left to neutralize, really depends on your business model and reduction efforts. SBTi, however, states you can only neutralize 5-10% of your total initial carbon footprint.
Say your company’s initial carbon footprint is 100 tonnes of CO2-eq. This means you are allowed by SBTi to use carbon credits to neutralize a maximum of 5-10 tonnes of CO2-eq.
Setting a short- and long term offsetting strategy
1. Short-term strategy: compensation
In the short term, you look for offset projects that compensate for the residual emissions you haven’t reduced yet with your reduction efforts.
These offset projects immediately contribute, as they offer you to buy carbon credits. This means you buy credits for emissions that have really been avoided already in the past. You are now officially compensating.
2. Medium to long-term strategy: compensation + neutralization
In the medium to long-term, you can invest in early-stage projects, such as carbon capture technology, or finance the expansion of existing projects. They are an investment and commitment, not an immediate compensation.
These projects don’t generate carbon credits immediately, only afterward as collateral. So you receive credits to buy when the carbon capture or avoidance has taken place.
Finally, you will neutralize your uncontrollable residual emissions at the end of your reduction strategy (although sustainable improvements should never end). And repeat this neutralization annually.
“A climate positive strategy provides an opportunity for companies to contribute not only to closing the emissions gap but also to closing the climate finance gap; and it is an avenue to evolve from an approach that “does no harm” to one that does good.”SBTi – Foundations for Science-based net-zero target setting in the corporate sector (2020).