LIFEWORTH REVIEW OF 2007: FIRST QUARTER January to March
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Lifeworth Review of 2007 GOTO www.lifeworth.com Lifeworth Review 2007: The Global Step Change
Jem Bendell
Adjunct Associate Professor,

Griffith Business School, Australia

Founder, Lifeworth, Switzerland
Claire Veuthey Ms Claire Veuthey
Research Associate,
Lifeworth Consulting, Switzerland

Green guilt offsetting?


Since the watershed moment in 2004 of HSBC announcing its intention to go 'carbon-neutral', many companies have become actively engaged in similar climate change responses. Typically, this includes a mix of energy efficiency measures, reducing consumption and waste, switching to suppliers of energy that are investing in renewables, using on-site micro-generation of power, and purchasing 'carbon offsets' for the amount of carbon still produced by their operations. In many cases the financial benefits have been clear: both DuPont and GE have taken measures that have saved them billions of dollars and substantially reduced their emissions.10

10 For example, see BusinessWeek, 'The Race against Climate Change', 12 December 2006; www.businessweek.com/magazine/content/05_50/b3963401.htm.

The Greenhouse Gas Protocol identifies three 'scopes' of emissions in order to differentiate between direct and indirect emissions. Scope 1, or direct, emissions come from sources 'directly controlled or owned by a company'; this includes emissions resulting from transportation, heating, lighting, etc. Scope 2 and 3 emissions are indirect, the former being electricity bought by the company from a third party, whereas Scope 3 covers the range of emissions resulting from the company's operations, such as the emissions caused by the use of a company's products, the transportation of purchased materials, employee travel or commuting, and waste disposal. The World Business Council for Sustainable Development (WBCSD) recommends reporting all three scopes of emission to fully understand and address the environmental impact of an organisation's activity.11 However, in 2007, most company claims to be going carbon-neutral covered only Scope 1-direct emissions. Interesting exceptions included Unilever, which began looking at the energy consumption involved in the use of its products, and HSBC, which began calling on its suppliers to reduce carbon.12 Meanwhile, further steps will be required from the finance sector to address the carbon profile of their investment portfolios and project financing if their claims to be addressing climate change are to be substantiated.

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11 World Business Council for Sustainable Development, 'GHG Corporate Accounting and Reporting Standard (Corporate Standard)'; www.ghgprotocol.org/templates/GHG5/layout.asp?type=p&MenuId=ODk2&doOpen=1&ClickMenu=Corporate%20Module.
12 Unilever states: 'For example, many of our laundry detergent brands, such as Omo, Surf and Persil, can now be used at temperatures as low as 30 degrees centigrade. We intend to incorporate a "greenhouse gas index" into our product development process, to assess, and where possible reduce, impacts during product use'; unilever.com/ourvalues/environment-society/sus-dev-report/wider-environmental-footprint.

The lack of regulation in the voluntary market for carbon offsetting has fostered a climate of uncertainty: the complexity of choosing the kind of carbon offsets to buy, how much, and from whom, could deter individuals and organisations from doing so. For example, although popular, purchasing carbon offsets from tree planting is problematic-namely, because a standing forest can eventually release its stored carbon, and the fact that these projects don't promote structural change regarding fossil fuel dependence. Whether the carbon captured by a project would have been captured without the investment from a carbon offsetting scheme is also key for the effectiveness of this as a mechanism to combat climate change.13

13 David Suzuki Foundation, 'What is a carbon offset?';
www.davidsuzuki.org/Climate_Change/What_You_Can_Do/carbon_offsets.asp.

Verifying the existence of carbon reduction projects and whether they actually add anything new is also key in a situation where unreliable sellers, or 'carbon cowboys', could operate. As with all purchases, the risk of fraud exists, with the funding of projects that turn out to be imaginary. Companies could also potentially sell the same credits several times. The Kyoto mechanism provides a tracking system to avoid this, but the lack of a central registry on the voluntary market still affords ample opportunity for abuse.14

14 Fiona Harvey, 'Beware the carbon offsetting cowboys', Financial Times, 26 April 2007;
www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MjQyNjE.

In response to this, self-regulation measures have been developed by more conscientious traders. The Carbon Neutral Company, one of the biggest intermediaries, uses KPMG to audit its carbon credit accounts. Industry standards and benchmarks are being set to emulate the regulated market. Nevertheless, there remains a problem with including reforestation projects as offsets. Unless undertaken in full knowledge of the region, local plants, soil and ecosystem, replanting destroyed or damaged forests can further damage to delicate, fragile ecosystems if foreign or over-aggressive plants are mistakenly introduced. In addition, as climate change makes regions more arid, there is a risk of these new forests drying up and burning. As a result of such concerns, the Gold Standard Label has been developed to guarantee that key environmental criteria have been met. Tree planting projects are excluded from this scheme; only green energy projects (energy efficiency and renewables) are accepted, and projects must also contribute to broader sustainable development goals and be verified by an independent third party.15 The absence of a credible system of endorsement for 'carbon sequestration' projects, such as reforestation or underground carbon capture, is one area where business could partner with expert and authoritative groups to find verifiable solutions.

15 The Gold Standard Foundation, 'About Gold Standard',
www.cdmgoldstandard.org/faqs.php?type=What+is+the+Gold+Standard%3F.

The carbon offsetting agenda is being driven by the need to communicate to consumers that 'something is being done' by the business community. But, when all is said and done on offsetting, too much is said and too little done to make a real impact on reducing emissions. A closer look at the leaders of 'climate neutrality' by the World Development Movement (WDM) is revealing.16 HSBC states that 'we achieved carbon neutrality in September 2005 through our carbon neutral pilot project'. However, WDM in analysis of HSBC's website found that its CO2 emissions actually rose from 585,000 tonnes of CO2 in 2004 to 663,000 tonnes of CO2 in 2005. Barclays launched a scheme with Climate Care to promote offsetting to Barclays' customers travelling abroad. Meanwhile, Barclays claimed: 'Carbon neutral flights really need not cost the earth. Offsetting a flight to New York costs around 12. It's so easy and cheap for everyone to get involved, that it could really take off.' While encouraging its customers to offset CO2 emissions, the latest figures for Barclays' CO2 emissions show a rise from 200,145 tonnes in 2004 to 207,650 in 2005. It appears that the advertising in this area is either inaccurate or disingenuous, with further misrepresentations identified by WDM in January including:

16 World Development Movement (WDM), The Voluntary Carbon Offset Market: Memorandum to the EAC by the World Development Movement (WDM, January 2007).

For it to be a means of climate change reduction rather than just 'green guilt offsetting' for consumers and staff, carbon offsetting will need to be a minor part of a comprehensive package of initiatives to reduce all three areas of an organisation's emissions. And corporate communications will need to exercise a little more rigour on this topic than is apparently being applied at the moment.

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