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The Carbon Conundrum: Should you offset, or invest?

Carbon offsetting has been a highly divisive topic since its inception. Opponents of offsetting view it as a conscience-salving exercise that gives buyers permission to continue carbon-intensive activities without altering the Earth’s carbon budget, all wrapped up in a smokescreen of greenwash.

This article is by Sophie Brooks, founder of Fit for Purpose and Root’s Non-Exec and Sustainability Strategy Lead

Independent verifiers are criticised as not delivering any real carbon reductions and potentially contributing to further global warming. Proponents argue that without these vital funds, projects ranging from conservation to health and education investment would collapse. They also point to evidence that organisations which have invested in offsetting traditionally gain a head start over others when it comes to decarbonising their own operations.

Packaging typically constitutes up to 30% of a product-producing company’s overall carbon footprint

Recently, Sodexo joined brands, including Nestlé, EasyJet, Gucci and Leon, by changing their carbon strategy. Claire Atkins Morris, Head of Corporate Responsibility, explains: “We would like to ring-fence money that we were going to use for offsetting into our own internal decarbonisation journey.” She says Sodexo considered this the best use of the funds, “not just from Sodexo’s perspective, but from a societal perspective.”

On the other hand, having purchased over 7million tonnes of credits so far, Microsoft is one of the largest investors in offsetting and plans to increase its commitments significantly. The multinational recently admitted that its ground-breaking carbon commitments (to reach Net Zero Scope 1 and 2 by 2030), are now unlikely to be achievable due to its growth trajectory. Microsoft is still reducing absolute emissions at source but using offsets to fund technological advances, which form key planks of the IPCC Net Zero Pathway.

What role should offsets play in reducing your business’s emissions?

As with many areas of sustainability, the answer is not black and white. However, we have developed five simple rules to help your approach become robust and effective, as well as greenwash-proof.

1 – Understanding the source of your emissions

As with many areas of sustainability, the answer is not black and white. However, we have developed five simple rules to help your approach become robust and effective, as well as greenwash-proof.

For businesses, with limited funds to invest, a Scope 1, 2 and 3 carbon footprint and materiality analysis will identify where the majority of your impacts come from, so that you can direct your investment squarely at absolute reductions in those areas. For most businesses, other than manufacturers, the biggest impact areas will be in their Scope 3, which includes purchased goods and services, your products in use phase, and packaging.

For packaging producers, understanding where in your portfolio impacts lie is critical to formulating an effective carbon reduction strategy. This will allow you to increase resiliency when customers change their packaging to meet their own environmental KPIs. It’s best to tackle this early on so you can avoid investment in the wrong areas, such as material swaps into high-carbon or low-recyclability packaging, investment in high policy risk formats, and reactive NPD.

2 – Engage with suppliers to tackle Scope 3

Businesses, of any size, can influence suppliers in reducing carbon emissions. Large suppliers may face pressure to disclose emissions for mandatory reporting and public sector procurement. For smaller suppliers, it is likely that many customers will be asking the same questions and need to find reductions in their supply chains. It’s vital to engage your top 80% spend suppliers to learn about their carbon reduction efforts, and the impact it has on your scope 3, through a supplier audit.

3 – Redirect carbon offsetting funds to reduction activities

If offsetting is a significant part of your current sustainability spend, reallocating that budget to absolute carbon reduction projects will, in many cases, be more impactful. However, when doing this, it is important to set absolute reduction targets, not those relative to growth. Packaging typically constitutes up to 30% of a product-producing company’s overall carbon footprint and is a key area where carbon can be reduced with investment. Crafting a sustainability strategy with key integrated packaging KPIs can focus business efforts towards meaningful change.

4 – Only offset those genuinely ‘unavoidable’ emissions

Relying on carbon offsetting to balance emissions poses risks, especially if you are early in your sustainability journey. Offsetting diverts funds from absolute own decarbonisation efforts and can create a false sense of progress without achieving genuine reduction, thereby increasing reputational risk. However, where budget exists for both reduction and offsetting, offsetting can play an important role in the Net Zero transition. It can help support technology scaling, sustainable development, renewable energy deployment, and nature conservation, particularly in developing markets.

To use offsetting effectively, follow Oxford University’s guidelines: offset only unavoidable emissions after maximising reductions, invest in reputable projects (e.g., verified Gold Standard), and prioritise carbon removal over emission reduction projects.

5 – Never use carbon offsets to make carbon-neutral claims

The awarding of ‘Carbon Neutral’ labels by brokers, based solely on offsetting of ‘unavoidable’ emissions, can mislead customers, and invite accusations of greenwashing, especially where the business is still emitting significant amounts of carbon. New regulations, like the EU Green Claims Directive, scrutinise or outlaw such claims, making them best avoided. Focus on investing in reducing your impacts to create opportunities for clean green claims.

What next?

We’re often asked how packaging producers can strike the right balance between inset and offset. Our advice is to create a holistic, policy-proofed, sustainability strategy to de-risk and future-proof your business, one that both aligns and supports your central business goals.

For more on how to do this, book a call with one of our sustainability experts.

About Sophie Brooks

Sophie has 30 years of experience in sustainability, purpose-building, CSR and communications. She advises leading global packaging companies on their sustainability strategies, reporting and target setting. Trained B Leader for B Lab UK, a Fellow of the Institute for Corporate Responsibility and Sustainability (FICRS) and a Mentor for both Sustainability Mentors and ICRS, Sophie is a leading expert in this area.