The pros and cons of carbon offsetting: is it just another form of greenwashing?

Posted on: 30 October, 2023

Is carbon offsetting actually having a positive impact on the environment, or is it just another way businesses avoid taking real action?

Sustainability is in a state of transition. As more and more businesses realise the benefits of adopting green practices, addressing environmental impact has gone from an operational bonus and ‘nice-to-have’ to a major priority among organisations.

With sustainability now in the limelight and a central factor in both customer acquisition and employee attraction and retention, it’s becoming a crowded market. Today, it’s likely you’ve come across multiple advertisements with an element sustainability, or something with at least some environmentally friendly messaging.

However, while this sounds like great news from an environmental perspective, it’s created plenty of competition – leading many organisations to take short cuts. Greenwashing – making deceptive marketing claims to portray your firm’s operations, products or environmental practices as greener than they actually are – is very prevalent. And while regulatory penalties like the Green Claims Code have been brought in to combat this, cases of greenwashing are on the rise.

Learn more: Green Claims Code checklist: are you guilty of greenwashing? 

You’ll probably have heard of the term ‘carbon offsetting’ in recent years. It’s just one of the new and popular buzzwords in sustainability marketing. But what does it actually mean, and is it just another greenwashing term you should watch out for?

Carbon offsetting, defined

Carbon offsetting is the process of compensating for emissions by taking part in activities that reduce the equivalent amount of carbon dioxide in the atmosphere.

Some of the most common examples of offset projects you’ll come across are reforestation – replanting trees in an area where they’ve been decreasing in number – or investing in renewable energy projects, such as the installation of solar panels.

How does carbon offsetting work?

If a company wants to offset its environmental impact, it can work with a carbon offsetting broker, who will calculate a fee based on their emissions. A portion of that fee will then be invested into a renewable energy project. The reduction in carbon emissions from these projects are then verified, allowing a company to make a carbon offsetting claim.

What are the benefits of carbon offsetting?

1. Boosts brand reputation and business growth

As mentioned above, acting sustainably is an important factor for incoming generations – both in terms of customers and job candidates. In fact, according to Deloitte, 40% of Gen Z would consider switching jobs if they were concerned about the environmental activities of their employer.

Offsetting emissions are a great way for businesses to show stakeholders, clients, consumers and potential employees that they’re taking measures to achieve net zero and reduce climate change.

2. Helps businesses comply with regulations

Increased legislation and regulations such as Environmental, Social, and Governance (ESG) standards are placing greater pressure on businesses to address their sustainable impact. Offsetting through methods like investing in emission reduction provide a simple solution that address their emissions externally without impacting their operations.

3. Can provide cost saving opportunities

Dedicating funds to carbon offsets can be a more cost-effective way for organisations to have a positive environmental impact over investing in new technologies or transforming their business operations.

Carbon offsetting in the built environment

The built environment is a sector with a significant responsibility to reduce its contribution to the climate crisis. Emissions from buildings have only fallen 10% over the last decade, and as contributor to around 40% of annual carbon emissions, many firms in the sector have understandably turned to carbon offset programs to address their impact.

Despite this, there’s significant scepticism around carbon offsets in the built environment. A survey of built environment professionals from IES found that 70% of its respondents believed that the government’s target to bring down carbon emissions to net zero by 2050 relied too heavily on offsetting.

Why carbon offsetting is causing controversy

The consensus on the merits of carbon offsets have shifted in recent years. Here are some of the biggest criticisms of this approach:

1. It’s potentially worthless

An article by The Guardian released in early 2023 revealed that at least 90% of rainforest carbon offset programs by Verra, the world’s leading carbon standard, are ‘worthless’, according to analysis. This resulted from a nine-month investigation into Verra’s rainforest schemes. Some of the highlights from the findings include:

  • Only a handful of Verra’s rainforest projects actually had any evidence of deforestation reduction.
  • A carbon offset project in Peru has caused concern for potential human rights abuses.
  • Shell, easyJet, Gucci and Salesforce are among the many companies to have bought rainforest offsets, dubbed ‘phantom carbon credits’, approved by Verra.

2. Businesses are using it to greenwash their operations

The results of investigations like the above have increased scrutiny on carbon offset claims, as organisations are able to use offsetting credentials to make their environmental impact seem more significant than it actually is, or potentially even mislead customers.

Organisations like Greenpeace and Earth are now taking businesses to task for using carbon offsets to detract attention from the environmental damage of their actual business operations. They also point out that carbon offset programs, such as tree planting, can actually have negative consequences for the environment through soil degradation.

3. It’s not a fix-all solution

While carbon offsets have their benefits, alone they are not enough to solve the climate change crisis and can’t be used as a substitute for directly reducing carbon emissions. Carbon offsets allow pollution through fossil fuels to continue unchallenged, as it by definition requires damage to the environment in order for there to be something to offset in the first place.

4. They don’t have any return on investment

Carbon offsets may be cheaper in the short-term than creating your own carbon reduction initiatives, but they won’t grant you the benefits and return on investment that come with internal, long-term sustainability initiatives.

Investing in sustainable measures, such as optimising buildings for energy efficiency through the use of heat pumps, can provide long-term cost savings that outweigh the initial expenditure required.

Learn more: Making a business case for sustainability: why now is the time to act

Final thoughts

While there is undoubtedly a place for carbon offsets in the sustainability agenda, businesses in the built environment should use it to complement their approach to sustainability, rather than define it. Greater awareness and scrutiny of carbon offsetting measures will decrease their reputational and marketing benefits, and with more guidance being drafted from the likes of UK Green Building Council, it’s possible that offsetting will soon no longer be viable as a long term solution to the sustainability challenges facing our sector.

The built environment has an opportunity to be at the forefront of change, but it’s in need of leadership. If you want to develop your sustainability knowledge and inspire real change in the sector, UCEM’s MSc Innovation in Sustainable Built Environments will give you the skills you need, both now and in the future.

Find out more: MSc Innovation in Sustainable Built Environments – University College of Estate Management