Views from our Experts
Carbon Offsetting For SMEs

In this edition Mark McKenna, NDY’s Global Sustainability Group Director, discusses how SMEs and mid-sized businesses can begin offsetting their carbon emissions and how to avoid the common pitfalls when selecting an offset method.

Given the uncertain world we’re living in today, it’s easy to forget the importance of staying the course and tackling climate change head on. As we enter the next crucial decade in tackling climate change[1], more and more small-to-medium organisations (or ‘regular business’) are taking action to embed environmental governance into their business operations.

SMEs, those considered having up to 500 staff, account for the majority of businesses globally. This sector includes a large spread of organisations, from micro-business through to established property sector companies, such as Architects and Engineers, Managing Contractors and suppliers.

For some, taking the first step to reducing their environmental footprint can be a challenging journey, particularly when trying to figure out how to approach offsetting their residual impacts – this is, the unavoidable emissions generated by business activities, even after best efforts to reduce. If this is your business, the good news is, you’re not alone – unfortunately, offsetting can be a bit of a minefield[2]! Multi-nationals and investors are continually trying to figure out how their offsetting practices can add value (or provide ‘co-benefit’) to their business in a meaningful way.

Investors and stakeholders want to better understand where money is being invested and how it benefits not only the environmental, but social bottom line. People want to see and feel the benefits of their investment.

Having a more human connection with your offset investment can be difficult for several reasons, not least due to the limited availability of local offset schemes in developed nations like Australia and New Zealand, the UK and Canada where NDY principally operates. Offsetting in African reforestation projects is no longer attractive to the end stakeholder or worth the reputational risk[3].

Purchasing carbon offsets in small quantities, which many small and medium-sized businesses intend to do, also presents its own challenges as some attractive schemes – those with the glossy brochures and beautifully crafted stories – often have minimum purchasing thresholds[4].

The way we account for and legislate carbon abatement has evolved significantly over the last 30 years – however the overarching principles of offsetting haven’t changed much – it’s a reduction in emissions made in order to compensate for (“offset”) an emission made elsewhere[5]. The true value of offsetting has however been constantly debated and for every 10 positive outcomes there are those causing reputational harm to the practice.

Despite the current challenges, carbon offsetting as a general practice is here to stay and it can be a credible approach to environmental governance, if considered and implemented in the right way. Doing so often requires the help of specialists, particularly for large projects or major offset investments. Regardless, it helps to understand some of the common pitfalls and traits of offset schemes.

About our Expert

Mark McKenna

Director Global Sustainability Group

Mark is NDY’s Global Sustainability Group Leader and joined the company in 2011. He oversees NDY’s multi-national team of sustainability consultants and he has a fundamental role in shaping the company approach and strategic direction for sustainability. Mark has overall responsibility for performance of the sustainability group and he reports directly into the NDY group executive committee.

Mark has diverse experience working in Sustainability & Heritage Architecture, Research, Academia and Engineering.

Sustainability has been a fundamental aspect of his career roles to date and this broad experience has prepared him well for working within different levels in client organisations. Mark is equally adept at engaging with executive-level stakeholders as he is delivering technical ESD advice; and this one of his greatest strengths in a major project setting.

Major government, tertiary and private organisations trust Mark to look after their interests on large complex projects. Mark has worked directly on client side in advisory and/or verification capacities to de-risk projects and drive a successful sustainability outcome. Equally, clients trust Mark to deliver large complex sustainability projects.

Despite over 30 years of offsetting maturity and swathes of guidance on how to offset, here at NDY we still see the many of the same questions and pitfalls arising from discussions with our Clients and industry peers.

Here are the top 5 pitfalls[6] we still come across today, and how best to avoid them when developing your offset approach.

1.     Understand your carbon account – avoid scope gaps or double-counting

Working out where your responsibility lies, and what you include in your carbon account is, can be tricky – but it’s from here that you’ll begin to work out your offset requirements. Thankfully several national [public] organisations exist to provide guidance on this very issue – which is especially useful if you have offices or activities overseas. For example, In the UK, you can rely on guidance from the Carbon Trust and their SME carbon calculator as a starting point. In Australia, Climate Active provides guidance for organisations, projects and services on what to include in your account.

2.     Consolidate your effort – don’t spread your investment too thin

Many businesses enter the offsetting game by initially tackling specific business activities, such as travel, and investing directly in related sector schemes such as air-travel offsets. While these are well-intentioned, its not always clear what you’re paying for (can you see or feel the benefit?) and importantly, your investment often requires a similar buy-in from other businesses to make a meaningful difference. For the majority of businesses, offsetting in small quantities is unavoidable – but apply sensible reasoning where possible to avoid a fragmented offset outcome.

3.     Consider where you’re purchasing from – and what broader factors could expose your risk

This is another tricky issue and almost impossible to completely avoid – but even well-established offset schemes have faced integrity issues – and no business wants to be exposed to bad publicity. The easiest way to avoid this pitfall is to broker carbon units through a reputable provider such as Carbon NeutralTM or South Pole© but even those businesses can’t eliminate the risk. So, when you come across a potential fund, answering these simple ‘googled’ questions will go a long way to understanding and reducing your reputational risk:

  • How long has the scheme been established? And how was it initially funded?
  • Are there known social or government conflicts in the location of the offset scheme?
  • How exposed is the offset scheme to climate change related events? E.g. purchasing reforestation offsets in bushfire prone areas would classify as an integrity risk.
  • What’s the general reputation of such scheme? E.g. some tree planting afforestation schemes, particularly those in developing nations, generate lots of debate. Renewable energy projects typically generate less debate, but they can be equally fraught.

4.     Understand what type offset you’re buying – to ensure its credible and available for purchase

Firstly, the concept of ‘Additionality’ is a big deal in carbon offsetting[7]. In basic terms however, any offset scheme must demonstrate that its reduction in emissions must be clearly above ‘business as usual’ – i.e. they wouldn’t have happened if the project didn’t occur. When selecting an offset fund, particularly those administered directly i.e. not through an offset provider, make sure that the offsets represent clear additional benefit and are fully verified. Carbon FootprintTM provides some handy guidance on the issue of accreditation[8].

So you’ve found a suitable offset fund and you want to invest. There are many attractive offset schemes across the globe and these may fit with your story or offset theme – but some require a minimum ‘unit’ (tonne of carbon equivalent) purchase and this information isn’t often known up front (in several cases >100 units). So check this requirement early with the provider and save yourself wasted research time.

5.     If looking to certify your organisation carbon neutral – know the local certifying body offset rules

It’s easy to become confused with the various accreditation acronyms and, while you may pay someone to figure this out for you, the important thing is to know if your offset accreditation will satisfy the certifying body requirements. For example, Australia’s Carbon Active provides clear guidance on what is and isn’t an acceptable certified offset.

Footnotes:

[1] 2020 – 2030 is generally considered a crucial decade for averting the worst impacts of climate change, in which the targeted outcomes of the Paris Agreement will be tested, against a backdrop of environmental disruption. Find a media example here.

[2] Source: The Guardian, Offsetting Carbon Emissions : ‘It has been a minefield’, 2 August 2019

[3] Source: The Guardian, World Bank & UN Carbon Offset scheme ‘complicit’ in genocidal land grabs – NGOs, 3 July 2014

[4] Typically, Norman Disney & Young has experienced several offset schemes requiring a minimum unit purchase between 50 and 100.

[5] Intergovernmental Panel for Climate Change (IPCC)

[6] There are several pitfalls that, if not considered, may impact the integrity of investments. These include taking into account region-specific future political and climate changes, the robustness of measurement and overall management practices; and the relationship with prospective offsets productive land-use for fuel and food sources.

[7] Source: World Bank Group, Carbon Credits and Additionality, Technical Note 13, May 2016

[8] Guide on carbon offset accreditation types

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