5 Ways Companies Can Benefit from Carbon Offsetting

Key Highlights

1. Climate Change and Carbon Markets

2. Benefits of Carbon Offsetting

3. Satellite Data and Carbon Projects

Unlocking Business Potential Through Carbon Offsetting

In this climate-conscious era, the importance of addressing climate change has never been more urgent. We are already experiencing the devastating effects of a warming planet, with record-high temperatures, extreme weather events, and rising sea levels. The latest reports from climate scientists indicate that we are on a dangerous trajectory, with Earth being about 2.45 degrees Fahrenheit (or about 1.36 degrees Celsius) warmer in 2023 than in the late 19th-century pre-industrial average.

This unprecedented rate of warming underscores the critical need for immediate action. Companies, particularly those in the fossil fuels, agriculture, fashion, food retail, transport, and construction sectors—identified by the Intergovernmental Panel on Climate Change (IPCC) as the most polluting—must act swiftly to reduce their carbon footprint and contribute to the global effort against climate change. The time to act is now, and the stakes could not be higher.

One effective way to achieve results is through carbon markets. Nature-based solutions (NbS) can provide up to 30% of the mitigation needed to limit global warming to 1.5ºC above pre-industrial levels by 2030. The voluntary carbon market allows companies or individuals to buy carbon credits as part of their plan to meet climate goals, mobilising public sector finance towards NbS. While these solutions are not a substitute for rapid decarbonization within value chains, they play an invaluable role in reducing and removing emissions.

Beyond environmental benefits, investing in carbon markets can improve your company's reputation, ensure regulatory compliance, achieve cost savings, manage risks, and drive business growth. In this blog post we will refer to the five ways your company can improve by investing in carbon markets.

> What is carbon offsetting in simple words? Carbon offsetting refers to the practice of compensating for greenhouse gas (GHG) emissions by reducing emissions elsewhere. This is achieved through carbon offset credits, which indicate that an organization or individual has successfully decreased their carbon footprint. The term "carbon offset" encompasses both the credit and the process of offsetting emissions.

> What is a carbon credit and how does it work? A high-integrity carbon credit means one tonne of carbon dioxide has been reduced or removed from the atmosphere. Further, this reduction or removal has been certified under an internationally recognized carbon standard.

5 Key Benefits of Carbon Offsetting for Companies

1) Boost Your Decarbonization Strategy

Lowering emissions across operations is complex, especially in a fossil fuel-dependent economy. This is particularly challenging for carbon-intensive industries where low-emission technologies may not yet be accessible or affordable. Even businesses in cleaner sectors, like software or communications, face difficulties managing extensive indirect emissions from suppliers and customers (Scope 3), which account for over 70% of most companies' greenhouse gas emissions.

Carbon offsets can be a valuable component of a company’s overall decarbonization plan, especially as more carbon disclosure mandates require companies to measure and reduce their emissions. These investments can help offset emissions while organizations work towards implementing more efficient operations, which may take several years.

While carbon credits are a useful tool for offsetting emissions, they should not be relied upon as the primary means of reducing emissions. Companies should also take other actions to directly reduce their emissions, such as adopting more efficient technologies and processes and engaging in sustainability practices.

> How do you define scope 3? Scope 3 emissions encompass all indirect emissions that occur in an organization’s value chain, both upstream and downstream, not covered by Scope 1 and 2. Essentially, the Scope 3 emissions of one organization are the Scope 1 and 2 emissions of another.

2) Accelerate Net Zero Goals

Purchasing and retiring carbon credits enables businesses to take immediate climate action and accelerate their net-zero goals. Achieving net zero requires reducing 90-95% of emissions, with the remaining 5-10% offset by carbon projects that sequester atmospheric carbon. Starting offsetting efforts alongside emissions reductions is crucial for protecting carbon sinks and supporting global sustainable development.

Industries like aviation, steel, and freight face significant challenges in achieving complete decarbonization by 2050. These sectors are critical to global supply chains, making their emissions difficult to eliminate. Carbon offset projects are essential for mitigating these residual emissions and helping these industries reach net zero.

Additionally, for emissions requiring future technological advancements, carbon credits offer an effective interim solution. This approach ensures that while new technologies are being developed, your company is already contributing to climate action and achieving immediate environmental benefits.

3) Differentiate Your business

Though some emerging carbon removal solutions are not widely available today, their future potential offers significant benefits for forward-thinking companies. Many businesses are leveraging carbon markets to finance innovative decarbonization technologies, often as part of a carbon insetting strategy. This approach involves compensating for emissions through activities within a company’s value chain.

Insetting is particularly relevant for businesses with multinational operations or extensive and complex supply chains. For example, some food and beverage conglomerates have integrated regenerative agriculture practices to reduce emissions within their supply chains. This model can also be applied to technology-based carbon removals, such as installing direct air capture units on cooling towers or incorporating biochar into agricultural soil.

Various financing models support these efforts, including taking equity stakes in project developers and securing future shares of carbon credits at discounted prices through carbon streaming deals. Additionally, third-party companies can help mitigate risks associated with investments in early-stage projects. For instance, Orbify uses satellite data to assign pre-issuance ratings to projects in areas such as forestry, soil carbon, and technology-based solutions.

4) Gain Climate Leadership

Climate commitments come with significant responsibility, especially in an era where climate claims are under heightened scrutiny. Effectively communicating your credible impact to stakeholders is essential. Carbon ratings provide an impartial assessment of the effectiveness of your chosen credits, ensuring they deliver on their promises. This transparency helps demonstrate the genuine impact of your efforts. Selecting credits that align with your company’s values and having independent ratings to back them up enhances the credibility and clarity of your communication.

Showcasing the high quality of your carbon credits and the additional benefits they provide to local communities, ecosystems, and biodiversity signals to employees and stakeholders that your climate strategy is genuine. This transparency can foster buy-in and strengthen your position as a climate leader. Emphasizing sustainability can drive business growth by opening new markets, securing competitive advantages, and building a loyal customer base that values corporate responsibility and environmental impact.

By communicating the authenticity and positive impacts of your carbon credits, you can effectively engage stakeholders and bolster your reputation as a leader in climate action. This approach not only supports your sustainability goals but also contributes to long-term business success.

5) Achieve Sustainability Targets

With governments worldwide implementing stricter regulations to combat climate change, businesses must comply with these requirements to operate responsibly. Carbon offsetting helps companies stay ahead of environmental compliance by offsetting emissions that exceed regulatory limits. Increased legislation and regulations, such as Environmental, Social, and Governance (ESG) standards, place greater pressure on businesses to address their sustainable impact.

Investing in carbon credits allows companies to showcase their proactive approach to sustainability, enhancing their corporate image. This transparency and accountability build trust with stakeholders, including investors, customers, and employees, leading to increased brand loyalty and a stronger market position.

And There’s More...

By investing in carbon offsetting projects, businesses can support environmental initiatives that benefit local communities and ecosystems. Many offsetting projects provide co-benefits, such as promoting biodiversity, improving air and water quality, reducing waste, supporting local communities, and creating employment opportunities. Furthermore, supporting clean energy projects helps reduce reliance on fossil fuels, which contributes to better air quality and improved health outcomes. Carbon offset projects often prioritize community engagement and involvement, fostering community development and ensuring that the benefits of these projects are felt at the local level.

Leveraging Satellite Data to Achieve High-Quality Carbon Benefits

Utilizing advanced technologies like satellite data is one of the most effective ways to enhance carbon offsetting projects. Platforms like Orbify provide accurate, near-real-time insights into project performance, ensuring that investments are both impactful and sustainable. By using satellite data to monitor and assess carbon projects, businesses can verify that carbon credits represent genuine emissions reductions and meet high standards of quality and sustainability.

Orbify’s comprehensive tool for carbon offset management streamlines project screening, development, and monitoring. It allows carbon buyers and developers to conduct detailed environmental assessments, verify additionality, and ensure the long-term stability of carbon projects. By leveraging these advanced analytics, companies can optimize their operations, accurately calculate emissions, and make informed decisions about investing in high-quality carbon projects, ultimately demonstrating a robust commitment to sustainability.