More and more businesses are making headlines by becoming “carbon neutral,” usually by buying carbon offsets. For clients of accountants offering ESG advisory services, carbon offsetting may appear to be a legitimate method to balance their climate impact—by emitting carbon in one place and funding its removal or reduction elsewhere. But a closer look reveals that this approach often lacks the environmental integrity it claims, and in some cases, amounts to greenwashing.
What is Carbon Offsetting?
Carbon offsetting is the method by which organisations compensate for their greenhouse gas emissions by supporting projects that remove or reduce an equivalent amount of carbon dioxide elsewhere. Typical offset projects include methane capture, renewable energy infrastructure, and reforestation. The goal is to progress toward a net zero society.
Why Businesses Find Carbon Offsetting Attractive
One key reason is flexibility. Offsetting enables businesses to address emissions that are currently difficult or costly to eliminate. It also channels private finance into climate-related projects that might otherwise go unfunded.
Offsetting can give the impression of progress, helping organisations inch towards net zero targets while they work on deeper, long-term decarbonisation. For accountants, this creates a scenario where clients may request advice or validation for such efforts.
The Reality: Does Carbon Offsetting Work?
There is increasing doubt about how effective carbon offsetting truly is. Major climate progress has come from actual emissions reductions, such as expanding renewable energy, improving energy efficiency, and electrifying transport.
Offsets face several challenges:
- Overestimated or unverifiable impact: A 2023 study showed that 94% of analysed forest carbon offsets failed to deliver their promised carbon savings.
- Temporary carbon storage: Forests and soil store carbon, but this is reversible. Fires, pests, or deforestation can undo progress quickly.
- Lack of regulation: The voluntary carbon market is loosely governed, making it easy for dubious projects to flourish.
- Double counting: Some projects claim the same carbon reductions multiple times or for benefits that would have occurred anyway.
When Offsetting Becomes Greenwashing
Greenwashing occurs when businesses exaggerate their environmental responsibility. Carbon offsetting becomes greenwashing when:
- Offsets are used instead of making real operational emissions cuts.
- Companies promote “carbon neutral” or “net zero” claims without addressing their core emissions.
- Low-quality offsets are purchased just to tick a box or for marketing purposes.
For example, oil and gas companies have advertised “carbon-neutral” fuel while continuing high-emission operations. Some airlines and retailers heavily market “carbon-neutral” services relying solely on questionable offsets.
The Role of Real Emissions Reductions
Actual emissions cuts have produced the most climate progress. Many regions and nations now operate partially or fully on renewable energy. For accountants helping clients meet ESG goals, the emphasis should be on transitioning operations—not just buying offsets.
Preserving forests and funding renewables remain critical, but they are no substitute for addressing root emissions sources such as fossil fuel use or industrial output.
Responsible Offsetting: A Framework for Accountants
The Oxford Principles for Net Zero Aligned Carbon Offsetting offer guidance for responsible action. Accountants can use this framework when advising clients:
- Reduce first: Prioritise actual emissions cuts before considering offsets.
- Verify quality: Use independently verified projects (e.g., Gold Standard, VCS).
- Prefer carbon removal: Choose projects that physically remove carbon, not just avoid emissions.
- Ensure transparency: Disclose emissions, offset purchases, and net zero progress clearly.
- Add co-benefits: Select offsets that also support local communities or biodiversity.
Examples:
- Kariba REDD+ (Zimbabwe): VCS certified, protects 780,000 hectares of forest.
- Clean Cooking Program (Ghana): Gold Standard certified, reduces open-fire cooking emissions.
- Pachama: Uses AI and satellite tech to track verified forest carbon removal in real time.
Final Word for ESG Advisors
Done right, carbon offsetting has a place—but it should be the last step in a net zero journey, not the first. As ESG advisors, accountants must help clients distinguish real climate impact from marketing gloss.
Ensure clients do their due diligence: scrutinise the quality, integrity, and permanence of offsets. Focus their attention on verifiable emissions reductions. Offsetting is a tool, not a solution.