Key Takeaways
- Carbon Offsetting investments are a popular method for supply chain companies to demonstrate their efforts towards reaching carbon neutrality.
- Industries heavily rely on offsets in favor of revamping their emissions reduction methods across the value chain.
- There is a deficit in oversight and regulations towards institutions in charge of offsetting activities.
- Nexxiot focuses on providing the visibility clients need to help them reduce emissions without relying on carbon offsetting initiatives.
What is Carbon Offsetting?
As our population grows, greater demand is placed on industries producing and transporting essential commodities around the globe. These industry pressures translate to higher environmental impact as companies look for ways to ramp up their efforts to maintain the required flow of goods. In response to these increasing demands, international regulatory organizations such as the UN, European Commission and rail and maritime organizations have set targets for the supply chain and transport sectors. They mutually agree that reducing carbon footprints requires individuals, industries, and government support for the supply chain and transport sectors to reach their goals of reducing 30% of emissions by 2030 and achieve carbon neutrality by 2050.
Carbon offsetting is a strategy to reduce greenhouse gases (GHG) through land restoration or directly sequestering carbon from the atmosphere. From this concept, various carbon capture technologies and programs emerged, and companies are driving investments to reduce their carbon footprints and achieve carbon neutrality. Simply speaking, businesses invest in carbon reduction strategies by buying emissions reduction credits to balance their own.
A popular carbon footprint reduction strategy is the Voluntary Offsetting Program, which involves charitable contributions from corporations or individuals to third-party institutions promising to invest in projects that reduce a certain metric tonnage of carbon emissions per year.
It is imperative that our supply chain carefully considers its own carbon impact and makes conscious efforts to act more sustainably while meeting growing demands. The question is, are carbon offsetting activities such as capture technologies and voluntary offsetting programs an effective solution?
The Pros: Technology and offsetting programs are readily available
The major technological blueprint in footprint reduction is the Carbon Capture, Utilization, and Storage (CCUS), which utilizes chemical processes to remove existing CO2 from the atmosphere, or captures and stores CO2 released from biomass. This technology can provide measurable and verifiable reductions in carbon footprints around the globe.
The voluntary offsetting programs offer an opportunity for investments in large- and small-scale environmental programs in developing and developed nations. They also provide a field for research and innovation to continuously improve the quality and credibility of these programs.
The IPCC 2022 report has made a clear statement on the immediate need for a global effort towards reducing carbon emissions, highlighting that the solutions and changes necessary to keep the global temperatures below 2oC by 2050 rely on both decarbonization technologies and offsetting.
The Cons: Technology is new, and offsetting strategies are unregulated
Carbon capture technology is still relatively new in the market, and there are a few drawbacks to its further development: it has not been shown to work on a large scale, it consumes a lot of energy, and it is expensive.
Voluntary offseting allow businesses that cannot immediately reduce their emissions to balance things out by buying emission reductions elsewhere. These strategies are attractive because they are far cheaper and less time-consuming than restructuring an entire company’s policies and procedures towards emissions reduction. In addition, establishing an offsetting institution is easy to the point where one can readily find online instruction manuals on how to profit from selling carbon credits.
However, investigations have shown that voluntary offsetting institutions may not dependably reduce emissions, and there are no specific laws in place for checks and balances or to prevent abuse. Despite these several examples of questionable practices, voluntary offsetting is becoming one of the pillars of corporate environmental policies of the largest companies on the planet.
Nexxiot empowers transparency to support our client’s sustainability goals
At Nexxiot, we prioritize our clients and their capacity to lead the climate narrative through the implementation of optimized IoT processes and innovative digital technologies. We believe these strategies empower the supply chain sector through bringing asset transparency and measurable data to enable cost-effective solutions and benefits to the environment.
For example, primary and program data from Nexxiot’s Connect Platform provides information to our clients to optimize asset maintenance and routes, identify risks, help estimate energy consumption, and clarify areas where cost and carbon emission saving strategies can be applied. Furthermore, Nexxiot data solutions can assist companies in estimating and reporting emissions within Scopes 1, 2 and 3 of the Greenhouse Gas (GHG) Protocol and GLEC guidelines, increasing a company’s asset intelligence to ensure international carbon disclosure compliance.
We at Nexxiot proudly stand behind our solutions to assist our clients in meeting their sustainability goals. We believe that through our combined efforts, we can help reduce the supply chain carbon footprint around the globe and support easier, safer, and cleaner global transportation.
References:
1 OECD – Organization for Economic Co-operation and Development (2019). ITF – International Transport Forum Outlook 2019: How transport demand will change by 2050. Online [Accessed 18 Oct 2022]. Available at: https://read.oecd-ilibrary.org/transport/itf-transport-outlook-2019_57f51e1e-en#page1
2 Greenhouse Gas Institute & Stockholm Environment Institute (2022). Voluntary Offset Programs. Online [Accessed 18 Oct 2022]. Available at: https://www.offsetguide.org/understanding-carbon-offsets/carbon-offset-programs/voluntary-offset-programs/
3 International Energy Agency – IEA (2022). Carbon Capture, Utilization, and Storage. Online [Accessed 18 Oct 2022]. Available at: https://www.iea.org/fuels-and-technologies/carbon-capture-utilisation-and-storage
4 Intergovernmental Panel on Climate Change – IPCC (2022). Mitigation of Climate Change – Working Group III Contribution to the IPCC Sixth Assessment Report (AR6). Online [Accessed 18 Oct 2022]. Available at: https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf
5 CNBC (2021). Carbon capture technology has been around for decades — here is why it has not taken off. Online [Accessed 18 Oct 2022]. Available at: https://www.cnbc.com/2021/01/31/carbon-capture-technology.html
6 Carbon Credits (2022). How to make money producing and selling carbon offsets. Online [Accessed 18 Oct 2022]. Available at: https://carboncredits.com/how-to-make-money-producing-and-selling-carbon-offsets/
7 Columbia Center on Sustainable Investment (2021). Corporate Net-Zero Pledges: The Bad and the Ugly. Online [Accessed 18 Oct 2022]. Available at: https://ccsi.columbia.edu/news/corporate-net-zero-pledges-bad-and-ugly
8 Calel R, Colmer J, Dechezleprêtre A, Glachant M (2021). Do carbon offsets offset carbon? Centre for Climate Change Economics and Policy Working Paper 398/Grantham Research Institute on Climate Change and the Environment Working Paper 371. London School of Economics and Political Science. Online [Accessed 18 Oct 2022]. Available at: https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2021/11/working-paper-371-Calel-et-al..pdf
9 The Guardian (2021). Carbon offsets used by major airlines based on flawed system, warn experts. Online [Accessed 18 Oct 2022]. Available at: https://www.theguardian.com/environment/2021/may/04/carbon-offsets-used-by-major-airlines-based-on-flawed-system-warn-experts
10 Forbes (2022). Not All Carbon Credits Are Created Equal. Here’s What Companies Must Know. Online [Accessed 18 Oct 2022]. Available at: https://www.forbes.com/sites/kensilverstein/2022/06/22/not-all-carbon-credits-are-created-equal-heres-what-companies-must-know/
11 GreenHouse Gas Protocol (2022). Corporate Standards. Online [Accessed 18 Oct 2022]. Available at: https://ghgprotocol.org/corporate-standard
12 Smart Freight Centre (2019). Global Logistics Emissions Council (GLEC) Framework for Logistics Emissions Accounting and Reporting. Online [Accessed 18 Oct 2022]. Available at: https://www.feport.eu/images/downloads/glec-framework-20.pdf
