Are there carbon-neutral companies?

Increasingly, companies claim to have carbon-neutral products and net-zero emission targets, raising doubts about the credibility of these commitments.

The worsening climate crisis demands governments and the private sector worldwide adopt more substantial and urgent measures to reduce greenhouse gas emissions. The scientists of the Intergovernmental Panel on Climate Change, the IPCC, have made it quite clear that these emissions need to be cut by almost half by the end of 2030. The new IPCC report, released on March 20, reinforces such a recommendation. This recent publication summarizes the main conclusions of the panel’s reports between 2018 and 2022.

In the private sector, the pursuit of recognition in the ESG area (which involves environmental, social, and governance best practices) has led more companies to announce carbon-neutral products. Others also declare goals to achieve net-zero emissions in their production. But what does this mean in practice? Are these corporate announcements anchored in practices that will lead to the necessary emissions reductions?

There is no unified understanding about who can claim to have a carbon-neutral product or be on the path to achieving net-zero emissions in production. That’s why international initiatives are trying to coordinate this debate and generate credibility in these announcements.

There is no unified understanding about who can claim to have a carbon-neutral product or be on the path to achieving net-zero emissions in production. That’s why international initiatives are trying to coordinate this debate and generate credibility in these announcements.

One example is the Science Based Target Initiative (SBTi). The main objective is to have more companies adopt emissions reduction targets that align with climate scientists’ recommendations. The SBTi evaluates the proposed targets from interested companies based on industry-defined standards (e.g., aviation, chemical industry, power generation, among others). Then, it determines if they are compatible with what the science indicates. If approved, the SBTi monitors the company’s progress toward its proposed target.

As of 2021, there were 2,253 companies with approved targets on the SBTi, but only four are Brazilian, according to the initiative’s website.

An essential point of the SBTi is that companies cannot base all their climate actions on emissions offsetting, such as purchasing carbon credits. The targets must include emissions reductions of at least 90% by 2050. In this case, companies could use carbon removal methods (such as tree planting) to neutralize up to 10% of their emissions which cannot be reduced. Outside of this possibility, companies could only use carbon credits to finance actions beyond the emissions reduction plans.

By reading it, it is already possible to identify a weakness of business initiatives that claim to be carbon neutral by offsetting all their emissions with carbon credits. Companies’ practices will not be compatible with the climate without emission reduction. They could be considered an example of greenwashing when there is an appearance of sustainability but without real improvements.

However, for some economic sectors, promoting a rapid and substantial cut in emissions is unfeasible. In this situation, using carbon credits could be considered a transitional strategy until a more profound emissions reduction occurs. But how can we know which companies are using these credits reliably while taking steps to reduce emissions later on? This topic is addressed by another international initiative, the Voluntary Carbon Market Integrity (VCMI).

The VCMI gathered several experts and delved into questions such as i) What can companies claim when using carbon credits? What type of credits are acceptable, and in what circumstances? What are the minimum requirements for using carbon credits in line with climate science? I participated in the VCMI Expert Advisory Group and can say that the answers to these questions are not obvious.

The VCMI’s initial proposal for recommendations is now available. It shows the type of communication and commitments companies must make to avoid greenwashing claims when using carbon credits. A common point between the VCMI and the SBTi is the need to have goals to achieve net zero emissions by 2050, adopting a trajectory of reducing emissions by at least 90%. The VCMI also indicates that this trajectory should include real emissions reductions by 2025 and every five years. In other words, defining the long-term reduction goal is not enough. There needs to be a short and medium-term plan that is monitored and evaluated.

There are also different proposed levels of commitment in VCMI: gold, silver, and bronze, depending on the scope of the short and medium-term emissions reduction commitment, as well as the percentage of carbon credits used in the initial phase.

Finally, VCMI brings criteria for the type of carbon credits that would be acceptable. The requirements include credits from activities compatible with human rights and have adopted protocols of free, prior, and informed consent in their development. It may seem like a simple criterion, but recent experiences in the Brazilian Amazon show that many cases of carbon projects violate these minimum rules. For example, I have already written a column about rights violations in carbon projects in the municipality of Portel, Pará.

I have mentioned above two initiatives that seek to organize and give more credibility to companies’ claims about climate practices. Amidst all the complexity in this area, I suggest a basic premise: if a company only buys carbon credits and does not adopt practices to reduce emissions, it is greenwashing! Carbon credits can be an acceptable transitional practice in companies as long as they are accompanied by actual measures to reduce emissions in the short term. 

I suggest a basic premise: if a company only buys carbon credits and does not adopt practices to reduce emissions, it is greenwashing! Carbon credits can be an acceptable transitional practice in companies as long as they are accompanied by actual measures to reduce emissions in the short term. 

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The opinions expressed in this article are the writer’s own.