Attacking carbon projects distracts from real corporate accountability on climate change

'Generalisations about carbon credits as corporate greenwashing are potentially harmful'

It’s happening again.

Forest carbon credits are being publicly criticized as a source of corporate greenwashing, sparking fierce debate. While careful scrutiny of carbon credits is necessary, the jump to blanket criticisms risks distracting us from several key points: the important role of forests in mitigating climate change and what’s actually being done by companies to reduce emissions in their value chains.

The latest exchange on the merits of emissions offsetting was sparked by an article about Verra, the world’s largest forest carbon credits provider that’s used by leading global corporations. This recent debate provides a good opportunity to take a step back and examine why so much attention has been given of late to discrediting carbon credits.

The concern stems from companies using carbon credits as a substitute for emissions reductions in their own operations or supply chain. To be sure, this is a legitimate concern given how offsetting works: Companies purchase carbon credits on the voluntary carbon market and use them to offset a portion of their emissions. Once this happens, some companies report lower climate impacts regardless of whether they implemented measures to reduce their own emissions.

A powerful tool to mitigate climate change

Unfortunately, generalisations about carbon credits as corporate greenwashing are potentially harmful. Natural climate solutions can be a powerful tool that companies use to mitigate climate change. In fact, protecting, managing, and restoring of forests and other ecosystems could deliver as much as a third of the climate mitigation needed to achieve the goal set by the Paris Agreement to limit global temperature rise to 1.5 degree Celsius.

Natural climate solutions can provide additional advantages beyond supporting corporate emission targets, including helping protect and improve biodiversity by preventing the destruction of natural ecosystems, which are critical to the underpinning of our society and broader economy. Well-designed carbon projects also have the potential to bring economic, environmental, and social benefits to the Global South.

But natural climate solutions must be done right, and they alone will not be enough to reduce global emissions. Nor should companies invest in carbon credits instead of – rather than addition to – setting and taking ambitious action on reducing their own emissions.

It is essential for corporate carbon credits to represent real climate change mitigation. When they do not, they contribute to the mistrust illustrated in the ongoing, negative attention.

There are several important initiatives currently working to bring more integrity to the voluntary carbon market. The Integrity Council for the Voluntary Carbon Market is developing principles for high quality carbon credits, while the Voluntary Carbon Market Integrity initiative provides guidance for how companies use them.

Companies need guardrails and actionable emission reduction plans

So, let’s turn our focus to whether companies are really taking meaningful climate action.

The most effective climate action plans need to have three fundamental components that function as guardrails to ensure ambition turns into demonstrated progress. Companies need to set a net-zero target for 2050, or earlier, that is science-based and aligned with 1.5-degree Celsius pathways. They should also have interim targets that cover the entire corporate value chain – from their own business operations down to their suppliers and distributors. And companies should develop climate transition plans which set out near-term steps to achieving their mitigation goals and report progress on those plans. Transparent disclosure is essential for investors and the public to clearly understand the claims companies are making on climate action.

If companies purchase carbon credits and they do not have these guardrails in place, they should be called out and pushed to set emissions reduction targets and act on them. Whether companies are doing this or not is the real action we should be watching to keep companies accountable for their climate goals and to raise awareness of potential corporate greenwashing.

Companies can and should do both. Those that reduce emissions and invest in high-integrity carbon credits contribute toward the global effort of limiting temperature warming and avoiding the worst of the looming climate disaster. The debate needs to be centered on whether companies are actually contributing to our climate resilience.

In the end, forest carbon projects can be a useful mechanism for channeling finance to communities that keep forests intact. We need standing forests to remain standing – whether they are under imminent threat today or become under threat in the future.


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...