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The Next Economy
CSOs Committed to Decarbonization But Skittish About Offsetting

Carbon management is top priority for Chief Sustainability Officers; but many are stymied by uncertainty around the most impactful strategies. Here, South Pole adds context and insight to the debate.

AiDash — a leading SaaS provider of vegetation management and other satellite- and AI-powered operations, maintenance and sustainability solutions — has released a study that shares key findings from a global survey of over 500 chief sustainability officers (CSOs) on the topics of sustainability strategy, carbon management planning, GHG emissions reporting and more.

Sustainability and carbon management are now mainstream business concerns — with 97 percent of companies including them in investment decisions and 79 percent of chief sustainability officers already accountable to their boards or the public. But as the Carbon Offsetting in 2023 study found, choosing the best carbon-management strategy or combination of strategies continues to be confusing for many — the majority of businesses say they will struggle to meet their decarbonization goals, particularly with regard to tricky Scope 3 emissions, without the use of carbon credits; but a lack of trust in carbon-offsetting options is stalling uptake and pushing corporate carbon-management plans off track.

However, nearly half (43 percent) feel they must use carbon offsets for hard-to-reduce GHG emissions alongside direct measures in order to meet decarbonization targets. Despite this critical need, the survey revealed a major lack of trust in carbon offsetting — with 41 percent of CSOs stating they do not use carbon credits for this reason. Another concern is the inconsistency in validation methods for carbon credits: 35 percent of CSOs only buy from government or voluntary certified schemes; 43 percent are exploring working with credit rating agencies; 35 percent undertake their own validation or third-party due diligence; and 41 percent use a combination of these methods. This lack of uniformity raises doubts surrounding the accuracy and comparability of corporate sustainability measurements.

There’s been much debate lately about the validity and efficacy of the voluntary carbon market (VCM) as many carbon-offsetting projects are being called into question for being inconsistently measured, inadequately monitored and frequently failing to prove they are actually sequestering additional carbon. But thanks to the market’s continued, rapid growth, digital monitoring innovations have emerged that promise to fill in the data gaps needed for credible validation of project efficacy and impacts.

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In the meantime, the controversy over the VCM rages on. But climate-solutions provider South Pole believes that the voluntary carbon market will play an important role in scaling global climate-stabilizing impact, and that concerns about its validity and efficacy are largely based on the market in its infancy. As CEO Renat Heuberger explained in a recent post:

“If we zoom out from the very technical debate and oversimplified headlines, the history of the VCM offers some valuable insights. After the collapse of the Kyoto Protocol, the VCM had a very low profile and limited financing — relying on a committed few to continue innovating in this space. A decade ago, the market value of the VCM was around $387M — a fifth of the estimated market value today — and VCM carbon credits were selling at less than $1 per credit. Low demand limited the carbon markets back then — only the 'low-hanging fruit' or the cheapest and most straightforward projects could get developed.

As the understanding of the real threat of climate change grows, so is the demand for action and carbon credits — which means that prices are rising. This suddenly creates the conditions for advanced technology to step in and take centre stage and more complex projects can get financed.

"Currently, what we often see in the media is a critique of the older projects which were cutting edge at the time … The current debate is applying a 2022 vision to a very different context and world. Put simply, the VCM is not flawless. But it's the only viable system we've got that rose from the ashes of Kyoto. … Witnessing problematic projects being cherry-picked and splashed across the media, it's clear we have a long way to go to win this argument.

"But we can't let the perfect become the enemy of the good. The VCM offers measurable, scalable and growing benefits. Right now, the market is channelling major financing into projects that avoid and reduce our carbon emissions. And it has huge potential to help us reach net zero — so long as more businesses go above and beyond decarbonization (as recommended by the Science-Based Targets Initiative [SBTi]) and add the important step of financing climate action as a milestone on their climate journey.”

As Nadia Kähkönen, South Pole’s Associate Director of Global Communications, added via email: “To truly move the dial on addressing runaway climate change, carbon credits should be used and talked about by corporations according to a clear set of principles that simplify and amplify the right way to do things, grounded in science and building on the work of many credible initiatives — such as SBTi and the Voluntary Carbon Markets Integrity Initiative, among many others.”

As the VCM continues to become larger, more accurately monitored and better verified, companies can feel more confident incorporating offsets as a potentially necessary addition to (but not the linchpin of or a substitute for) broader decarbonization strategies.