The Future of Carbon Offsetting: And what food companies with serious intentions can do without fearing a shitstorm.

Recently, research by DIE ZEIT [1] and The Guardian [2] revealing the alarmingly low effectiveness of many Verra-certified forest conservation projects hit the headlines. In the face of the criticism, doubts among companies arise whether carbon offsets are still a valid part of a sound climate strategy. Or are there any promising alternatives??

The voluntary offsetting market has been growing steadily since 2005 and is expected to grow at a CAGR of 42.91% over the forecasted period of 2022-2027. [3] Many food companies complement their decarbonisation strategy with carbon offsetting. Product labels claiming “carbon neutrality” are especially popular among FMCG companies. [4] However, a number of companies announced that they will reevaluate their offsetting strategy and/or remove these labels from their products in response to the recent criticism.?

Critics vs. supporters

It is not the first time that carbon offsetting has come under scrutiny. Critics accuse companies of shirking their responsibility to reduce their own emissions by buying carbon credits. Some credits are very cheap, so there is a danger that it is much more attractive to offset emissions than to change the company’s own climate-damaging behaviour. In addition, there are concerns that offsetting projects are often carried out in countries of the Global South where local communities may be disadvantaged. [5] To establish a sustainable market for carbon offsets, it is essential that the monitoring and verification processes become more transparent and easier to understand. Standardised reporting formats, a global database, and an independent institution monitoring the market are missing until today, leading to a lack of transparency. [6]?

Despite this justified criticism, supporters say that carbon credits are an important tool for making the transition to a low-carbon economy. IPCC measurements show that it is not possible to meet the 1.5 degree climate targets without offsets, and the Voluntary Carbon Market can be a way to finance those. [7] Offsetting? cannot replace direct carbon reduction, but should complement it. The risk of waiting and doing nothing until we have a fully transparent voluntary carbon market is high, because the climate crisis does not wait.?

Another option is emerging?

As the discussions continue, an alternative model to carbon offsetting is currently evolving with the so-called contribution credit approach. Contribution credits allow companies to financially support the promotion of global climate protection. Just like offsetting projects, the projects are about avoiding or removing emissions. However, companies cannot use the investments in these projects to offset their own emissions or to achieve "climate neutrality". The emission reductions cannot be counted towards the corporate carbon footprint. [8]?

Changing the target from an emission-based compensation to an outcome-based contribution encourages companies to shift their activities from finding the most economic solution to reach their target,? i.e. buying cheap offsetting credits, to finding the most impactful solution. Klim has always been focused on transparent impact in different dimensions, not only carbon reduction and storage, but also farmer wellbeing, food security, and biodiversity. Therefore, we are highly supportive of this new approach and are closely monitoring its development.

The strategy for food companies?

Regardless of whether it’s offsetting or contribution credits, careful selection of projects and transparent impact monitoring are crucial. The important question is how companies can assure that they’re investing in “high-quality” projects - and the answer to it is not straightforward.?

We at Klim advise food companies in the following manner: The first priority is the direct reduction of the corporate carbon footprint. Klim supports food companies in reducing scope 3 emissions in cooperation with farmers from their own supply chains in so-called insetting projects. By applying regenerative measures, farms can reduce their emissions, and at the same time increase yield security and biodiversity. Nonetheless, we also enable companies to create a positive impact independently of their own supply chain by buying Klim credits - in the form of compensation or contribution credits. Klim credits offer the following advantages:?

• Regionality: When buying Klim credits, you can choose to buy credits from regional farmers and thus create an impact in the region your company is operating in. Moreover, the farmers can be visited on their farms, if desired. It’s possible to verify that the money is actually going where it is supposed to.
• Side benefits: Regenerative measures aim to improve soil health. The build-up of humus contributes to an improved water storage capacity of the soil, increases its resilience, and reduces the dependence on chemical input. Regenerative agriculture is not only climate and biodiversity protection, but at the same time living adaptation to the ongoing climate change, and a contribution to food security.
• Price: Our credits have a reasonable price, which we believe minimises the incentive to purchase our credits for companies that don’t show an effort to reduce emissions, and want to greenwash their sustainability image with cheap credits instead.
• Focus on quality criteria: We are optimising our model for additionality, permanence, transparency, no double counting, no double claiming, 3rd party qualification.

We would be pleased to advise you on the strategy that works best for you - be it an insetting project, or complementing your reduction efforts with contribution or with compensation credits. Get more information on our website .?

References: [1 ], [2 ], [3 ], [4 ], [5 ], [6 ], [7 ], [8 ]