A Net Zero Fairytale? The Reputational Risks of Carbon Offsetting

November 20, 2023

“The world’s first carbon neutral airline” has been in hot water this year.

In February 2020, Delta, one of the US’ largest airlines, announced its net zero plans, pledging $1bn to mitigating all greenhouse gas emissions from its business worldwide by 2030.

“Carbon neutral” was a phrase touted by Delta executives, company adverts, and slapped on social media posts and in-flight napkins alike. Except – the airline is now facing a class action lawsuit over claims that this is “demonstrably false”.

Filed on behalf of a Californian Delta passenger, the complaint states that these claims had led the customer to purchase flights at a premium on the basis that it was a more ecologically conscious decision – only to find that Delta’s ‘carbon neutrality’ is based almost entirely on ‘junk’ [sic] carbon offsets that do nothing to counteract the climate crisis.

In August 2023, the airline asked a federal judge in the US to toss the lawsuit, but public perceptions may not be so easily discarded. A recent KPMG poll of British consumers, for example, found that over half of those surveyed said they would stop interacting with a company that was found to have misled consumers over sustainability claims.

Delta is not the only big name being called out. BP, Spotify, Chevron and Credit Suisse are among other well-known international corporations to face media scrutiny after being accused of using misleading carbon offsetting schemes, some of which have also been found to involve human rights violations as well as being environmentally dubious.

And yet, carbon offsetting remains a booming business. Today’s annual carbon market is valued at about $400 million and is predicted to grow to anywhere from $10 billion and $25 billion by 2030. A separate analysis published by McKinsey in January forecast that the global demand for voluntary carbon offsets could increase 15 times by 2030 and 100 times by 2050.

What is voluntary carbon offsetting?

To cap global warming at 1.5C, as called for in the Paris Agreement, emissions need to be reduced by 45% by 2030 and 100% by 2050. A tall order, even more so when you consider that countries are falling behind on almost every policy required to cut greenhouse gas emissions, according to the new State of Climate Action report.

To reach net zero emissions by 2050, as dictated by the UK’s 2008 Climate Change Act Legislation, many UK organisations are making great efforts to cut their greenhouse gas emissions and reduce their carbon footprint. For what they can’t cut, business leaders are looking for alternative routes to net zero – such as buying ‘carbon credits’ from third party providers.

Each ‘credit’ represents one metric ton of CO2, removed from the atmosphere through green projects, such as tree planting. Once a credit has been purchased, companies are able to claim they have ‘offset’ or compensated for the equivalent amount of greenhouse gas emissions they created, known as the voluntary carbon market.

Too good to be true?

The problem with these carbon offsetting schemes, according to a joint investigation from The Guardian and non-profit climate watchdog Corporate Accountability, is that the “vast majority” of environmental projects within the voluntary carbon market to offset greenhouse gas emissions seem to have “fundamental failings” and cannot be responsibly relied upon to tackle global warming.

The most widespread projects include forestry schemes, solar and wind farms, hydroelectric dams, waste disposal and greener household appliance schemes across 20 countries, most of which have developing economies. The investigation analysed the top 50 emission offset projects, that is to say those that have sold the most credits, and found that most of them dramatically overstate climate benefits and underestimate the potential harm caused by the project’s action.

As a result, in May this year, the European Parliament set out to ban environmental claims about carbon neutrality based on carbon offsetting schemes, causing a ripple effect for sustainability and marketing teams, and altering how organisations are approaching public-facing climate communications and branding.

The risks of ‘carbon-neutral’ messaging

The Delta lawsuit comes as companies globally are facing heightened scrutiny of their sustainability claims, with consumers and regulators increasingly on the lookout for exaggerations or misrepresentations of the impact or sustainability profile of products and business operations. We explored these issues in a previous article, here.

This closer analysis by both legislators and consumer watchdogs like the Advertising Standards Authority (ASA) on such claims has come at a time when the global crackdown on greenwashing is forcing brands to re-evaluate their labelling and external communications.

As a result, we’re beginning to see brands adopt more caution – though the pendulum does risk swinging too far towards ‘green hushing’ which is potentially just as harmful as greenwashing.

Gucci is amongst the high-profile companies now transitioning away from carbon-neutral messaging, having removed this from its website following the decision made by the European Parliament. This is taking place alongside inquiries about the very existence and value proposition of those brands that are entirely built using sustainability messaging, or offer ‘sustainable’ collections, such as retailers like H&M and Zara, who have discontinued their Conscious and Join Life collections respectively after this legislative action.

Protecting reputation through transparency

The ASA’s updated guidance on carbon-neutral claims draws on key facets of the UK Competition and Market Authority’s Green Claims Code. The updated regulations have asserted that businesses and brands must avoid using false and unqualifiable sustainability claims and be transparent about their carbon footprint. They must also state the degree to which climate policy is based on offsetting, in order to ensure that consumers aren’t being misled, stating “marketers must consider consumers’ likely interpretation of a claim” when considering environmental marketing.

With sustainability an increased priority for the majority of consumers, brands and organisations globally need to tackle how to efficiently and genuinely approach net zero policy.

Communicating this effectively to employees, consumers and regulatory bodies is going to be paramount, and transparency is key.  According to the United Nations Convention Framework on Climate Change (UNFCCC), “by providing clear and robust data and information on climate action, transparency also serves to build trust, credibility and accountability among all those involved”.

With the net zero deadline fast approaching, pressure on reducing emissions is at an all-time high. Schemes like carbon offsetting, whilst seemingly viable, pose a serious reputational threat to businesses’ public image.

As a result, it’s vital that corporate and brand environmental policy, whether involving carbon offsets or not, are clearly communicated, self-aware, and accurate.

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