Beyond Philanthropy – Carbon Offsets and Risk Mitigation

This month we review the major findings of the recent Ecosystem Marketplace report into carbon offsetting, and present a compelling summary of why companies around the world are committed to purchasing carbon offsets as part of their broader emission reduction strategies. Far from being akin to buying religious indulgencies, carbon offsets are now understood to be a cornerstone of any well-thought out and executed corporate strategy that aims to reduce risk from the threats posed by climate change.

We hope you enjoy it,

Many thanks for reading,

Jo Anderson – Carbon Tanzania Co-Founder

The Yaeda Valley REDD+ project has injected over US$100,000 into the indigenous communities who have called the Yaeda Valley their home for thousands of years.  This income has been used to educate children, deliver medical care, provide employment and purchase emergency rations in times of drought.

Where does this money come from?  The project generates carbon offsets by protecting existing forest from deforestation.  The project area is wholly on village land with the community carrying out regular patrols and annual carbon monitoring activities.  The carbon offsets are independently certified and then sold to both local Tanzanian companies and international buyers, with the money flowing back to the community.

Why Buy Carbon Offsets?

Companies and individuals who buy carbon offsets understand the risk that global climate change poses to their business operations, to the economy within which they operate, and to the markets on which they depend. In addition, it is increasingly the case that consumer behaviour reflects how well a business reacts to the risks of climate change and can have a significant effect on their reputation.

The physical risk of climate change to our environment is now well understood as long-term weather patterns transform and extreme weather events occur more regularly.  Market leaders across industries such as insurance, banking, production and farming have already identified which of these risks will affect their businesses and have implemented emission reduction strategies that include offsetting in an attempt to mitigate climate change.

Climate change will lead to a change in consumer behaviour, whether the change is due to product scarcity or simply an attempt by consumers to minimise their own impact on the environment.

The risks and change in customer behaviour will be significantly noticed by tour operators and hoteliers as our environment alters.  As the glaciers of Patagonia melt and rising sea temperatures bleach the Great Barrier Reef, tourists will turn to new destinations, consequently reducing foreign income at the once popular destination.

In East Africa the Tanzanian safari industry is already acting to protect their natural resources by purchasing offsets from a project that conserves landscape, wildlife and supports indigenous communities that their clients come to visit.  It is not just international organisations such as National Geographic Expeditions and Asilia Africa that are offsetting, but smaller locally owned operators such as Nyange Adventures and Kisima Ngeda Tented Camp as well as air charter company Regional Air Services.

Most importantly, a company’s brand is at risk if they do not take steps to mitigate climate change.  Today’s consumer is educated in the causes of climate change, most notably deforestation and the burning of fossil fuels.  Consumers are demanding deforestation free supply chains and divestment from fossil fuel companies, forcing businesses to assess their operations and make the necessary changes or risk losing their favourable reputation.

What Types of Carbon Offsets are Being Purchased?

Carbon offsets are generated from a variety of projects ranging from renewable energy, installation of clean cook stoves to avoided deforestation, also known as REDD (Reduced Emissions from Deforestation and forest Degradation).

The most popular offsets are those with benefits beyond simply the mitigation of climate change, also known as co-benefits.  Co-benefits can include the protection of wildlife, the preservation of iconic landscapes or the support of marginalised communities.

REDD+ projects are often the preferred choice of offsets due of the variety of co-benefits offered by a single project.  These include biodiversity conservation, or the protection of endangered species, and provision of employment and the promotion of indigenous land rights.  In 2015 11.1 million tonnes of carbon dioxide were offset by REDD projects, equating to 22% of the market share.

Who Buys Carbon Offsets?

Carbon offsets are bought by companies and individuals looking to offset the unavoidable carbon emissions generated from their activities.  According to the Forest Trends’ Ecosystem Marketplace report into corporate offsetting strategies, companies offset 142.2 million tonnes of carbon dioxide in 2014, which is the equivalent of taking 30 million passenger vehicles off the roads for one year.

The Finance and Insurance sector understand risk in a way that few others do, so maybe unsurprisingly they purchase more offsets than any other sector.

The consumer goods and retail industry are advocates for first conducting detailed emission assessments, implementing emission reduction strategies and then offsetting the remaining unavoidable emissions.  These assessments measure both the direct emissions generated in the manufacturing of their product as well as the indirect emissions associated with the products entire lifecycle.  These indirect emissions can occur at the beginning of the lifecycle, such as growing soya beans for soya milk, through to the end of the lifecycle including distribution and disposal of the product.

Here in Tanzania safari operators are the most likely to purchase offsets followed by safari camps and lodges.  Braeburn International School Arusha is demonstrating leadership in the educational sector having offset their emissions since 2009. Offsetting at Braeburn School is seen as an educational tool to teach the younger generation on the need to protect both the local and global environment.

Where Can you Buy Carbon Offsets?

Carbon offset projects are located the world over and are traded on the Markit registry so you don’t have to purchase offsets from the country where your business is registered.

Some companies in Europe will have an interest in saving existing forests but with little indigenous forest remaining in Europe, they can choose to purchase offsets from forested countries in the southern hemisphere.   Other companies will have a desire to support projects in developing countries to fulfil their philanthropic endeavours or they may choose a company close to home to whom their customers relate.

For those who don’t have direct access to project developers, there are companies in Europe, America and Australia who act as middlemen, trading in a variety of offsets and matching buyers to projects.

The business case for purchasing offsets is now clear and the data collected in the Forest Trends report debunks the popular myth that purchasing carbon offsets provides companies with a licence to pollute.  In 2014 offset buyers spent more than $1 million on first reducing their emissions before purchasing offsets to balance out the remaining unavoidable emissions.  This figure is 10 times more than companies who didn’t purchase offsets but were engaged in reducing company emissions.

By purchasing offsets that align with a company’s ethos, companies and individuals can do more than just mitigate climate change; they can conserve landscape, protect wildlife and support indigenous communities.