Environmental Instruments: Going Beyond “Bridging the Gap”

In response to the increasingly urgent call for significant global reductions to greenhouse gas (GHG) emissions, businesses large and small are setting more challenging climate targets. For many of these companies, climate leadership is now about carbon neutrality, or net zero emissions.


Reaching carbon neutral status isn’t easily achievable through internal actions alone. Even the most stringent of energy management systems, low-carbon product designs and effective behaviour-change strategies will get you only part of the way. So how are these climate leaders “bridging the gap” between their own efforts and their ultimate target? This is where carbon credits and renewable energy certificates step in.


Carbon offsetting delivers finance to where it is most needed


Carbon credits enable companies to deliver finance to emission reduction projects, such as wind farms or forest conservation, which would not otherwise be financially viable. Each tonne of carbon avoided by the project produces a carbon credit, which can be purchased by a company to offset their Scope 1, 2 and 3 emissions.


These instruments can help businesses to reach their climate targets immediately and deliver much needed finance to low carbon development in other parts of the world. Climate leaders are using environmental instruments in parallel with internal reductions as part of their climate action plan, and to bridge the gap towards stretching and impactful reduction targets. In fact, recent research by Ecosystem Marketplace found that companies that included offsetting in their carbon management strategy typically spent about 10 times more on internal emission reduction activities than companies that didn’t offset.


Former United Nations Framework Convention on Climate Change (UNFCCC) Executive Secretary Christiana Figueres has said that carbon neutrality is what policy and regulation will have to deliver by the end of the century, if not sooner. She stressed that the vast majority of businesses, individuals or nations wishing to make absolute reductions to their emissions now will have to rely on quality offsetting.


Customising carbon project portfolios for greater impact


Leading media and communications company Sky has been certified CarbonNeutral® for 10 years. For Fiona Ball, Head of Responsible Business, internal emissions reductions and offsets go hand in hand: while investing in carbon offsets to meet its carbon neutral goal, the company has also made significant efforts to reduce its actual company emissions, including installing on-site solar, wind and biomass power generators.


Projects that sell carbon credits include wind farms which displace fossil fuels, efficient cookstove projects which reduce fuel requirements in low-income households, forest protection from illegal logging, reforestation for smallholder farmers, as well as run-of-river hydro power and geothermal energy. These projects must demonstrate that they require carbon finance from the sale of carbon credits in order to be financially viable and achieve GHG reductions.


Over the past 10 years, voluntary climate action has grown, delivering $4.5 billion in carbon finance for 1 billion tonnes of GHG emissions reductions from a broad range of climate change mitigation projects worldwide. By supporting carbon-offset projects, businesses can deliver positive impacts far beyond the carbon reduction. While these co-benefits vary by project, recent research by Imperial College London and the International Carbon Reduction and Offset Alliance (ICROA) found that for every one tonne of carbon offset, $664 of benefits are delivered to communities, infrastructure and biodiversity.


Sky carefully considered how its offset programme would engage its employees and align with other parts of its Bigger Picture strategy. Sky’s Rainforest Rescue project in partnership with WWF has helped to save one billion trees in the Acre region of the Amazon rainforest in Brazil, and several of the offset projects Sky invests in are based in the same region. These projects are working with the local community to provide alternative models of economic development which avoid destruction of pristine rainforest in the Amazon basin, thereby avoiding the carbon emissions associated with deforestation while protecting some of the world’s most biodiverse habitats.


Supporting the climate actions of others


The results of Sky’s work stretch even further: the company has engaged and inspired 50 of their most carbon-intensive suppliers to save around two million tonnes of carbon and around USD $104 million. Climate leaders have not only already achieved their climate goals and are maintaining them as the company grows, but are thinking of new and innovative ways to engage others in their journey.


Elopak is another international company with an impressive mission. The company supplies large businesses with paper-based packaging solutions for liquid food and aims to have zero impact on the environment. As part of this broader goal, Elopak became CarbonNeutral® in June this year. The company’s commitment to sustainable forestry aligns with one of the projects Elopak sources carbon credits from: a rainforest conservation project in Indonesian Borneo that additionally protects orangutans and improves the health and economic prosperity of forest-dependent communities.


Elopak aims to reach “absolute sustainability” and is vocal about what this means to the business. To achieve this strong vision and reduce carbon emissions at the pace recommended by climate science, Elopak is among the list of climate leaders looking beyond their own boundary and working closely with suppliers to reduce GHG emissions in the value chain.


Scope 3 emissions are indirect emissions that occur in a company’s value chain, including both upstream and downstream. By offering CarbonNeutral® packaging solutions, Elopak is helping its customers to reduce their impact on the environment and is proactively engaging with suppliers to make their products even more sustainable. Similarly, UKCloud is the first and only company to offer CarbonNeutral® cloud services to its clients, which have similar climate goals and therefore appreciate UKCloud’s efforts as their service provider.


Certificates support business targets of 100% renewable electricity


Along with Sky, Elopak is part of the RE100: a group of climate leading companies who have pledged to source 100% of their electricity from renewable sources.


Of course, it is not always feasible to build a wind turbine next to an office or factory, and businesses with complex supply chains covering the globe can find it difficult to directly source renewable electricity in every country of operation. Companies wishing to address their Scope 2 emissions, which come from the generation of purchased energy, can purchase carbon credits or renewable energy certificates. A renewable energy certificate is generated for every MWh of energy produced by a solar, wind, hydro or geothermal power plant. The GHG Protocol Scope 2 Guidance endorses these instruments as a credible way to quickly and cost-effectively claim that all electricity sourced is 100% renewable. The release of this guidance has resulted in the rapid development of the renewable energy certificates market, offering corporates solutions beyond Power Purchase Agreements (PPAs) and on-site investment, both of which can involve long-term, complex contractual agreements. H&M and BNY Mellon are just two of the many companies which have purchased these instruments to address their Scope 2 emissions.


Benefits beyond compliance drive the low carbon economy


 As with carbon credits, companies can customise the selection of their renewable energy certificates according to the type or project, location and cost. It is this ability to build a customised portfolio of environmental instruments from global projects according to business operations, geography, finance and long-term sustainability strategy, which enables businesses to engage their employees, customers and investors and see greater value from their investment. In this way, companies are not just purchasing environmental instruments to “bridge the gap” and reach absolute climate targets, but to serve a range of benefits that align with business goals and deliver low carbon sustainable development.


It is through these immediate, impactful programmes that climate leading companies have a compelling story to tell. This can help to attract and retain talent and customers, can generate revenue, and can increase market share by differentiating products and services with a powerful statement of environmental credentials.


Carbon offsets and renewable energy certificates alone will not provide a solution to global warming, but alongside internal efforts, the wider benefits they deliver are encouraging more corporates to incorporate environmental instruments into their climate action plans. The benchmark for climate leadership is going beyond compliance and beyond the immediate boundaries of a company’s emissions, to meet a meaningful reduction targets and deliver finance for low carbon sustainable development throughout the world. 


Rosie Helson is Marketing Manager for Natural Capital PartnersFor more information visit Natural Capital Partner’s Project Browser


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