Between now and 2030, companies must reduce greenhouse gas (GHG) emissions to minimize the risk of exceeding a 1.5°C global temperature increase. Investors want corporate climate transition strategies that deliver tangible emissions reductions and scalable net-zero solutions.

Understanding responsible corporate carbon offsetting strategies and emissions accounting is essential for accurate portfolio company evaluation. In the last year, companies have notably shifted away from using offsets. Firms such as Delta Air Lines have pivoted toward internal decarbonization strategies aligned with the recommendations of the Science Based Targets Initiative and the United Nations’ High-Level Expert Group, which stresses that offsets are not a substitute for emissions reductions. Legal risks associated with using carbon credits to make “carbon neutral” claims are on the rise, illustrated in lawsuits from consumers and environmental groups against Delta and KLM.

Despite these growing risks, additionality concerns and methodology scandals, the voluntary carbon market continues to sell millions of credits annually, with carbon offset users shifting from nature-based and traditional projects to emerging carbon removal technologies.

However, carbon capture technologies face criticism that they cannot be scaled up, are used in enhanced oil recovery and are not economically viable given their use in other emissions-intensive operations. Furthermore, carbon removal credits can be “double counted,” with the same carbon credit claimed by more than one entity. All these problems weaken decarbonization ambitions and ultimately create higher global emissions.

While the U.S. Inflation Reduction Act and the Department of Energy incentivize developing carbon removal technologies like direct air capture, debate persists about using such technologies in net-zero pathways. As You Sow is actively engaging with industry leaders, including Occidental Petroleum and Linde PLC, to enhance transparency. We advocate for best practices that prioritize emissions reductions and mitigate the risk of double counting in the near term. New technologies must enhance sustainability ambitions and not just maintain current emission levels.

Sometimes companies also make carbon reduction claims based on avoided or “Scope 4” emissions. Avoided emissions are not emissions reductions, however. They simply compare the life cycle emissions of traditional products to lower-carbon products (e.g., diesel compared to renewable diesel fuel). The GHG Protocol requires that avoided emissions not be counted or reported as reductions in Scopes 1, 2, and 3 emissions. They can be reported separately from annual emissions to demonstrate the benefits of lower emission products, however. The Science Based Targets initiative also clearly says avoided emissions should not be counted toward reduction goals. Companies that make claims about avoided emissions therefore must transparently and accurately disclose whether their Scopes 1, 2, and 3 emissions are increasing or decreasing. Through engagement with Valero, As You Sow is working to establish clear and transparent reporting about avoided emissions to help investors and make sure the company’s business strategy is aligned with the Paris Agreement.

Diana Myers
Say On Climate Sr. Associate, As You Sow