Give offsets some credit

As companies seek to cut costs, why offset in a credit crunch? David Wellington makes the business case.

As the dark shadow of the credit crunch spreads across the world’s economies, it’s tempting to lay aside corporate commitments to tackle climate change. How can companies facing economic meltdown even justify maintaining their existing plans to reduce emissions, let alone offset them?

It’s flawed logic, of course. Nicholas Stern recently restated his report’s clear warning that failure to act now would cost far more in the longer term. But because offsets are ultimately an external expense with no direct returns, bean counters may well see them as a non-core spend, along with expensive technological reductions and renewable energy.

If so, energy efficiency may be the only carbon reduction option to survive the chop in 2009’s company budget planning process. That doesn’t bode well for a credible corporate commitment to tackle climate change.

So is it inevitable? Far from it. Instead, there’s every reason in the current economic climate to start questioning the traditional ‘carbon hierarchy’ of measure – reduce – renew – offset. The common belief is that companies should make internal emissions reductions at any cost before they start offsetting. But there’s an argument to say that, in tough times, offsetting should take precedence – even if only for the short term. The climate needs us to reduce as many emissions as possible for every pound we have to spend – and offsetting is one of the best ways of achieving this.

The credit crunch aside, it makes both economic and ethical sense for offsets to play a part in the climate change policy mix. Research suggests that 65% of the most cost-effective opportunities to reduce CO2 emissions are in the developing world. That’s where we also have a moral responsibility to support both mitigation and adaptation – and well-designed carbon offsets do both of these.

Apart from the environmental and moral imperatives, there are other business benefits to be had. Firstly, there’s the very practical point that offsets can kill two birds with one stone – fulfilling a company’s CSR and climate change aims with one expenditure line.

Secondly, the market value of many companies still depends more on intangibles than assets – with brand reputation at the heart of this. Offsets offer a cost-effective and easily communicable means of positioning a company as green. The real-life experiences behind these carbon reduction schemes are an ideal way to engage stakeholders in a business’s efforts to tackle climate change. Examples range from smokeless stoves that are cutting emissions and improving health in Uganda [above] to green electricity generated from sugar cane waste in Kenya.

As well as providing content for marketing and PR campaigns, these stories can motivate employees to change their own behaviour, which is often one of the hardest areas to reach. For example, businesses might choose to use project visits as a prize for the best performing teams. Just keeping them up to date on how the projects are progressing provides positive reinforcement of the overall carbon strategy, and research shows that working for an organisation with sound environmental and social values improves retention.

So while we all come to terms with the aftermath of the credit crunch, let’s not forget that the climate crunch hasn’t gone away. Now is not the time to stop doing all that is cost-effective to tackle it. 

David Wellington is vice president of Climate Care.

Climate Care is a Forum for the Future partner.

3 March 2009

David Wellington

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