Research has shown that natural climate solutions can deliver one-third of the net emission reductions we need by 2030. However, there is a danger that the carbon offsets meant to fund such solutions as part of corporate net zero strategies may end up allowing more emissions.

A nine-month joint investigation published by the Guardian, Die Zeit and SourceMaterial asserts that more than 90% of the rainforest carbon offsets approved by the world’s leading provider and used by Disney, Shell, Gucci and other large corporations are likely to be ‘phantom credits’ and do not represent genuine carbon reductions. Verra, the world’s leading carbon standard for the rapidly growing £1.6bn voluntary offsets market, has strongly disputed the studies’ conclusions. Nonetheless, carbon offsetting as a whole has been subject to increasingly high levels of scrutiny, especially in relation to quality and “additionality” of carbon credits and the human rights issues associated with certain offset projects. Accusations of greenwashing will persist while schemes fail to provide credible assessments and evidence that emission reductions or removals from a mitigation activity are “additional”, meaning that the mitigation activity would not have taken place in the absence of the added incentive created by the carbon credits. The system for measuring emission reductions must be corrected if carbon markets are to be scaled up.

Despite the risks, international consumer research by the Carbon Trust found continued levels of support for carbon labelling on products across all countries surveyed. If consumer purchasing power is to drive decarbonisation, consumers must be able to readily access information on the true climate change impacts of products and services.

This is a hot topic for campaign groups, policy makers, regulators and legislators. Although greenwashing has no legal definition, the EU has reportedly drafted plans to tackle the practice. The draft plans propose to stamp out the prevalence of "vague, misleading or unfounded information" in marketing by requiring companies to back up green claims about their products with scientific evidence. EU countries would need to establish a system to verify companies' claims, and impose penalties for non-compliance. Companies whose claims rely on buying carbon credits to offset their own environmental impact would have to disclose this. These draft plans also identify ways to spot greenwashing, including phrases such as “carbon neutral” and “50% reduction by 2030”.

It is clear that careful selection, robust verification processes and contractual protections are needed to prevent claims that your business’ use of carbon offsets is ‘greenwashing’.

Our climate change lawyers advise government departments, businesses, financial institutions, trading desks, charities and investors on all aspects of mandatory and voluntary emissions trading, Nature-based Solutions and climate change law.

Areas we can help with include:

  • Advising on contractual arrangements for emissions trading and carbon offsetting projects.
  • Regulatory advice on EU and UK legislation.
  • Advising on ESG risks, reporting and opportunities.

While more than half of FTSE 350 companies have “dramatically" increased carbon offset spending over the past two years, 41% of chief sustainability officers do not use carbon offsets due to trust issues, find new studies by Kana Earth and AiDash.