Navigating carbon credit deficiency

Accelerated since last year’s COP26 UN climate summit, decarbonisation strategies have been a key focus for businesses, with many adopting their own net-zero climate commitments. As a result, demand for carbon credit to compensate for unavoidable emissions is soaring, increasing prices dramatically.

Following the initial fall in stock prices at the time the Ukraine war first broke out, the market has largely stabilised. In the hope the Ukraine crisis is not long-lasting, it is expected that the carbon credit market will remain buoyant, or at least bounce back.

So, what does this mean for corporate travel buyers?

Those looking to offset the cost of their business-critical travel for the first time are facing challenges. This is not only driven by rising costs but also the limited availability of certain types of accredited carbon projects. Perhaps more important is the risk of buying into unaccredited projects that, if not properly monitored, can do more harm than good, potentially putting a business in a compromising position.

Companies face accusations of greenwashing and a damaging reputation fall-out when investing in unquantified carbon projects if necessary due diligence has not been undertaken.

The challenge at the moment is that genuine carbon reduction and removal schemes can be costly and/or not readily available. There is also a greater emphasis on pushing for carbon removals only, when carbon reductions are an equally critical option at the beginning stages of a decarbonisation strategy.

“Companies face accusations of greenwashing and a damaging reputation fall-out when investing in unquantified carbon projects”

While there are new projects in the pipeline, the certification process is lengthy due to the extensive due diligence that must go into each project to ensure that accreditations are reliable and genuinely deliver sustained carbon reduction or avoidance. There are specific geographic and legal hurdles to overcome before a project reaches the accreditation stage.

As companies scramble to purchase the credits that either avoid or compensate for greenhouse gas emissions, the limited number of projects that do have availability has seen prices soar, pushing them outside of budget for many who do not hold ready stocks.

With pressure mounting for companies to meet their sustainability targets, many businesses face the reality that they can’t afford to wait around when it comes to purchasing carbon offset credits. In some instances, by the time a decision is made, stock can sell out and prices increase even further.

However, unaccredited projects are flooding the market, some having no positive impact on reducing or avoiding emissions. In some cases, they can even have a higher emission output than the activity itself that they’re being purchased to offset.

Without suitable research, these options can lead to businesses paying a greater reputational price. While prices of both removal and reduction credits are increasing, corporates can begin their decarbonisation efforts by starting with reduction credits and then progressing to removals.

“It’s about finding the right balance between cost, traveller wellbeing and sustainability”

The cost of sustainable travel has long been a hot topic of conversation and corporates are forced to ask themselves what is more important – the cost to the bottom line or the cost to the planet?

While there is growing demand for sustainable solutions, many travel policies are behind the curve and remain focused on cheaper options rather than greener solutions.

Yet, not every sustainable choice is dearer. Domestic rail is cheaper than air travel and emits less CO2 while replacing certain meetings with video conferencing removes the need for some travel altogether. It’s about finding the right balance between cost, traveller wellbeing and sustainability. Reducing the need for relying on large-scale offset credits is one route to manage this challenge that can help in the long term.

For travel buyers, either independently or working with an established ESG team in their organisation that can cross multiple divisions, purchasing carbon credit to offset corporate travel is a new part of the job. Whether the budget for this sits at the corporate level or within the travel budget is still being debated by many.

Without informed insight into authentic projects, there is real risk in what is a murky and largely unregulated industry. Working with a valuable TMC partner can help to navigate this new world. An informed and transparent partner can support sourcing accredited projects and, in some cases, having this available at the point of invoicing to make a single transaction process for both travel booking and offsetting.

While the corporation may not have the purchasing power to compete with the mega conglomerates when it comes to purchasing credits, a savvy TMC is able to buy in aggregate at a fixed price for multiple clients. This has significant cost savings for travel buyers when compared to purchasing direct and ensures that carbon credits have been robustly audited by a reliable third party.

“Working with a valuable TMC partner can help to navigate this new world”

It is worth remembering that even small steps make a difference. If the budget doesn’t suffice to cover a full year’s travel-related CO2 footprint, even offsetting the emissions of some departments or a portion of the total makes a difference to the planet, and takes your organisation one step closer to its net zero targets. Every carbon credit represents either the permanent removal of a tonne of CO2 from the atmosphere or the avoidance of 1 tonne of CO2 being emitted.

TMCs are working with trusted partners in this space to source offset projects that ensure sustainable travel policies have a real, positive and tangible impact. Ed Hewitt, Director of Natural Climate Solutions at Respira, highlights that while carbon offsetting is an extremely valuable tool, it should not be seen as a panacea to all net zero challenges. Direct emissions reductions must still be the priority.

Demand for carbon offsetting schemes is expected to continue to escalate this year and the cost of neutralising carbon emissions is anticipated to keep on rising too. It’s vital that travel buyers are ahead of the game when it comes to their own sustainability strategies to ensure their efforts are contributing positively to net zero targets and not adding unnecessary cost and risk to their busy plates.