Groups wary of carbon offsets aim to devise their own credits
• Energy giant Shell was the first major company to develop offsets
IT ’ S GOOD TO INVEST IN IT NOW. IF YOU START TODAY, YOU MAY HAVE A GOOD CREDIT IN FIVE YEARS
Aworld away from its steel-and-glass headquarters in London, GSK is wading into unfamiliar waters: a mangrove nursery in coastal Indonesia that is being nurtured to harbour crabs, fish — and carbon.
It’s the precious carbon GSK is really after, as it seeks to apply the mangroves’ carbon-capture prowess to nullify climatewarming gases emitted by its global network of factories and vehicles and the many asthma inhalers it sells. The drugmaker, wary about the poor quality and questionable climate benefits of carbon offsets for sale by brokers on the open market, is now devising its own credits.
Carbon offsetting is “a fundamental mechanism to move capital where it is needed for nature, climate and health”, said Adele Cheli, sustainability partnerships and strategy director at GSK. “Just because it’s not perfect doesn’t mean we’re going to step out. We’re going to lean in and make it better.”
Other companies are pursuing similar ideas. Shell was the first large company to branch into offsets development, and has created a “nature-based solutions” team working on projects from Australia to Senegal.
TotalEnergies plans to invest $100m a year in nature-based projects to develop a “natural carbon sink capacity” of more than 5-million tons of carbon dioxide a year from 2030.
BP owns a majority stake in a carbon offset developer and has “scaled up” its carbon credit development efforts. Danish clean energy giant Orsted says it intends to generate carbon removal credits from a Gambian mangrove project. Chevron said in 2022 that it was supporting a reforestation project in Louisiana that will generate carbon offsets. And Bayer is working with Indian farmers to make rice cultivation less methaneintense, an outcome that could be monetised by carbon credits.
Existing offsetting schemes are “being challenged”, said Klaus Kunz, head of environmental, social and governance (ESG) strategy at the German drug and agriculture company. “Quality of the projects is key. If done properly, this is a positive tool.”
It’s also an untested and risky gamble for companies under intense scrutiny from climateconscious investors. Offsets are a known source of exploitation in poorer countries.
A recent UN report on corporate greenwashing warned against “undue reliance” on offsets. The expert UK Climate Change Committee says offsets can discourage buyers to cut emissions.
“We need to be on red alert” to ensure the new breed of corporate offsets “are not replacing or delaying radical action to decarbonise”, said Nathalie Seddon, professor of biodiversity at Oxford University.
GSK and VW said they were aware of the greenwashing risk and the need to prioritise emission avoidance and reduction ahead of offsetting. The drugmaker said it consulted technical experts on issues such as “additionality” and “leakage”, and how to share benefits with local communities. GSK said it would prioritise carbon removal credits for its 2030 target. For its 2045 target, only removal offsets will be allowed.
If it works, the entry of large companies could rapidly professionalise the nascent $1.3bn market and spark a fresh growth cycle.
“Instead of buying [offsets] from a broker where it’s truly caveat emptor, with your own projects you could oversee the impact, quality and expenditure,” said Philip Hardwick, a former executive of emissions businesses at Barclays and JPMorgan Chase & Co.
That may explain why Volkswagen — whose direct and indirect emissions are about 30 times larger than GSK’s — wants to generate 40-million credits a year by 2030, according to an informed source who declined to be identified. A VW spokesperson declined to comment on the target. The German carmaker aims to achieve net zero by 2050, and has teamed up with a local carbon developer to create a venture called Volkswagen ClimatePartner to generate offsets. It aims to use those credits to offset supply chain emissions of VW electric vehicles in Europe, enabling a “carbon-neutral handover to our customers”, said Ralf Pfitzner, VW’s head of sustainability.
The venture has about eight projects on the go, including the protection of forests and savannahs, and plans to release the first credits by 2025, according to Michael Rumberg, MD of the venture.
GSK says home-grown offsets can help it neutralise any emissions it can’t otherwise eliminate, as it tries to become carbon neutral just seven years from now. It’s a challenge: GSK’s asthma inhalers alone generate almost half its carbon emissions.
The drugmaker says it expects to eliminate 80% of its emissions directly by 2030, as well as those linked to its suppliers and customers, while neutralising the remaining 20% with offsets.
One approach is to invest in mangroves, an attractive tool for sucking carbon dioxide from the air. Easily identified by their distinctive latticed roots, the plants thrive in shallow, brackish water, creating a defence against floods and a vibrant habitat for aquatic life.
Crucially, they can sequester up to 50 times more carbon in their soils by area than tropical forests, according to the World Bank. But mangroves are under threat globally, and Indonesia is one of the hardest-hit areas. GSK’s project in Java, developed with carbon developer First Climate, aims to restore more than 2,500ha of mangroves. In return, the drugmaker would get 120,000 to 140,000 credits a year, said Cheli.
A carbon credit represents a ton of carbon dioxide emissions removed from, or not added to, the atmosphere. And this is just the beginning. GSK plans to eventually generate about 2million credits a year for its own use. As more projects come on line, the company in the next five years expects to secure all the credits it needs for the 2030 to 2034 period.
“It’s good to invest in it now. If you start today, you may have a good credit in five years,” said Anais Bach, former head of operations for TotalEnergies’s nature-based solutions business who now runs a carbonfocused start-up.
“Those who do nothing now will be in trouble as projects at the right price and quality will only become scarcer.”