A guide to offsetting

A guide to offsetting

27 Jun 2019

In this guide we will cover the following key areas of offsetting due to climate change:


  1. We describe why offsetting efforts are important

  2. We categorise different technical and social solutions

  3. We explain the difference between sequestration and mitigation

  4. We explain differences in offsetting curves between different solutions

  5. We explain the importance of considering international value-chains

  6. We explain the relationship between the UN SDGs and offsetting

  7. And finally, we shed a light on the offsetting process


Why offsetting is important


At the current pace of climate change and the potential critical impact on life on earth it will have, and considering the existing ongoing efforts of mitigating these effects, we must look at every conceivable way of impact mitigation. Not only focusing on achieving zero net carbon emissions but also sequester carbon beyond our emissions.


The stakes have never been higher, and neither has the interest of not only governments and companies but also the public. People are educating themselves at a rapid speed and identifying real solutions.


We need to consider solutions at every scale and across every sector as well as considering that climate change is not localised and its impact will be the biggest in the developing countries. Thankfully, you and I don’t need to invent every solution ourselves. A team of 200 scientists and researchers around the world have modelled and calculated the potential impact of different solutions. 


Is there a difference in impact between solutions?


Some of these solutions may seem abstract and/or counterintuitive at first glance, but all contribute to climate change mitigation.


Many of the proposed solutions are technological, e.g. methane digesters, cool roofs to wind turbines, smart grids to bioplastic, but likewise is the importance of natural systems and ecological solutions, e.g. biological carbon sinks, regenerative gazing, agroforestry, etc.

Not only are solutions technical in nature, but social efforts rank highly according to the scientists, e.g. educating girls and widening access to family planning both increase climate resilience.


Following are the main sectors of solutions:


  • Energy: e.g. wind turbines (onshore), solar farms, rooftop solar

  • Food: e.g. reduced food waste, plant-rich diet, regenerative agriculture

  • Women and girls: e.g. educating girls, family planning

  • Buildings and use: e.g. district heating, insulation, LED lighting

  • Land use: e.g. tropical forests, temperate forests, afforestation

  • Transport: e.g. electric vehicles, ships, mass transit

  • Materials: e.g. refrigerant management, alternative cement, and bioplastic

  • Future solutions / coming attractions: e.g. autonomous vehicles, living buildings, smart highways

  • Sustainable finance: e.g. sustainable investing (funds and pension)


Although all of the above are important they have different impacts.


  • Onshore wind turbines have approx. 17x impact vs LED lighting in commercial buildings

  • Plant-rich diet has approx. 4x impact vs afforestation

  • Educating girls has approx 5x impact vs electric vehicles


Individual impacts of different solutions can be explored here in a list by Project Drawdown.


Sequestration vs. mitigation


These two concepts, sequestration and mitigation, are widely used in the world of environmental matters and especially in terms of offsetting. These two are quite technical terms, but it is essential to understand the difference, especially when evaluating different mitigation solutions.


Sequestration is the process involved in carbon capture and the long-term storage of atmospheric CO2 or other forms of carbon. It can be described as removing it from the atmosphere and depositing it in a reservoir.  Solutions in this range focus on capturing CO2 naturally through biological, chemical, and physical processes.


Examples of solutions focusing on sequestration: afforestation (i.e. planting trees) and geological sequestration (e.g. the Icelandic project CarbFix).


Mitigation is defined as the action of reducing the severity or seriousness of something. We can, therefore, say, that solutions focusing on mitigation are those that are trying to reduce its environmental impact.


Examples of solutions focusing on mitigation: solar farms (that produce renewable energy and helps others stop using fossil fuel generated energy), mass transit (helping reduce the reliance on private cars and therefore reduce their environmental impacts).


To better understand the impact difference between sequestering projects and mitigation projects, it is interesting and vital to understand the nature of the offsetting curves for the following types of projects.


Offsetting using carbon sequestration through afforestation (i.e. forestry) takes time. This means that for the first years after the trees have been planted, the rate of sequestration is low, and increases with time. This means that the sequestration is also not constant for every year, but changes. 


The process of geological sequestration (e.g. CarbFix) is close to constant, where carbon emissions are sequestered through mechanical processes and pumped underground.


Educating women in developing countries may not have an immediate impact, but as has been shown, the fertility rate of educated women drops significantly, resulting in fewer children and less use of resources down the line. 


The curve shape for the wind turbine project assumes that as time passes, the electricity replaced becomes cleaner. The wind turbine is, therefore, replacing cleaner electricity as time passes, lowering the rate of carbon offsetting.


All the types of carbon offsetting mentioned above result in a lower amount of greenhouse gases in the future, either because they have been sequestered or not emitted in the first place.


International value-chains


Most companies worldwide are a part of international supply chains, meaning their environmental footprint does not only happen in its home country of operation. This relates to what was previously stated that environmental impacts are not localised.


Let’s take an example of a hypothetical product X. Its critical raw materials are from China and Russia. Parts of the product are assembled in Poland and Germany. The final assembly of the product, including energy-intensive final processing of raw material, is in Norway, using renewable energy. The use-phase of the product is then in the US and the Nordics. It is clear, describing this hypothetical product, that the environmental impact stretches over several countries and continents. 


Likewise, considering the general operation of a company that does not necessarily produce a product. It may have its main office in Iceland and a secondary office in Norway and frequent meetings all over the world, data servers in the US and perhaps importing products from South America and Asia. Another scenario may be an investment company (or a bank) that has investment or credit exposure in foreign countries. 


In those hypothetical scenarios, the environmental impact of a company is not isolated to one country. 

Sustainability strategies and UN SDGs


Companies are increasingly forming robust sustainability strategies which are based on comprehensive risk management and materiality mapping as well as benchmarking with foreign peers. Those who are going farthest are integrating science-based targeting into their strategies.

A part of a company’s sustainability strategy is how it will offset its environmental, and even social, impacts. Many companies set ambitious net-zero carbon goals, for example, and many increasingly choosing to contribute to global sustainable development by selecting a few or more SDGs to benchmark their sustainability efforts.


Let’s take an example of a company benchmarking with the UN SDGs on the left. This company could, as a part of its sustainability strategy choose to offset a portion of its environmental impact by selecting projects which contribute directly to these SDGs.


Following example projects include:


  • No. 5: The Community reforestation project in Uganda, where small agricultural groups are required to include both genders. Females are provided with leadership training and managerial responsibility.

  • No. 7: The Household Agricultural Biogas project in Vietnam. Families do not need to buy fuel or collect wood for energy. Bio-slurry, a by-product can also be used as an organic fertiliser. 

  • No. 9: The Kanungu Run-of-River Hydro project in Uganda. The additional electricity generated from this project will support the development of new companies and inject investment in south-western Uganda.


The offsetting process & carbon neutrality


When choosing offsetting projects, it is essential to select an offsetting partner with the credibility to manage the offsetting projects and deliver the claimed positive environmental impacts. Across the globe are international offsetting companies that carefully choose projects based on their impacts. 


These projects are usually certified (using, e.g. the Verified Carbon Standard, the Gold Standard Voluntary Emission Reductions, and Certified Emission Reductions all of which meet the Quality Assurance Standard for Carbon Offsetting).


Some offsetting companies offer the service of carbon neutrality. That carbon neutrality process follows rigorous protocols encouraging transparency and calculated impacts.


The offsetting process could look something like this:


  • Calculate your carbon footprint using internationally recognisable methodologies

  • If needed, seek the advice from credible parties/consultants with specialised knowledge in GHG emission calculations

  • Figure out in which areas you can reduce carbon emissions yourself

  • Find reliable offsetting partners that offer high-quality projects in line with your sustainability strategy (e.g. risk management, materiality, and/or UN SDGs) and/or support local offsetting initiatives

  • Fulfil the offsetting partners’ stringent and internationally recognisable requirements

  • If a recognized carbon neutral certification has been acquired feel free to disclose your carbon neutrality initiative in-house or to the public


Please check out our guide on how to avoid Greenwashing so your company can make meaningful and relevant claims backed-up by data.


CIRCULAR Solutions’ approach


CIRCULAR Solutions works with companies to create holistic robust sustainability strategies based on risk management, social responsibility, and materiality principles with measurable targets and offsetting mechanisms.








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May 27, 2019

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