Most Companies Buying Carbon Credits Are Not Greenwashing

In 1983, at a beach resort in Fiji, a young man named Jay Westerveld saw a request that hotel guests reuse their towels to “save our planet.” Reflecting on his experience in a college term paper, Westerveld pointed out the hypocrisy of guilt-tripping guests about towels while the hotel was hastily building more bungalows. “It all comes out in the greenwash,” he wrote, coining a new phrase in the process.

Today, we understand what “greenwashing” looks like: A company makes a deceptive claim to appear more environmentally friendly and mislead consumers. This has been going on for decades. In the 1990s, for example, Conoco ran an ad campaign that featured seals clapping for the company’s new environmentally-friendly oil tankers. All the while, Conoco and other oil giants allegedly hid the risks of fossil fuels that they knew about and were discussing internally at the time.

More recently, media critics have attached this moniker to corporate purchasers of nature-based carbon credits, a way for companies to “offset” a fraction of their emissions by funding conservation projects through the voluntary carbon market (VCM) that protect and restore natural carbon sinks. A recent deluge of media criticism paints credit-buyers as lazy, even nefarious. These stories repeat a now familiar narrative: “They are not interested in decarbonizing, and credits are a way to virtue-signal without meaningfully reducing emissions.”

A comprehensive new study from Ecosystem Marketplace, a D.C.-based nonprofit that researches environmental markets and financing, presents evidence that those broad-brush assumptions are wrong. It finds that most companies that participate in the VCM are climate leaders, not laggards.

According to the study, which analyzed transactions reported by over 7,000 companies, those engaged in the carbon market are nearly twice as likely to be decarbonizing their operations year-over-year. They are investing three times more in reducing emissions of their own business than companies who steer clear of credits. They are also 3.4 times more likely to have science-based climate targets. In other words, companies are typically not using carbon credits to greenwash their operations, but rather as an add-on to the efforts they are already taking to clean their own houses.

Anger at corporations that pollute is justified. But critics of carbon-credit systems are antagonizing the wrong actors, with perverse effect. Companies that engage in the VCM face near-constant media scrutiny, while companies who duck the conversation are able to entirely evade critique. The result is a chilling effect on corporate climate action.

In a survey undertaken by Conservation International, a global non-profit, and the We Mean Business Coalition, a group of influential companies working to galvanize climate action, 44% of corporate leaders said that accusations of “greenwashing” was a top concern regarding the voluntary carbon market—the highest-ranked concern among those listed. Recent conversations I’ve had with sustainability officers at Fortune 500 companies affirm this fear: if misplaced criticism continues, they say, their companies may pull out of the market.

A mass withdrawal from the VCM would have disastrous consequences for climate stability, nature conservation, and human wellbeing. Terrestrial ecosystems currently absorb a quarter of all greenhouse gases emitted by humans. If we invested more in protecting and restoring nature, that could rise to at least one-third, a significant step towards stabilizing our climate. These projects are just one part of the solution, and require continued refinement—but without them, we have no chance of reaching our global climate goals.

Certainly, there are some companies that choose to operate in bad faith and purchase low-quality, low-transparency credits, while also refusing to decarbonize their own emissions. But let’s not allow those bad apples to spoil the rest. Let’s work together to improve fidelity across the board.

Indeed, the recent Ecosystem Marketplace study shows that demand for higher-priced credits has increased—a signal that companies are increasingly willing to pay a premium for quality in the carbon market.

And there are ways to improve integrity across the board. Independent governance bodies like the Integrity Council for the Voluntary Carbon Market are providing concrete standards for high-quality credits. Meanwhile, companies should embrace endeavors like the Voluntary Carbon Markets Integrity Initiative, which help them make credible climate claims by providing a “rulebook” to follow. By standardizing this market, we can all more clearly discern good-faith actors from bad-faith ones; high-quality credits from junk; and climate allies from foes. 

Shame is a powerful tool. It’s crucial that we channel it toward those inhibiting climate action—rather than those leading the way to solutions.