In line with Foundations for Net-Zero Target Setting by Science Based Targets initiative (SBTi), compensation measures – such as preventing deforestation or funding energy projects in communities that lack the capital to do this today – are voluntary actions that companies take outside of their value chain to help society avoid or reduce GHG emissions.
Compensation measures and the associated carbon offsets are often used in carbon neutrality commitments. A business can claim carbon neutrality by measuring its emissions and then offsetting the balance through financed projects outside of its value chain without actually reducing its own emissions.
Net zero commitments, conversely, do not permit compensation, which compels companies to reduce emissions. On its own, carbon neutrality won’t keep the world under the 1.5°C target. To learn more about the difference between "carbon neutrality"* and "net zero"**, read this blog post by Greenly, one of our members.
To ensure your strategy is science-based and aligned with the 1.5°C ambition, your priority should be to take immediate and direct action to reduce all GHG emissions across Scope 1-3 and limit emissions that remain after taking all possible measures. If you wish to set a net zero target, it is important to remember that compensation measures should not be counted towards reaching it as they do not remove carbon from the atmosphere and store it. For more on this, please read related action on neutralization.
Companies are using both compensation and neutralisation measures to offset emissions. In science-based net zero strategies, offsetting can play two roles:
In the transition to net zero: You may voluntarily undertake efforts to compensate for emissions still being released into the atmosphere to contribute to the global transition to net zero or achieve Sustainable Development Goals (SDG), among others.
At net zero: Companies with residual emissions within their value chain are expected to neutralise them.
The Oxford Offsetting Principles provide further information on taxonomy and guidelines for successful offsetting practice. For further information on carbon neutrality and net zero, please refer to ISO Net Zero Guidelines and/or follow the development of a new standard on carbon neutrality.Download: The Oxford Principles for Net Zero Aligned Carbon OffsettingDownload: ISO Net Zero Guidelines
* Net zero (as an individual actor): when a company is reducing emissions following science-based pathways, with any remaining emissions being fully neutralised by removals, either within the value chain or through the purchase of valid offset credits.
** Carbon neutrality (as an individual actor): when a company counterbalances emissions with carbon offsets without necessarily reducing emissions by an amount consistent with a science-based pathway.
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