It has never been so chic to be eco-friendly. Former U.S. Vice-President and 2000's unsuccessful Presidential candidate Al Gore nabbed two Academy Awards on Feb. 25 for his documentary on global warming. Politicians are falling over themselves to establish their "green credentials," and banks are plowing money into developing trading platforms for carbon credits, or the right to emit specified amounts of greenhouse gases (see BusinessWeek.com, 11/1/06, "The Big Money Pouring into Carbon Trading").
Now, awareness of global warming and climate change is starting to migrate from governments and big corporations down to individual consumers. The buzzword of the moment is "carbon offsetting," or compensating for the environmental impact of activities—whether driving a car, taking a flight, or shopping at a department store.
Nowhere is this popular movement more pronounced than in Britain, where carbon neutrality has become the rage. Worried that your SUV is polluting the environment? No problem: Just pay the CarbonNeutral Co., Climate Care, Global Cool, or any number of other "carbon offset providers" a fee to fund a hydroelectric program, tree planting, or wind power program, and you can put your mind at ease.
Not Simply Words Now
There are even Web sites, such as www.carbonfootprint.com, that let people calculate the environmental impact of their lifestyles and make monetary contributions to eco-friendly projects to neutralize the effect.
Carbon neutrality also is becoming a catchphrase for image-conscious companies. On Jan. 15, for instance, venerable British retailer Marks & Spencer committed to becoming carbon-neutral within five years by cutting energy use, reducing carbon dioxide emissions from its delivery trucks, and even using less air freight. As a last resort, it will buy carbon credits to offset lingering environmental impacts.
"Marks & Spencer is taking a leadership role, very much in keeping with its image" says Rita Clifton, the London-based chairman of branding consultancy Interbrand. Unlike in the 1990s, she says, when companies "jumped on the bandwagon and said symbolic things about the environment," today they "are backing up their words with actions."
The same goes for banking and financial-services giant HSBC (HBC), which has adopted offsetting practices and went carbon-neutral last year. So, too, Rupert Murdoch-owned broadcaster BSkyB (BSY), which went carbon neutral in 2006. The media company mitigates its CO2 emissions by funding a hydroelectric project in Bulgaria and a wind farm in New Zealand.
Even airlines, whose environmental impact is becoming a growing public concern, are trying to polish their green credentials. New transatlantic business carrier Silverjet, which debuted in January, includes in the price of each ticket a mandatory carbon offset contribution. Customers can choose to reinvest earned "Carbon Points" into a number of climate-friendly projects around the world in partnership with the CarbonNeutral Co. (see BusinessWeek.com, 1/25/07, "Business Class at Bargain Prices")
Such moves sometimes have a genuine environmental benefit, but they're also designed to attract eco-conscious customers. And that, invariably, prompts questions over whether carbon offsetting is just a feel-good fad—the eco-equivalent, say, of jogging for a half-hour to compensate for eating a pint of Häagen-Dazs ice cream.
No Standards Yet
Indeed, some environmentalists have their reservations. Friends of the Earth, for instance, says it does not advocate carbon offsetting because widespread use of the tactic could shift focus away from developing alternative low-carbon technologies.
"Offsetting looks like a way to carry on with the polluting activity because you can buy your way out of the problem," the group says. Friends of the Earth also is concerned about the environmental credibility of many of the offset projects, which often are unaudited.
Also, with carbon offset schemes, it's difficult to calculate the actual damage caused by polluting activities. The amount of carbon emitted by an airplane, for instance, varies depending on its age, the number of passengers on board, and the route taken, among other factors. The price of carbon offsetting also varies widely among intermediaries. The CarbonNeutral Co., for example, calculates it costs $34.78 to offset the emissions for a round-trip flight from London to Los Angeles, while rival Climate Care puts the price at $37.08.
Sue Welland, who co-founded the CarbonNeutral Co. 10 years ago, originally as Future Forests, concedes there's potential for confusion about how the "virtual product" served up by offset providers is analyzed and measured. To help solve such questions, Britain's Environment, Food, & Rural Affairs Dept. plans to come out later this year with a set of standards for the types of carbon credits that can be used in carbon offsets.
Little Impact So Far
Even then, doubts may linger about the integrity of independent carbon offset providers or the validity of corporate carbon neutrality claims. To assuage such concerns, the CarbonNeutral Co. is audited quarterly by consultancy KPMG and another independent group. But many offset providers lack such controls. The lack of standards and audits "is an issue because we don't want anything to shake business or consumer confidence in carbon offsetting," CarbonNeutral's Welland says.
And for all the visibility carbon offsetting has attained, it may not amount to much as long as it's largely voluntary. British Airways (BAB), for instance, introduced a consumer-focused scheme on its Web site 18 months ago that lets passengers calculate how much they need to pay to make their flight carbon neutral. The airline uses British intermediary Climate Care to spend the money on sustainable development projects.
But customer uptake, at less than 1% of passengers, has "not been as high as we would have anticipated," says company spokesman Paul Marston. The airline is now trying to increase the visibility of the program on its Web site, where it may get lost amid special offers and other promotions.
The ultimate lesson of BA's experience may be that for carbon offsetting to have a meaningful impact on the environment, it can't rely on the sometimes fickle awareness of consumers. Rather, the cost of carbon—like that of taxes or health benefits—has to be built into the price and treated as a cost of doing business.