Contribution vs. Compensation

Voluntary carbon credit retirements are down 9% YTD versus 2023 (Q2). This is another data point which suggests that corporate stakeholders are ‘sitting on the sidelines’ in a market that continues to lack guidance. SBTi’s recent deferral on their stance towards the use of credits to compensate Scope 3 emissions, coupled with the introduction of restrictive regulations like the EU Greenwashing Directive, is resulting in significant uncertainty for corporates. In addition, continued media publications on flawed carbon projects are increasing the "Guardian Risk" facing corporates. Why risk involvement when public backlash may be imminent and the usage value of credits is unclear? At TransparenC, we believe that so long as clarity on compensation claims is missing, corporates should shift their focus towards contribution.

Contribution differs from compensation in that corporates do not make claims on carbon neutrality or the achievement of decarbonization targets via the use of carbon credits. Contribution messaging, on the other hand, can have a strong signaling effect that corporates are willing to go above and beyond any decarbonization targets that they have committed to, either voluntarily or under regulated reporting schemes. But why would they even elect to do so? Let us examine three reasons:

1. ‍Corporate Responsibility: Globalization and complex supply chains mean that corporates no longer only influence their domestic markets. Their strategic decisions impact the lives of people across the globe and play a key role in global climate change, putting livelihoods at risk. As such, these corporates also have a global responsibility to at least mitigate the direct impact of their operations on the environment, biodiversity and people. ‘Sitting on the sidelines’ due to fear of reputational risks does nothing to mitigate these negative externalities, even if projects were to overstate impact. We need decision makers to be bold and courageous. It is time for corporates to step up and prove that corporate responsibility is not some over-used buzz word, but actually means something.
2. ‍Employee Engagement: Our recent survey results clearly show that employees care about sustainability. They want their employers to act and invest in climate projects, in a clear and transparent manner. ‘Greenhushing’ leads corporates to miss out on tangible internal value drivers, such as increased employee satisfaction, morale and retention metrics. If done right, with a focus on contribution vs. compensation, our survey suggests that workplace satisfaction can increase by 72%, morale can increase by 61%, and hiring metrics can increase by 75%. If altruism in corporate decision makers is not enough, then can an improved workforce convince them?‍
3. Customer Engagement: Many people have been exposed to voluntary carbon credits even if they are not aware of it. Namely through the purchase journey of airline tickets. The likes of Lufthansa and Ryanair give us the option to compensate our flights via carbon credits for a small sum at checkout. However, the data suggests that only between 1-4% of customers elect to do so, despite us living in a Fridays for Future generation. Once again, our survey results suggest that the reason behind this lack of engagement lies less in peoples’ unwillingness to pay, and more in the lack of project transparency. Most of us simply do not understand where the money is going, what the impact is, and why our involvement is important. Our survey indicates people do want to engage and contribute; 71% of respondents said they would elect to offset their flight emissions if the carbon projects were visualized by TransparenC. Corporates have a direct financial incentive to increase consumer credit purchases, because if the consumer doesn't participate, the uncompensated carbon emissions end up on the corporates carbon account. If corporate responsibility and employee engagement aren't enough, can reduced costs motivate corporates to act now?