Carbon offsetting: A guide for small businesses

Blogs 12 May 2023

What is carbon offsetting and is it accessible for small businesses? As more of us start working towards net zero, find out what you need to know about carbon offsetting schemes and how they work.

A close up of a man's hands planting a tree

Once you’ve calculated your carbon footprint and started making as many eco-friendly switches as possible, you might find that you’re still producing some unavoidable emissions. So what can you do to shrink your carbon footprint further and reach net zero

You may have seen your favourite brand pledging to plant a tree for every order or sharing their commitment to offsetting schemes on social media. Carbon offsetting, sometimes known as carbon balancing, is being used by many companies to neutralise their emissions and gain carbon neutral accreditation. But what exactly is carbon offsetting, how does it work and is it an option for your small business?  

What is carbon offsetting and how does it work? 

The United Nations recognised the difficulty of reaching net carbon zero at the Kyoto Protocol in 1992. They created a concept called carbon offsetting. Carbon offsetting is the removal of carbon dioxide from the atmosphere to counter the greenhouse gases that you have put into it. If you think of your carbon footprint as a form of accounting, then your emissions are your expenditure and any carbon offsets you buy is your revenue. You want to break even each year to achieve net carbon zero.

Achieving net carbon zero (or carbon neutrality) is the scenario where your business has a carbon footprint of zero. Ideally, this would be achieved by eliminating your greenhouse gas emissions completely. However, sometimes it is not financially feasible to eliminate them and in other situations it is impossible. For example, if your business involves concrete then carbon dioxide will be emitted during the process of making it.

Carbon offsetting is the process of ‘cancelling out’ the carbon dioxide and other harmful greenhouse gases you create by investing in environmental projects that reduce emissions. Businesses can pay for these initiatives to be carried out on their behalf to offset the emissions that they produce day-to-day. Restoring forests by planting trees is one of the most popular ways of doing this, as trees naturally absorb and store carbon dioxide. Some offsetting initiatives aim to reduce future carbon emissions, like solar panels, whilst others remove it from the atmosphere. 

For a smaller business, this might include neutralising the emissions from: 

  • waste produced through your manufacturing process  
  • energy usage in your premises  
  • fuel consumption as a result commuting or traveling  
It is vital that you do not use carbon offsetting to get away with business as usual. If your emissions (or your carbon expenditure) are as low as possible, then the amount of offsetting (or your carbon revenue) to break even can be as low as possible also. Lower emissions mean that it is easier for the country to achieve net carbon zero and it is cheaper for you as you can purchase fewer carbon offsets. The internationally recognised carbon neutrality standard, PAS 2060, insists that reduction comes before offsetting for this reason.

Carbon offsetting without reducing emissions first has come to be seen as greenwashing and could ultimately hurt, rather than enhance, your business’s reputation.

What types of carbon offset projects are available? 

There are lots of carbon offset options available. They range from planting trees and preserving wildlife to installing insulation and renewable energy. Carbon offsets as an industry is still in its infancy. As demand grows and this industry accelerates, expect many more schemes to form and become eligible carbon credits. 

According to the Environment Agency, there are currently only two accredited carbon offsetting standards in the UK: the Woodland Carbon Code and the Peatland Code. Verified Woodland Carbon Credits, for example, can be used to support your business’ claims of carbon neutrality. More will join it and we would advise you to use the Environmental Agency’s guidance to find the best carbon credits. More schemes are recognised internationally. If you wish to pursue these then groups like Verra and Gold Standard offer verification.

Some examples of types of carbon offsetting schemes include: 

  • woodland creation and planting trees 
  • installing renewable energy solutions in communities 
  • investing in biodiversity and conservation 
  • energy efficiency projects, such as insulation and electric cars 
  • recycling schemes to support waste management 

If you reach net carbon zero, then you might want to get this independently verified.

Which scheme is best for my business? 

Paying to support sustainability projects to offset any emissions you produce isn’t a replacement for actively reducing your emissions. It’s advised that these schemes are used alongside reduction efforts to reach carbon neutrality, because it’s important to minimise and prevent the emissions you produce in the first place wherever possible. Net zero is when emissions are equal to, or less than, the emissions removed from the atmosphere.  As the UK works towards its goal of net zero by 2050, learn how your small business can take steps towards sustainability by reducing its carbon footprint.

Small business sustainability hub

The race to a net zero economy by 2050 has begun. We’re making sure small businesses aren’t left out of the big picture. Visit our sustainability hub today to explore free resources.

Find out more