Rethinking Offsetting – Moving from Neutral Claims to Real Contribution.
# Rethinking Offsetting: Moving from Neutral Claims to Real Contribution
When I first came across carbon offsetting, I wanted to believe it was the perfect solution.
It looked like a familiar financial mechanism: measurable, tradable, and scalable.
You emit here, you pay there, and the balance sheet stays clean.
But what works in finance does not always hold in physics.
The atmosphere does not keep ledgers.
Carbon accounting and financial accounting share the language of measurement, but not the same laws of reality.
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## How Offsetting Works — And Where It Breaks Down
Offsetting was built on a simple premise: that emissions created in one place can be cancelled by reductions or removals elsewhere.
Credits are issued for verified projects such as renewable energy, forest conservation, or reforestation.
In theory, one credit equals one tonne of carbon dioxide equivalent (CO₂e) reduced or removed.
In practice, several flaws have emerged:
- **Additionality:** Many projects would have happened anyway, so the credit funds nothing new.
- **Permanence:** Forests burn, peatlands dry, and storage reverses.
- **Measurement uncertainty:** Baselines and modelling vary widely, producing inconsistent results.
- **Double counting:** The same benefit is sometimes claimed by multiple parties.
The **Integrity Council for the Voluntary Carbon Market (ICVCM)** now reviews crediting programmes against its **Core Carbon Principles (CCPs)** to address these issues, while the **Voluntary Carbon Markets Integrity Initiative (VCMI)** limits how companies can make public claims.
These are welcome steps, but they reinforce one truth: offsetting is not a magic equaliser.
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## Why Accountants Should Care
Accountants are trained to question evidence.
If a figure looks too precise, we ask what assumptions lie behind it.
Carbon credits demand the same mindset.
When a client says they are *carbon neutral*, ask:
- What is the source and quality of the credits?
- Are they verified under an approved methodology?
- Have they been retired on a recognised registry?
- Is the claim proportionate to their actual emissions reduction work?
This is not environmental consultancy.
It is responsible financial leadership.
We are dealing with a form of intangible asset.
It has a cost, a lifespan, and reputational exposure.
If it fails to deliver its stated impact, that is an impairment in every sense of the word.
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## The Compliance Landscape in 2025
In the United Kingdom, **voluntary carbon credit transactions have been subject to VAT at the standard rate since 1 September 2024**.
Across Europe, regulators are tightening control of green marketing.
The **Advertising Standards Authority (ASA)** has ruled against unsupported neutrality claims, and the **EU Green Claims Directive** will make offset-based marketing risky territory.
Meanwhile, the **Science Based Targets initiative (SBTi)** continues to centre real emissions reduction in its *Net-Zero Standard V2*, now in consultation.
Credits may play a supporting role for *Beyond Value Chain Mitigation* (BVCM), but they cannot offset inaction.
The market is evolving toward transparency and verified removal, not easy equivalence.
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## The Accountant’s Analysis
Treat offsetting as you would any financial instrument:
- **Substance over form:** What is actually being bought? A verified removal or a marketing story?
- **Materiality:** Does this expenditure meaningfully affect the company’s footprint or just its image?
- **Disclosure:** How is the purchase recorded and communicated? Are claims clearly supported?
- **Ethics:** Does the transaction align with professional codes of integrity and objectivity?
Helping clients think through these questions is not a diversion from core accounting.
It is a continuation of it, applied to a new kind of asset.
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## From Offsetting to Contribution
The smarter move is to shift from **compensation** to **contribution**.
This means continuing to cut your own emissions while supporting credible climate solutions elsewhere.
At Thrive, we treat this as a **climate contribution**.
We work with **[Ecologi](https://ecologi.com/)** for verified carbon credits and with **[Veritree](https://www.veritree.com/impact-hub/thrive)** for reforestation and restoration.
Both partners provide transparent data and third-party verification.
For measurement, we use carbon accounting tools such as **Sage Carbon Accounting**, **Sumday**, **NeoEco**, and **Trace**.
They do not sell credits, but they give the data integrity needed before deciding how to act.
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## Introducing a Voluntary Carbon Price
One way to bring rigour to contribution is to set an internal or voluntary carbon price.
Think of it as a **voluntary carbon tax**.
Assign a value per tonne of emissions and allocate that budget to high-quality removal projects each year.
This approach aligns environmental and financial accountability.
It creates a predictable expense line and demonstrates intent without overstating achievement.
It is also the simplest way for SMEs to participate in credible climate finance.
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## Communicating with Integrity
When talking about carbon credits:
- Avoid phrases like *carbon neutral* or *offset in full* unless you meet strict criteria.
- Use clear language such as *we contribute to verified removal projects through Ecologi and Veritree while continuing to reduce our own emissions*.
- Share data and context publicly. Transparency builds trust faster than perfection.
The goal is not to sound virtuous.
It is to be accurate.
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## Final Thought
Offsetting appealed to the accountant in me because it looked like a balancing entry.
It turns out the climate ledger is more complex than that.
Our role is not to create the illusion of equilibrium.
It is to ensure that the numbers (and the stories behind them) stand up to scrutiny.
That is responsible financial leadership.
And it is the foundation for the next step: **Beyond Value Chain Mitigation**, or as I prefer to call it, **climate contribution**.
📘 *Catalyst* explores how accountants can guide this shift with confidence.
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🔗 Follow me on [LinkedIn](https://www.linkedin.com/in/jameslizars/) for the next article in this series: **What Is BVCM and How Can SMEs Practise It?**
