Tourists and business event organisers are increasingly seeking hyper-local projects to invest in that directly reduce their environmental impact. However, traditional carbon offset approaches often restrict investment to a narrow selection of projects that fail to meaningfully benefit the local communities most affected by inbound tourism and events.

The current practice of “offsetting” emissions on a tonne-for-tonne basis tends to prioritise cost reduction, which compromises the quality and effectiveness of the offsets themselves. Chief Sustainability Officers (CSOs), constrained by the budgets provided by their Chief Financial Officers (CFOs), are frequently driven to select the cheapest carbon credits to neutralise or “offset” their residual emissions. This cost-centric approach often leads to investments in projects such as renewable energy initiatives or improved cookstove programs in the Global South. While these projects may be affordable, they frequently suffer from questionable additionality and measurability, undermining the integrity of the offsets and satisfying financial objectives rather than delivering genuine climate impact.

A deeper issue lies in the inherent flaws of traditional carbon offsetting, rooted in the misguided assumption of the like-for-like principle—the idea that emitting a certain amount of CO2 can be balanced by removing or avoiding an equivalent amount elsewhere. This assumption is problematic for several reasons, namely:

• Temporal Disparity: The impact of emissions is immediate and can last for centuries, while many offset projects, such as reforestation, require decades to sequester an equivalent amount of CO2. This time lag creates a significant mismatch between the timing of emissions and their supposed neutralisation.

• Uncertainty of Durability: Projects reliant on natural processes, such as natural ecosystem restoration, carry inherent risks, including wildfires, disease, or deforestation, which can release the sequestered CO2 back into the atmosphere. This undermines the permanence that offsets claim to provide.

• Non-Comparability of Emission Types: Emissions vary greatly in their sources and context—for example, CO2 from aviation has a different climate impact compared to emissions from agriculture or mining. Attempting to balance these diverse emissions with a one-size-fits-all “offset” fails to account for these nuanced differences, compromising the integrity of true carbon neutrality.

These shortcomings have resulted in increased scrutiny and negative coverage in publications such as The Guardian, where companies have been criticised for making misleading climate claims or accused of greenwashing. Despite these challenges, many companies are genuinely motivated to adopt meaningful climate action. The key question, then, is how they can shift from strategies centred on balancing, neutralising or offsetting emissions to those that demonstrate a real commitment to impactful, localised climate initiatives.

Solution

Adopting a contribution approach represents a fundamental shift in how companies engage in climate action. It moves away from the traditional model of carbon offsetting and introduces a more dynamic, impactful method of supporting climate initiatives. 

There are three key steps companies must take to transition to a contribution-based approach:

1. Set an Internal Carbon Price (ICP)

The company establishes an Internal Carbon Price that reflects its commitment to supporting impactful climate initiatives.

1. Calculate emissions and create a Climate Action Budget

The company calculates its total emissions for a given year and multiplies this by the Internal Carbon Price to form a dedicated Climate Action Budget.

1. Allocate the budget to meaningful, localised climate action

Unlike traditional offsetting, the focus shifts from purchasing a specified number of carbon credits to contributing the climate action budget to meaningful, high-impact projects. The quantity of carbon tonnes “offset” is no longer the primary metric; instead, the emphasis is on the quality and relevance of the climate action taken.

This shift from carbon compensation to carbon contribution offers greater flexibility and allows companies to align their investments with their values and strategic goals. No longer bound by the need to purchase outdated ex-post vintage credits solely to claim “Carbon Neutral” status for a specific year, companies can instead proudly state that they allocated their climate action budget to the most effective and locally relevant projects. This approach supports transparency, fosters genuine climate engagement, and enhances the positive impact on communities directly affected by the company’s operations, creating a more authentic and sustainable path forward.