Moody’s: Carbon Offsets Open Up Supply Chains to Financial, Reputational Risks
- Media Manager
- Nov 6, 2023
- 1 min read
Supply Chain Management Review
Written By: Amy Wunderlin
Published: November 6th, 2023
New research from Moody’s Investors Service finds that the use of carbon offsets in corporate carbon transition strategies can pose financial and reputational risks if they are not applied as part of a credible, science-based approach.
A carbon offset is a reduction, avoidance or removal of CO2 or other greenhouse gas emissions made with the intention of compensating for emissions elsewhere. These projects include initiatives like landfill gas capture, forest restoration, or mass tree planting.
While many companies depend solely on offsets to reduce their emissions, to have a real effect on climate change, companies must also apply solutions across their supply chain to reduce their production of carbon emissions, the report noted.
Not only that, but the report found that improperly using carbon offsets opens your supply chain up to a range of credit risks such as reputational, regulatory, and litigation risks or the risk of technological disruption. Inadequate use of offsets can include:
• Ambiguous or exaggerated decarbonization claims
• Inadequate vetting of carbon credits
• Excessive reliance on offsets as a transition risk management strategy
