Sustainability professionals tend to flock together. We speak the same odd language, face the same challenges and generally find motivation in the same things. We attend the same conferences, seminars and webcasts that reinforce our world. But there are dangers to staying in our own bubble – among them is the difficulty in viewing our work through the lens of “outsiders.” Sustainability practitioners must recognize this shortcoming and make efforts to course-correct when needed. CEOs, CFOs and CLOs make up a particularly critical audience in this regard.
Perhaps no topic is as emblematic of this as carbon offsets, something sustainability professionals know, but executives – not so much. Here are but a few questions CEOs, CFOs and CLOs are likely to ask about offsets that sustainability folks take for granted:
- “What is an offset?” It’s not the job of a company’s top executives to understand details of carbon markets – that is your job. Keep in mind that the intangible nature and accounting ambiguity of voluntary carbon offsets don’t make them easy to understand at a practical level. Be prepared to answer this question with clarity and simplicity – and without being judgmental. It is best to focus on the operational, financial and compliance aspects of offsets rather than impact benefits – at least for now.
- “If they are voluntary, why should we spend money on climate matters?” This is the old “what’s the ROI?” question. You need to develop a solid business case to support your request for money. If you emphasize risk management aspects of climate programs, don’t develop your risk values in a vacuum. Understand that every company faces competing priorities for limited capital and each request is scrutinized. Don’t be tempted to use garbage economics to strengthen your ROI. Thinking about using “impact” values or externalities? Best understand what your executives think of that – they may not see that as a credible argument since there is no actual line-item cost or consensus on what those values are.
- “How expensive are offsets and are they really worth it?” Sure, it might be easier for you to convince executives to spend a small amount on low-cost offsets, but there are certainly downsides to that – including to your internal reputation if something goes wrong. Company leaders sometimes prefer quality over cost management, but with such a wide range of pricing (take a look at the graphic in this LinkedIn post) and quality in the voluntary carbon markets, it can be hard to find that sweet spot. Consider presenting three options (low, medium and high cost/quality) and be forthright and objective about pros/cons of each.
- “I’m reading a lot about problems with offsets – I don’t trust them.” Offset project failures routinely make headlines in mainstream media and there have been plenty of those headlines in the past 24 months. As Zach blogged today, the Department of Justice, SEC and CFTC all filed charges against the CEO and Head of Carbon of a major project developer for fraudulently obtaining carbon credits worth tens of millions of dollars, fraudulently securing an investment of over $100 million and commodities fraud. You should also check out Matt Levine’s take on the matter (which also touches on “what is an offset?”). Corporate leaders don’t want to be connected to situations like this – they are embarrassing and demonstrate money was wasted. Furthermore, these situations (a) mean the company has to start over again and (b) could trigger reporting restatements. Combat CEO/CFO/CLO anti-offset bias by developing a due diligence program for offset purchases. Keys to this: don’t rely on a single source of information, be prepared to roll up your own sleeves to review and evaluate projects with professional skepticism.
Obviously, there are other questions you will face when discussing offsets with executives but these provide a good start for seeing how to think like your company’s leadership and maybe other important “outsiders.”
Our members can learn more about carbon offsets here.
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