The corporate responsibility to reduce greenhouse gas (GHG) emissions is seen increasingly as having a legal dimension, grounded in human rights, due diligence laws, and tort law. Corporate climate strategies often rely on carbon credits to offset emissions, but available credits typically fail to deliver real reductions. This raises doubts about their suitability for meeting responsibilities to reduce emissions.
This article examines the issue through the lens of due diligence, a key concept in defining corporate obligations. Due diligence demands that firms prioritize preventive and effective action to address the climate impacts of their business activities. Available carbon credits meet neither condition; accordingly, they are, as a rule, unsuitable for fulfilling a corporate duty to reduce GHG emissions.
The article also evaluates exceptions suggested in guidance documents, particularly the use of credits for offsetting residual and Scope 3 emissions. It concludes that these exceptions are difficult to justify from a due diligence standpoint, given the limited effectiveness of credits.
