As more companies announce net-zero emissions by 2050 commitments, many are relying on carbon offsets to achieve these targets, rather than decarbonizing their own operations and value chain. This business-as-usual approach risks continuation of unabated carbon pollution from the extraction and combustion of fossil fuels.

Carbon offsetting occurs when a buyer purchases carbon credits, each equal to a ton of sequestered carbon, to compensate for an equivalent quantity of carbon emissions generated elsewhere. These credits often come from natural carbon sinks, such as forests, or from renewable energy, and experts expect demand for carbon credits will soar.

Carbon offsets are problematic for several reasons. First, while it is important to conserve and restore natural ecosystems to improve carbon storage, natural climate sinks cannot fully offset emissions from fossil fuel combustion. Fossil fuel reserves offer stable permanent storage of carbon. Natural ecosystems do not offer the same stability since carbon sinks shift and change on shorter timescales from fires, degradation, or other changes that release carbon. Second, nature-based carbon sequestration capacity is finite given available land. Oxfam calculated that just four fossil fuel companies – TotalEnergies, Shell, Eni, and BP – need land more than twice the size of the UK to reach net-zero emissions by 2050.

Given these fundamentally risky limitations and growing criticism about accounting practices behind carbon credit markets, companies and shareholders need a common understanding of what net zero means and accepted methods to achieve it. The Science Based Targets initiative’s Net-Zero Standard provides guidance for an acceptable “mitigation hierarchy” for companies.

Before buying carbon credits, a company should complete an emissions inventory following the GHG Protocol, set near- and long-term science-based targets to reduce value chain (Scope 1, 2, and 3) emissions, implement a climate mitigation strategy, and disclose progress annually. A company then can invest in carbon removal through conservation, forest restoration, or technological carbon removal to go beyond direct value chain emissions. However, these credits purchased from outside the value chain should not count reductions for a company’s direct activities.

Williams-Sonoma has committed to achieve “carbon neutrality” by 2025 for its Scope 1 and 2 emissions, saying it will “offset any GHG we don’t eliminate making our impact neutral.” This implies that the company will rely on offsets to meet its targets, showing an acceptable mitigation hierarchy. This year, As You Sow filed a shareholder resolution with Williams-Sonoma to request greater detail about the quality and scale of purchased credits and where they are counted in the company’s emissions reporting.

Carbon offsets are not emissions reductions. To fulfill net-zero goals, companies first must reduce emissions in their operations. Later, they can invest in additional carbon removal.