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EP7 Using Carbon Offsets In Your eCommerce Business

sustainable-ecommerce-podcast

EP7 Using Carbon Offsets In Your eCommerce Business

EP7 - Carbon Credits in eCommerce

Today we’re talking about using Carbon Offsets in your eCommerce business. 

At this point, everyone has heard the terms “Carbon Credit” and “Carbon Offset”, but do you really know what they mean?  Do you know how they work, when to use them, how to choose them. And, do you know what services exist to make it easy to get started & clear transparent for your customers to understand? I’m going to try and answer all these questions & more in today’s show

What is a Carbon Credit and is that different to a Carbon Offset?

A carbon credit is a kind of permit your brand can buy to emit Green House Gases (typically CO2 or Methane). One Credit enables the business to emit 1 tonne of carbon dioxide. 

So let’s say your business is in the construction industry, and you make concrete blocks.  Your planning for the year suggests that you’re going to make 5 million blocks.  Once you’ve worked out how much CO2 will be emitted by that activity, you can ‘purchase’ credits to cover that production.

In the event you make less than planned, you can sell those credits back, or on-sell them to another business that needs more to cover their activities.

Many countries have mandatory systems in place now, and regulation around GHG emission tracking and caps on the amount of credits corporations can buy.  Hence, Carbon Credits become a kind of tradeable asset, and just like other markets including the stock market, the price of these assets is set by supply & demand.

Now, we could spend a great deal of time discussing the merits & ethics of Carbon Credits – but to keep this episode relevant, I need to point out 2 things: Firstly, there is no country in the world that has so far created a requirement for Carbon Credits in eCommerce. In Australia, there is no regulatory compliance market. All Carbon credits are currently voluntary and purchased from Credit Brokers, though there are plans to create a centralised online marketplace by the Clean Energy Regulator (the government body that issues Australia Carbon Credits).

The key thing about Carbon Credits is they are typically purchased in advance, and while they can only be used once, they are a tradeable asset.

How Carbon Offsets Work

By contrast, Carbon Offsets are typically purchased at the time or after the activity is conducted, matched to the estimated CO2 released in conducting the activity.  While still notionally pegged to a 1:1 relationship between offset and tones of CO2 – they can be leveraged in much smaller denominations.  For example, if you’re shipping an order to a customer, you can use some standard estimations based on distance between your fulfilment centre and the customer’s location to calculate the CO2 of that shipment, and purchase the exact amount of Carbon Offset to make that Carbon Neutral.

How do either of these things actually work? How do they help the environment?

The quality and impact of offset programs definitely vary, but broadly speaking, your spend in offsets is effectively injection of cash for a selected environmental project. 

Typically that includes projects that actively reduce emissions into the environment, recapture & lock away carbon that has already been released, or community projects aimed at introducing clean, energy efficient methods & technology to undeveloped communities around the world.

Community projects are probably the least well known and least leveraged of the three. They include things like alternative water treatment for remote communities where typically they might burn wood or coal to boil & purify the water. They are terrific projects, and much needed – but that said they are hard to scale up to the kind of impact needed in the short term, and it can be hard to accurately measure their impact in terms of the amount of pollution being reduced.

Projects that actively reduce emissions would include things like sustainable energy generation, including windfarm projects, geothermal energy and so on. Effectively, the investment goes to building out these sources of energy so that we can reduce reliance on fossil-fuel generated energy.  It can also include things like Waste to Energy programs where methane and other digesters are used to turn waste – for example in landfill into energy – thus intercepting GHG from entering the atmosphere as well as providing a non-hydrocarbon based source of power.  In terms of the climate emergency and our pathway to Net Zero, it is certainly better to prevent CO2 from entering the atmosphere than trying to take it back out once it has.

Sidrap Winfarm Project

Sidrap Wind Farm in South Sulawesi: Image Courtesy of Ecocart

Nevertheless, that is the focus of probably the more widely used are Carbon Reduction schemes. Forestry & conservation projects are the most well known & I’m sure you’ve seen plenty of examples of trees planted with every order type offsetting.

All three have their own inherent value & benefits.

How do we know that our Carbon Offset investment makes a difference?

I think that’s a great question, and one that most brands want to know. If you’re investing money into an offset scheme, lets say, tree planting, you want to know that that tree really got planted. You want to know that it wouldn’t have been planted without your investment, and that it isn’t going to get cut down in a couple of years to harvest the wood or clear the land. 

There indeed have been cases of scams, but these topics are covered off by key criteria of independent verification bodies who look for measurability, additionality and Permanance. 

Just as there are a LOT of Carbon Offset projects, there are a lot of verification bodies, and due to the geographic dispersion of these, different countries tend to have different Verification bodies.

A couple of the good independent ones include the Gold Standard & Verra’s Verified Carbon Standard. There are verification services offered United Nations, like the also bodies like the Clean Development Mechanism (CDM), and here in Australia by the Emissions Reduction Fund

In short, when selecting a project, make sure that their activities are verified by one of these bodies.

How do we choose a great project?

So you now know what Offsets are & how they work. You also know the different buckets projects fall into, and how to the good work they do gets verified.  How do you choose a great project to donate to?

The most important thing here is the optics of the project, and how it fits into your brand.  Firstly, how does the activity of the project align with the values of your brand, and help support your mission and brand story. It also makes it easier for your customers to identify with your efforts and more likely that your offset will resonate with them.

For example, if your brand is related to the ocean, you might prefer to choose a wave or ocean current energy project, rather than choosing a tree planting or reforestation project.   

Project location is another thing to consider. Now, GHGs & the climate crisis are considered to be a global problems, and baked into the fundamental principles of carbon offsets schemes is that carbon offsets related to projects in one part of the world can be used to balance out the economic activity from anywhere else.  That’s perfectly legitimate – your offsets will still go to making a genuine difference, and you can still claim against your carbon footprint in Australia, even if your chose scheme is in Venezueala, for example.

BUT – there is definitely brand message value in choosing a project regionally aligned with your brand.  If your brand is about importing sustainably made products say from Mexico or Argentina, then choosing reforestation projects centred in those areas is congruent with your message.

If you’re loud & proud about being Australian made – first of all, GO YOU GOOD THING!  But secondly, you’re probably going to want to choose one of the great projects make a difference right here, literally on home soil.

When Should You Use Carbon Offsets?

Both Credits and Offsets are kind of tools to help you rebalance emissions generated by your business.  When it comes to making a real difference, they need to be thought of as a kind of last resort – a way to minimise the impact of things you cant improve to actually reduce emissions.

They should not ethically be used as a kind of excuse not run things, make things or send things more sustainably.

That being said, with a real commitment to making positive change, Carbon offsets can be used, with clear conscience to bridge the gap for things that can’t be changed (at least not yet), and as low hanging fruit while you undertake the often considerable exercise of cutting emissions.

Obviously, the types of activities you may need to offset will vary depending on your business model:

  1. If you’re a brand manufacturer – you’ll need to assess and offset carbon expended in the production and freight of your products. How to do that is going to be the topic of a whole show in a few weeks, so I won’t get too much more into it here, but suffice to say once you know that, you can purchase offsets for each item sold.
  2. As we’ve talked about already on the show, there is a real carbon footprint to your digital marketing activities. Your first priority should be to minimize your footprint, but there isn’t really a way yet to completely remove carbon from digital marketing, so offsets are a great way to bring this part of your business back to neutral. And, great news if you’re a Shopify store owner. As part of Shopify’s environmental commitments, they already offset carbon generated by usage of the platform, so you don’t need to offset your website data.  If you’re using wooCommerce or Magento, your best bet is going to be to switch to one of the green hosting providers that focus on renewable energy to power their data centres like Austiger.
  3. Thirdly you have your office & operations related carbon.  If you travel to expos or conferences, run zoom meetings, plug away at your desktop, keep the lights on in your warehouse, and many many other activities, you’re likely generating carbon dioxide!  Of course, carbon offsets can help here too
  4. And lastly, there’s the shipping of your orders to the customer. The event of customer checkout is probably the ultimate in low-hanging fruit for generating carbon offsets, and there are a number of terrific apps you can get to make life easy in this regard.

Where & how do we purchase Carbon Offsets?

There are in fact a bewildering array of brokers, platforms and projects you can work with directly. 

I want to pick just three to dive into with you today, and I’ve selected each of the three because they do offer offsets that include projects in Australia.

Carbon Neutral Cart

The first is Carbon Neutral Cart by CarbonClick.  This is a plugin that allows customers to add a voluntary carbon offset when they check out.  Its available for Shopify, WooCommerce & Magento so if you use any of the major platforms, they have you covered. 

Carbon Click have an interesting approach to project selection that they call the ‘blended basket’ approach.  50% of the offset contribution goes to projects local to you, and 50% to high-impact international clean energy projects.  Their project in Australia is a farm-based bush conservation project based in Cobar NSW, verified by the Emissions Reduction Fund.

What I love about it is that in-built into the app is full transparency and traceability for the customer about where their contribution is going, and the impact of their decision.  This kind of transparency definitely goes to supporting your brand story, generated a memorable customer experience, and can lead to improved customer retention.

It’s hard to argue that giving customers the choice to pay a small additional fee to offset their purchase isn’t a good thing, and there’s no doubt in my mind that Carbon Click’s in-built messaging will increase stickiness among climate action takers. But I have seen reports from brands that suggest that this kind of optionality results in surprisingly few takers, so I’ll be very interested to get your feedback on the conversion rate of these offsets if you do choose Carbon Click.

I think the zeitgeist among environmentally conscious consumers is also that they expect Brands to be taking care of the carbon footprint of their operations, rather than asking the customer to cover it.

In any case, the Carbon Neutral Cart plugin is available on subscription and is $399 per month.

EcoCart

Another awesome plugin that allows consumers to choose to offset their order is Ecocart.

The big difference between the two is that Eco-cart also allows you configure it so that you cover the cost of the offset rather than them. This nicely gets around the potential perception problem. Also, if your objective is to make the experience carbon neutral, then you’re closing the loop for all orders, rather than just the ones where the customer buys the offset.

Its’ also available for the Big 3 of Shopify Woo & Magento, as well as BigCommerce & Wix. 

All the projects they works with are independently verified by organisations including the big ones we mentioned earlier, so you can be confident your offsets are being leveraged properly.  Unlike CarbonClick, you can choose a specific project to donate to from a wide array across the globe. Including a reforestation project based in WA.

In terms of pricing, if the customer is choosing to purchase the offset, so there is no cost to you, and the app is free – which is a big advantage over Carbon Click.  Instead of charging a subscription, they bake in a 15c transaction fee to every offset. If you choose to cover the offset yourself, you’re looking at around 1-2% of the order value for the offset, and a reduced 3c per transaction fee to eCoCart.

Ecologi

The last one I want to talk about isn’t strictly speaking an offset exactly.  Ecologi is a Shopify plugin that allows you to plant a tree with every order, unit sold or pegged to revenue goals that you set.  If you’re not on Shopify, they do also have a Zapier integration as well as an open API, so there are other ways to connect.

There’s something nice, simple and tangible about planting a tree – it’s a very easy thing to understand for the customer. There’s a nice story around it as your impact is described in terms of your own ‘Ecologi Forest’, so customers can clearly see how interacting with your brand has a positive outcome. Each tree planted costs only 33c which makes it insanely affordable.   Behind the scenes, ecologie partners with not-for-profit charity One Tree Planted, and has dedicated projects in Australia related to Bush regeneration.

ecologi

Now I say it’s not a Carbon offset – because even though your trees will eventually lock away way more carbon that your order generates, most verification services don’t verify carbon removal from trees until they are 10 years old. That said, you can become an Ecologi member and configure a variety of offset programs to meet the specific needs of balancing your carbon footprint. I’ll post a link to how to connect with Ecologi in the extended show notes page.

So there you have it – 3 easy ways to get started with Carbon Offsets in your eCom business, all of which have the potential to improve cart conversion and amplify your brand message. I’m working on having these guys join me on the show so we can dive deeper into this topic, so let me know who you really want to hear from in a future show! 

In the meantime keep working on ways you can reduce the environmental footprint of your business, and consider how what we’ve covered today in terms of carbon offsets can help you move towards being carbon neutral as well as augment the story of your journey towards sustainability.

Giles Smith - eCommerce Coach

About Your Host: Giles Smith

eCommerce Coach & Mentor
Giles is a serial entrepreneur, eCommerce growth expert, coach & mentor. Views, Knowledge & Opinions shared in this article are drawn from over 20 years experience in building 6, 7 and 8-figure businesses as well as working with agency clients and personal coaching clients.