Do carbon credits negatively impact sustainability reporting?

As The Guardian reported on September 15, a review of greenhouse gas emissions reports from Google, Microsoft, Meta, and Apple found that actual emissions could be up to 662% higher than the companies’ official statements.

According to The Guardian, the discrepancy is largely due to the difference between direct, “site-based” emissions at company facilities and the purchase of renewable energy credits. Meanwhile, the growing use of generative AI is further increasing energy demand for big tech companies.

The Guardian analysed emissions reports from 2020 to 2022.

Renewable energy certificates provide credit for indirect energy purchases

In a renewable energy certification scheme, organisations purchase electricity generated from renewable sources to offset their energy consumption costs elsewhere.

Critics of the system say including credits or “market-based” emissions in emissions calculations obscures “site-based emissions,” or pollution that is produced directly by company-owned infrastructure. Companies subtract the amount of sustainably produced electricity they buy from their emissions reports — even if that electricity is never used on company facilities, The Guardian reports.

The Guardian combined location-based emissions data with market emissions data and concluded that actual emissions could be 662% higher, a difference of 7.62 times compared to official reports.

At the heart of the discussion is a behind-the-scenes lobbying battle over the Greenhouse Gas Protocol, a watchdog that allows market emissions to be included in official calculations. Because these standards underpin how companies report their emissions, including or excluding market calculations could be controversial.

Meta also runs its calculations according to GRI standards, an independent metric. Google and Microsoft are a step ahead of the pack when it comes to separating credit-based metrics from climate reporting, as seen in Microsoft’s 2024 Sustainability Report . Their 24/7 (Google) and 100/100/0 (Microsoft) targets remove carbon energy purchases from the equation.

Amazon, which also claims to be carbon neutral, was too large and complex for The Guardian to accurately assess how its reported emissions might differ from the actual emissions it generates. Amazon’s data centres do not account for the majority of its Scope 2 emissions (internally purchased electricity). Instead, e-commerce and warehouses contribute a large part of its Scope 2 emissions.

Asked for comment, a Meta spokesperson noted the tech giant’s history of building electricity grids in the same locations as its data centers. The spokesperson also highlighted the company’s sustainability report, which lists both location-based and market-based emissions, as well as its strategy of using long-term purchase agreements to support the development of sustainable electricity projects, as well as promoting green tariffs.

SEE: Tech giants are aware of the harmful impact of artificial intelligence on the climate – but they’re not slowing down.

Recommendations for CISOs and CTOs

Emissions reporting reminds organisations that they should consider the financial and environmental costs of resource-intensive technologies.

CISOs and CTOs should be kept up to date on the standards used to calculate emissions and the company’s own guidelines for making technology decisions that take into account both energy use and environmental sustainability. An environmental policy can reassure customers that using your product or service does not worsen human-caused climate change.

In particular, the use of generative AI could increase emissions. A September 2024 Forrester report advised companies to consider using smaller, more efficient AI models; applying AI only when truly needed; and using AI to correlate sustainability practices with financial results.

TechRepublic has reached out to Google, Microsoft, Meta, and Apple for comment.