The Problem of Carbon Credits and Offsetting in Corporate Climate Disclosure

p class="MsoNormal"Undertakings are increasingly required or encouraged to report on their climaterelated performance, including their greenhouse gas (GHG) emissions and emission reduction targets. Corporate climate disclosure is regulated by a significant number of hard- and soft-law instruments. They include the Corporate Sustainability Reporting Directive (CSRD), other EU instruments such as the Sustainable Finance Disclosure Regulation (SFDR) and the Benchmark Regulation, as well as the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, the IFRS and GRI sustainability reporting standards, the GHG Protocol and relevant ISO standards.p class="MsoNormal"Many corporate net-zero strategies rely heavily on offsetting greenhouse gas (GHG) emissions through carbon credits. However, research shows that carbon credits are typically not effective. They do not deliver the climate benefits they claim to achieve, and are therefore not equivalent to real emission reductions or removals. This article examines how the various instruments regulating corporate climate disclosure deal with carbon credits and offsetting. It finds that these frameworks share a broadly consistent approach: they require carbon credits to be reported separately from the undertaking’s GHG emissions. They also largely do not allow carbon credits to be counted towards emission reduction targets, or require gross targets (i.e., excluding carbon credits) to be disclosed alongside net targets. This approach aligns with research findings that carbon credits are typically ineffective and reinforces the fundamental requirement for corporate disclosures to be accurate and non-misleading.