REP Wrap: Airlines and oil companies under fire over offsets

Your weekly summary of corporate sustainability news.

EU regulators are investigating alleged greenwashing at 20 airlines, and have given them a month to “bring their practices in line with EU consumer law”. The European Commission, along with a number of national consumer protection bodies, sent letters to the undisclosed firms “identifying several types of potentially misleading green claims”, including telling consumers that they can offset the emissions produced from flying by paying additional fees. There were concerns these claims could fall foul of the Unfair Commercial Practices Directive, explained the Commission, adding that the airlines should clarify “whether such claims can be substantiated based on sound scientific evidence”. “This is interesting as it is one of the first examples of a regulator taking an interest in the use of carbon offsets in green claims in carbon intensive industries,” said Elaina Bailes, commercial litigation lawyer at law firm Stewarts, adding that the move could encourage other regulators to follow suit, and open the door to civil claims. The letter comes shortly after a court ruled that Dutch airline KLM had misled customers with a green advertising campaign.

Just 13% of companies that use carbon credits have had their 2050 net-zero targets verified by the Science Based Targets initiative, according to research from MSCI. The firm’s carbon markets arm told Responsible Investor this figure climbed to 28% if it included companies that had promised to set such targets but hadn’t done so. SBTi recently landed itself in hot water by suggesting that it would allow carbon offsets to contribute to Scope 3 decarbonisation targets.

Shell reportedly sold millions of carbon credits linked to “phantom” emissions reductions. According to the Financial Times, the oil major registered 5.7m credits via a registry hosted by the Canadian province of Alberta. The government project, shelved in 2022, was intended to foster the industry through subsidies. The credits were bought by some of Canada’s largest oil sands companies, including Chevron, Suncor and ConocoPhillips. However, according to the article, Shell was able to “register and sell carbon credits equivalent to twice the volume of emissions avoided by its Quest carbon capture facility between 2015 and 2021”.

The news comes as US Democrats slammed the oil industry for its climate tactics in a report from the House Oversight Committee. After a three-year investigation focused on Exxon, Chevron, Shell, BP, and the US Chamber of Commerce, the committee published a report claiming the sector had undertaken “extensive efforts… to deceive the public and investors about their knowledge of the effects of their products on climate change”.

ISSB and EFRAG have published guidance on how interoperable their two sets of sustainability disclosure standards are. The latter, which advises the EU on its European Sustainability Reporting Standards, is also understood to have cut 36 data points out of its rules. Michelle Gordon, a sustainability expert at Deloitte, noted that the reductions – made in response to market feedback -had been mentioned in an EFRAG meeting last month, but a revised list of data points had not been published. Last week’s interoperability guidance highlighted that ESRS defines financial materiality in the same way ISSB defines overall materiality, and almost all ISSB climate disclosure rules are covered by the European rules. The guidance only addressed climate.

The Korean sustainability standards board has launched a consultation on draft standards based on the ISSB. The plans involve creating two mandatory standards and one voluntary one. Feedback is invited until August 31. Canada, Brazil and Japan are also currently consulting on sustainability disclosure standards.