Carbon Offsetting Services and the Net Zero Supply Chain: Mapping Credible Pathways for Hard-to-Abate Sectors

 The hard-to-abate sectors experienced a reduction of 0.9% in their absolute emissions from 2022 to 2023, while global energy-related emissions increased by 1.3% [1]. While this reflects progress, the pace of emissions reduction remains insufficient relative to net-zero targets. It will cost approximately USD 30 trillion to decarbonise these sectors before 2050 [1]. 

Carbon offsets are not a substitute for emissions reduction. Their role is to address residual emissions that cannot yet be eliminated through available technologies while organisations continue progressing towards net zero. However, their use must be highly selective and credible. A 2024 meta-study published in Nature Communications by the Max Planck Institute, covering 2,346 projects and approximately one billion tonnes of issued credits, found that less than 16% of the credits studied represented genuine emissions reductions [2]. While the study covered specific project types (cookstoves, avoided deforestation, industrial gas destruction, and wind power), its findings raise significant concerns about credit quality across the broader market.

This blog explores ways for hard-to-abate companies to devise credible offset programs through carbon offsetting services.

The Net Zero Hierarchy: Where Offsets Actually Fit

In considering offsets, it is essential to position them within the broader net-zero hierarchy. The sequence is critical: first reduce emissions, then substitute with lower-carbon alternatives, and only then neutralise residual emissions.

Offsets should be used exclusively for residual emissions that cannot be abated through operational or technological measures. Furthermore, leading frameworks increasingly emphasise the transition from avoidance-based credits to high-permanence carbon removals.

Companies that rely on offsets ahead of meaningful emissions reductions face increased scrutiny from investors, regulators, and rating agencies.

Why Hard-to-Abate Sectors Still Require Carbon Offsets

Steel making, cement production, air travel, and sea freight face a similar challenge. They have processes central to their operation which emit pollutants that cannot be eliminated by existing technologies. Electric arc furnace steelmaking offers a lower-carbon alternative to blast furnace production, and sustainable aviation fuels can reduce lifecycle emissions for airlines. But neither pathway achieves zero emissions.

This highlights the role of carbon offsetting services in enabling these sectors to address unavoidable residual emissions. Without access to high-integrity carbon offsets, many hard-to-abate sectors will find it difficult to address residual emissions and achieve credible net-zero targets. Poor-quality offsets can expose organisations to reputational, regulatory, and transition risks, potentially undermining broader net-zero commitments. In addition, increasing regulatory and voluntary standards are placing stricter requirements on the type and quality of offsets that can be used in net-zero claims.

The numbers on the demand side bear out this conclusion. For example, for CORSIA Phase I, spanning the period between 2024 and 2026, IATA estimates a cumulative offset requirement of 146 to 236 million metric tonnes of carbon dioxide from international aviation alone [3]. This is one sector alone. Add steel, cement, and sea freight to this list.

The Credibility Crisis: Why Not All Carbon Offsets Are Equal

A significant proportion of carbon credits in the market fail to meet high-integrity criteria. Estimates suggest that only a small share represents genuine, additional, and durable emissions reductions [2], with many credits facing concerns around additionality, permanence, and baseline integrity.

Concerns around additionality, permanence, baseline integrity, and monitoring have raised questions about the credibility of many carbon credits. Baseline inflation, additionality concerns, reversal risks associated with forestry, and poor monitoring and verification. For companies using the credits to claim their net-zero targets, there are serious risks involved.

Robust offset selection increasingly requires third-party verification, alignment with emerging Core Carbon Principles (CCPs), and strong monitoring, reporting, and verification (MRV) frameworks.

What Credible Offsetting Looks Like in Practice?

In practice, credible offsetting involves integrating high-quality carbon credits into a broader decarbonisation strategy. Organisations must prioritise emissions reductions while using offsets selectively for residual emissions.

An effective offset strategy includes sourcing credits that are independently verified, supported by robust monitoring and reporting frameworks, and increasingly composed of durable carbon removal solutions such as biochar, enhanced rock weathering, or direct air capture.

This approach ensures that offsets complement, rather than replace, emissions reduction efforts and are aligned with evolving net-zero standards.

Building a Credible Offset Portfolio: Applying the Oxford Principles

The Oxford Principles on Net Zero Aligned Carbon Offsetting provide a widely accepted framework for building our portfolio. The framework recommends gradually shifting offset portfolios from avoidance-based credits towards durable carbon removal solutions as these become more widely available.

Translation into practice will require building a portfolio that begins with validated avoidance offsets (such as methane capture and energy efficiency projects) while also incorporating increasing amounts of permanent removal offsets, such as biochar, enhanced weathering, and direct air capture. Note that renewable energy credits have faced scrutiny, with ICVCM determining in 2024 that earlier renewable energy methodologies did not meet additionality criteria, so portfolio construction should prioritise avoidance credits with strong additionality evidence.

Companies seeking carbon offsetting services can build a portfolio that meets this standard by beginning with offsets that have a credible supply and moving to permanent removal over time as supply grows.

SBTi Net-Zero Standard and Ongoing Emissions Responsibility

The SBTi Net-Zero Standard introduces a clear distinction between emissions reductions and neutralisation. Companies are required to achieve deep emissions reductions aligned with science-based targets, with offsets not permitted to count toward these reduction targets.

Offsets are instead used to neutralise residual emissions, with increasing emphasis on high-durability carbon removals. This distinction is critical, as it reinforces that offsetting cannot substitute for decarbonisation but serves as a complementary measure.

In this context, GHG verification services play a key role in validating both emissions reductions and the integrity of offsets used.

From Offsets to Supply Chain Strategy: Integrating Offsets into Net Zero Pathways

The leading organisations are not purchasing offsets as an isolated transaction. Rather, they’re building offsets into their larger supply chain strategy. This includes identifying sources of emissions within their value chain, focusing on reducing emissions where it counts, and applying offsets against any remaining emissions.

This also supports the transition from offsetting to insetting, where organisations invest in emissions reductions within their own value chains.

As a result, carbon offsetting services become an important part of a broader supply chain decarbonisation strategy. This also makes your investment in offsets a much stronger defence. Each carbon offset is tied to a gap in your emission reduction process, verified and proven.

Conclusion

Hard-to-abate sectors face a fundamental challenge: achieving net-zero targets while operating within technological constraints that limit full decarbonisation. Carbon offsetting, when applied credibly, provides a mechanism to address residual emissions within this context.

As scrutiny around offset quality intensifies, organisations must prioritise high-integrity credits, particularly those aligned with durable carbon removals and recognised frameworks such as the Oxford Principles. The quality of an offset portfolio has become a key consideration for both risk management and the credibility of corporate net-zero claims.

As global standards evolve toward stricter assurance and verification frameworks, including alignment with emerging assurance standards, the role of credible, verified offsets will become even more critical.

If you need professional GHG verification services and carbon offsetting services to establish your offset portfolio, Earthood supports businesses in sourcing credible credits and implementing the Oxford Principles-based approach to your offset portfolio.

Statistics & Citations

[1] Hard-to-abate sectors achieved a 0.9% absolute emissions drop (2022–2023) while global energy-related emissions rose 1.3%; $30 trillion in additional capital is required by 2050 to decarbonise these sectors.
Source: WEF, "Net Zero Industry Tracker 2024," December 2024.
URL: https://www.weforum.org/stories/2024/12/net-zero-hard-to-abate-sectors-decarbonization/

[2] Only 16% of issued carbon credits represent genuine emissions reductions; the other 84% still trade at low prices and pull market averages down.
Source: Senken, citing Max Planck Institute 2024 study, "Carbon Credit Prices in 2026," May 2026.
URL: https://www.senken.io/academy/carbon-credit-price

[3] CORSIA Phase I (2024–2026) projects a cumulative offset demand of 146–236 million tonnes of CO2, per IATA's updated Sectoral Growth Factor forecast.
Source: South Pole, "2026 Carbon Market Buyer's Guide," February 2026.
URL: https://www.southpole.com/blog/2026-carbon-market-buyers-guide-what-you-need-to-know