Why carbon risk assessments matter
When companies invest significant effort in reducing their greenhouse gas (GHG) emissions, the last thing they want is for that progress to be undermined by concerns over the integrity of carbon offsets used to address residual, hard-to-abate emissions.
Conducting carbon risk assessments is essential to safeguard against reputational damage, particularly if carbon credits are later revealed to be flawed or associated with credibility issues.
Case Study 1: Corporate Purchases of Kariba REDD+ Carbon Credits – Volkswagen, Nestlé, L’Oréal, Gucci, McKinsey, Porsche, and Delta Air Lines
Several major corporations, including Volkswagen, Nestlé, L’Oréal, Gucci, McKinsey, Porsche, and Delta Air Lines, purchased carbon credits from the Kariba REDD+ project in Zimbabwe. However, the project later came under intense scrutiny for significant credibility issues.
Independent analysts and carbon credit rating platforms found that Kariba had substantially overestimated its emissions reductions, by up to five times, according to some evaluations, resulting in the issuance of credits that did not correspond to real or additional carbon savings.
Approximately €100 million was generated through credit sales, yet only about €14 million reportedly reached local communities. The remainder was directed toward developer profits, intermediary fees, and operational costs. Investigations further revealed that funds were routed through offshore accounts (e.g., in Guernsey), obscuring transparency and raising concerns about financial governance and equitable benefit-sharing.
Local residents expressed dissatisfaction with the project, citing minimal evidence of promised community development or infrastructure improvements.
The association with Kariba had reputational consequences for corporate buyers. Many, including Volkswagen, Nestlé, Gucci, and McKinsey, were accused of greenwashing after media investigations revealed the questionable integrity of the credits. Prominent headlines highlighted that “luxury brands, airlines, and consultancies bought junk carbon offsets,” directly naming these firms.
In response, investors and ESG analysts raised broader concerns about the credibility of net-zero strategies that depend heavily on offsets of uncertain quality, emphasizing the need for greater transparency and integrity in the voluntary carbon market.
Case Study 2: Corporate Purchase of Alto Mayo REDD+ Credits – Disney, United Airlines, BHP, Microsoft and Gucci
A number of high-profile companies, including Disney, United Airlines, BHP, Microsoft and Gucci purchased carbon credits from the Alto Mayo REDD+ forest conservation project in Peru, as part of their voluntary offsetting and carbon neutrality efforts.
Subsequent independent investigations raised serious concerns about the project's environmental integrity and social impact. Analysts found that Alto Mayo’s projected deforestation baselines had been overstated, resulting in the issuance of carbon credits that did not correspond to actual or additional emission reductions. These so-called “phantom credits” significantly undermined the project’s claimed climate benefits.
In parallel, allegations of human rights violations emerged. Local Indigenous and rural communities reported cases of forced evictions as conservation enforcement expanded within the protected area. Some families had their homes removed without sufficient notice or recourse, prompting accusations of “carbon colonialism” and inadequate stakeholder engagement.
While certain households received limited support through project initiatives, many, particularly those without formal land titles, were excluded from benefit-sharing mechanisms. In some cases, basic services such as schools, clinics, and water access points were dismantled rather than enhanced, further exacerbating community grievances.
From a technical standpoint, Alto Mayo applied a Verra-approved methodology (VM0015) that failed to adequately account for critical drivers of deforestation, such as migration-related and market-driven activity. This omission allowed for the issuance of credits without fully addressing potential emissions leakage.
Several of the project’s corporate buyers publicly promoted their use of these credits to support “carbon-neutral” claims. However, such marketing, especially in the aviation and luxury sectors, has since come under scrutiny. Adverts featuring claims like “CO₂ neutral flights” have been challenged as misleading, sparking broader criticism that companies may have gained reputational and commercial benefits at the expense of forest-dependent communities and credible climate action.
