For years, businesses have relied on carbon offsets to meet sustainability goals. However, the question arises of whether offsetting is just a corporate band-aid. As scrutiny around greenwashing grows, investors and regulators are demanding action plans in carbon reductions and not just compensation. Moreover, the climate crisis is no longer a distant threat, with 2024 recorded as the hottest year in human history as per the World Meteorological Organization (WMO). The extreme weather has cost the global economy over USD 300 billion annually, putting pressure on businesses to act. Amidst these developments, traditional carbon offsetting, once the gold standard for corporate sustainability, is now under fire.
A key reflection of the heightened scrutiny is from the EU’s Corporate Sustainability Reporting Directive (CSRD), which now requires companies to disclose emissions data, while the U.S. SEC’s climate rules mandate effective from March 2024 requires disclosures related to the impacts of climate-related matters. From direct air capture to biochar, companies are being pushed to rethink sustainability strategies to secure long-term viability. In the era of accountability, permanent carbon removal may become imperative.
The Carbon Dilemma: Why Carbon Offsets Can Lead to Greenwashing?
Carbon offsets allow companies to claim neutrality by funding projects such as reforestation or renewable energy. But mounting evidence reveals critical flaws in the approach with a Stanford University Study published in 2023 indicating that only 12% of offsets actually reduce emissions. Furthermore, indigenous communities often bear the brunt of land-based offset projects. The Volkswagen scandal underscores this with the automaker relying on forestry offsets to brand its vehicles as carbon neutral, but investigations revealed that these projects failed to deliver promised reductions. The backlash impacted Volkswagen’s stock price, proving that offsetting can be a liability in the age of transparency. In 2020, in the final court summary reported by the Federal Trade Commission, the company had to repay more than USD 9.5 billion to consumers deceived by its clean diesel campaign. Below are two recent instances of companies facing the brunt of greenwashing via carbon offsetting:
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Greenpeace reported that in 2025, Shell faced allegations regarding carbon offset initiatives in China. Investigations revealed that Shell’s projects claimed carbon credits for promoting sustainable rice farming methods that were already widely practiced by local farmers.
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In October 2023, South Pole, a leading carbon offset provider, curtailed its involvement in the Kariba REDD+ forest conservation project in Zimbabwe. The project faced allegations of exaggerated claims regarding its carbon sequestration effectiveness. This incident reflects the challenges in ensuring the integrity of carbon offset projects and the risk of greenwashing when offsets do not deliver environmental benefits.
Is Carbon Removal the Path to Net-Zero?
Leading companies are shifting from net-zero to gross-zero, eliminating emissions entirely by pairing reductions with permanent carbon removal. Unlike offsets, which balance emissions elsewhere, carbon removal actively eliminates CO2 from the atmosphere. Below is a rundown of technologies leading the carbon removal revolution and use cases.
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Direct Air Capture (DAC): The use of renewable-powered facilities to suck CO2 from air and store it underground is an effective method. Climeworks has been at the forefront of DAC technology. In September 2021, Cimeworks unveiled Orca in Iceland, a facility designed to capture up to 4000 tons of CO2 per year. The CO2 is stored underground through a partnership with Carbfix, where it mineralizes into stable carbonates, ensuring long-term sequestration. Building on this success, Climeworks initiated Mammoth in 2024, aiming to capture up to 36,000 tons of CO2 annually.
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Biochar: A carbon-rich material produced from biomass offers a method to sequester carbon while enhancing soil health. Charm Industrial has innovated in this space by converting biomass into bio-oil, which is then injected underground for permanent storage. In a major development, Google partnered with Charm Industrial in 2025 to remove 100,000 tons of CO2 by 2030 using biochar. This collaboration underscores the potential of biochar in large-scale carbon removal efforts.
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Enhanced Mineralization: This method leverages the natural reaction between Co2 and minerals to form stable carbonates and Carbfix is a pioneer in this field. Since 2014, the company has been capturing CO2 emissions from the Hellisheiði Geothermal Power Station, dissolving the gas in water, and injecting it into basaltic rock formations. Remarkably, over 60% of the injected CO2 mineralized within four months. Carbifix has also collaborated with Climeworks to integrate DAC technology to capture CO2 directly from the atmosphere and store it underground through mineralization.
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Ocean-Based Carbon Removal: This method explores the vast potential of marine ecosystems to sequester CO2. Running Tide is investigating the use of algae to capture carbon. By cultivating fast-growing kelp, which absorbs CO2, and then sinking it to the ocean floor, the company aims to sequester carbon for extended periods. This method not only captures carbon but also contributes to ocean health by providing habitats and improving biodiversity.
These technologies represent a multifaceted approach to carbon removal, each with unique potential and applications. As they scale, they offer promising pathways for the industry to embrace sustainability 2.0.
The Business Case for Carbon Reductions
Despite not being a one-size-fits-all fix, carbon removal must be integrated into corporate sustainability strategy. For companies ready to make the transition, here are 4 actionable steps.
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Invest in Early-Stage Innovation and Carbon Removal Projects: Carbon removal tech is scaling rapidly from its nascent stage. Pre-purchasing future removal credits, as Stripe did with its USD 6 million worth of carbon removal purchases. Companies can partner with emerging startups such as Ebb Carbon and Carbofex or join initiatives such as Frontier, a USD 925 million fund backed by Alphabet, Stripe, and Shopify to scale removal tech.
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Integrate Removal into Scope 3 Plans: Scope 3 emissions associated with supply chains and product use are the toughest to fix, often accounting for around 70-90% of a company’s carbon footprint. Carbon removal offers a way to address these indirectly by integrating removal into Scope 3 strategies. This allows firms to show stakeholders a comprehensive action-oriented plan. For instance, Microsoft now requires suppliers to adopt removal solutions, embedding criteria such as durable storage into procurement contracts.
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Partner with Verified Marketplaces: Since transparency is rapidly becoming non-negotiable, platforms such as Carbonfuture and Puro.earth vet projects for permanence and co-benefits. Collaboration with these marketplaces ensures investments hold up under scrutiny. Stripe’s Climate Program is a prime example of this in action. Since 2020, the company has committed USD 15 million to early-stage carbon removal, funding everything for DAC pioneer Climeworks to Project Vesta’s Ocean mineralization. Smaller companies can follow suit by pooling resources to amplify impact.
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Advocate for Supportive Policy: Lobbying for supportive frameworks and incentives such as the U.S. 45Q Tax Credit or the EU’s Carbon Removal Certification Framework sets standards for monitoring and verification.
In January 2024, Apple announced the first Restore Fund, which invested up to USD 200 million, aiming to remove 1 million metric tons of CO2 from the atmosphere. The investment aligns with a viable financial model that scales up investment in forest restoration and reforestation. The success of Apple’s strategy will be a key indicator of shifts within the industry. Moreover, for a successful business case for carbon removal, prioritizing real carbon reduction over offsets, investing in proven and emerging carbon removal technologies, aligning sustainability strategies with business growth, and reporting progress transparencies to stakeholders lays the necessary groundwork for success and ROI.
Are There Barriers to Carbon Removal?
Although the progress has been noteworthy, the challenges loom large, and companies need to weigh them carefully. A significant constraint lies in cost barriers and scalability, as DAC’s price tag is steep and biochar’s scalability hinges on biomass supply. An IPCC report in 2023 underscored global removal capacity at just 2 gigatons of CO2 annually, which is far short of the 5-16 gigatons required by 2050 for net-zero. For cash-strapped firms, justifying these costs to investors is tough when cheaper offsets exist.
Another barrier is the shifting regulatory policy. For instance, in March 2025, South Dakota enacted a law prohibiting the use of eminent domain for CO2 pipeline projects. This legislation directly impacts Summit Carbon Solutions' proposed USD 8.9 billion, 2,500-mile pipeline, which aims to transport CO2 emissions from ethanol plants across five Midwestern states to North Dakota for underground storage. While Summit secured approvals in Iowa, North Dakota, and Minnesota, the new law in South Dakota has led to uncertainty. Additionally, in May 2023, a UN climate panel expressed skepticism regarding engineered carbon removal technologies such as DAC and Bioenergy with Carbon Capture and Storage (BECCS). The panel labelled the emerging technologies as economically unproven at scale.
Where Do We Go From Here?
With investors' increasing scrutiny over ESG metrics and regulations tightening, companies must move beyond carbon offsetting to actively removing them. Companies that are able to formulate financially viable plans of carbon removal in long-term sustainability strategies are future-proofing and setting the pace of the industry. Industry leaders such as Microsoft have been redefining their carbon strategy, Apple is reimagining its supply chains, and Stripe is betting on tomorrow, highlighting that the risk of inaction can lead to stranded assets.
The future of sustainability is not about balancing the books with offsets or greenwashing but about creating action plans to remove carbon. For instance, auditing offset reliance and setting science-based removal targets, allocating 5-10% of climate budgets to pre-commercial removal tech, and collaborating with peers to standardize metrics and share risk are a few strategies that can be leveraged. Moreover, for investors, it’s a lucrative opportunity to be a part of the trillion-dollar transition. As the climate crisis worsens, the time for businesses to act is now.
