The voluntary carbon offsetting market is young and because policies and strategies differ around the world – as well as opinions – we’ve been talking with a variety of organizations and companies.

Two weeks ago we interviewed America’s for-profit carbon offsetter, TerraPass. And previously, we cast our net wide and interviewed non-profit providers from countries such as France, Switzerland and the UK (see the round-up post here)

Continuing with our interview series on for-profit providers, today we talk with Canada’s ZeroGHG. Adopting a hybrid business model, ZeroGHG sees offsetting as only part of their business strategy.

Writes Mary Sutera, the president of ZeroGHG based in Montreal: “our organisation is focused not only on providing offsets but also helping our customers with developing successful GHG strategies. In fact, we see our offsetting services as an add-on to our consulting services and not the other way round.”

ZeroGHG provides “our customers with quality service, we are not in this for the glory,” she adds.

Now for the interview:

What motivated your company’s founders? Profit or the environment? What is their background?

Both founders (myself and one partner) are of technical backgrounds and were already involved in various environmental initiatives throughout our careers (engineering design projects to reduce emissions as well as program-oriented projects such as ISO14001 implementation).

Through this work, the growing interest in GHG reduction became evident to us as well as our personal desire to provide assistance in this field. ZeroGHG was a natural extension.

In running your business, how do you strike a balance between achieving environmental goals, and making a profit for your shareholders?

As consultants

How do NGOs respond to you in Canada? Is there less glory in being a
for-profit provider?

When we have had interactions with NGOs they have always been professional and efficient. We do not perceive any differences in approach because we are a for-profit organization.

Also, our mission is to provide our customers with quality service, we are not in this for the glory.

Who is your competition? (A few names)

As I mentioned, an important component of ZeroGHG objectives is not only to provide carbon offsets but also providing consulting services to develop GHG reduction strategies as well as more technical mandates such as quantifying emissions or performing audits.

There are other pure carbon offsetters in the Canadian market (eg. Zerofootprint, CarbonZero and Planetair) and there are certainly many consultants ranging from small environmental specialists to engineering giants like SNC-Lavalin, however, the combination of these services is unique.

The voluntary carbon market is experiencing a lot of growth, but there is also an increasing amount of competition. From your sense of the marketplace, do you think there is room for more players, or do
you expect consolidation?

The market is still very young and far from mature. The legislative background is also still in its infancy in North America and likely to change rapidly in the next few years. The good news is that the recognition and interest in climate change both at the corporate and public level is genuine and very serious. These elements will ensure that the voluntary market will continue to grow and evolve. We will see companies in this sector evolve with these changes and find their own specialty niches before any consolidation.

Can you estimate the value of the carbon offset market in Canada today? Projected growth in the next 5-10 years?

The nature of the market is such that it is almost impossible to get any accurate estimates. Worldwide studies have put estimates for the strictly voluntary market at $90 million. Canada has been a laggard in this area and I cannot see the current market as being worth more than $5 million. Clearly this market will experience tremendous growth in the coming years though; my guess is 10-20 times in the next 5 years and perhaps more if a better legislative framework is put in place.

Considering the additional tax advantages that non-profit providers can give their customers, do you believe you can compete in the long term?

Because of additional services ZeroGHG provides we believe we have an advantage over pure offset providers. We also believe the consulting services we provide are not possible under a non-profit structure.

Are there any tax benefits your company can offer businesses or individuals?

Unfortunately there are currently no special provisions to allow for deductions relating to investments in environmental initiatives.

How do you feel about possible stringent cap-and-trade regulations, or a carbon tax? Do you think this would affect your business?

Ultimately, a cap-trade-system and/or similar regulations are the only proven methods to make a significant impact on GHG emissions. The EU model has proved this and North America has begun drifting in that direction. Implementation of such a legislative framework would clearly inject much energy into the environmental consulting sector and we will be ready to answer that challenge.

Can you explain a little, about how the carbon market is different from America? Or the same? Does Canada build policy based on what’s happening in the states, or is there a different system there entirely?

There are many similarities. For one, both countries currently have federal governments that have prioritised economic growth over environmental priorities. As a result, much of the policy trends have been driven at the provincial and regional levels much in the same way as regions and states have played a leadership role in the US.

The Canadian carbon market is of course much smaller than the US but I also believe that carbon offsetting is disproportionately smaller that the US because Canadian companies have been slower to develop GHG reduction strategies.

One of the oft-cited reasons for being a company is the ability to raise money from investors. Has your company raised any funds, and if so, can you give some indication of how much, and from which sources?

This has not been a factor for us yet. Funding has been limited to the founding shareholders.

What do you think motivates your corporate customers to voluntarily buy carbon offsets? Are their customers demanding it?

A combination of response to customer demand as well as the recognition of the importance of the public image of companies in this arena is what I believe motivates corporations. I also believe there is a genuine concern by corporations to do the right thing when it comes to the environment. Some companies may want to lead the trend and be recognized for being responsible rather than wait for legislation to impose regulations.

Most indicators suggest we’re at the start of a recession, or at the very least a slowdown in growth. How do you think this will affect the carbon business? Are you seeing any changes already?

Perhaps. An economic downturn means less financial flexibility and more limited investments in all areas including the environment. Work in the climate change arena will continue though, it is too big and too important to ignore.

Some companies invest directly in carbon offset projects, without using the services of a provider such as yourselves. What value does your company provide, in its role as an intermediary?

This indeed is why our organisation is focused not only on providing offsets but also helping our customers with developing successful GHG strategies. In fact, we see our offsetting services as an add-on to our consulting services and not the other way round.

Also, direct purchase of offsets by smaller companies and individuals is less evident. There will be a continued need to aggregate smaller orders to achieve efficient pricing.