Power Points
The enterprise software provider is one of the large corporations signing offtake agreements with carbon reduction and removal projects.
By Margaret Morales
May 2, 2024
Offtakes are the next step in Workday’s journey to support high-quality climate action. Source: Workday
Since January, Workday has signed three new offtake agreements with carbon projects, committing to purchase over 300,000 carbon credits over the next six years. By guaranteeing future demand, the enterprise software provider is helping to close the finance gap that holds back many high-impact carbon projects.
The projects include forest protection in the Amazon with remote sensing, carbon removal via biochar in Namibia and an innovative approach to plugging orphaned oil and gas wells.
In 2023, Workday also joined Frontier Climate, a coalition of more than a dozen companies that together have committed to purchase $1 billion in durable carbon removal (CDR) by 2030, helping to scale the removals industry. Frontier signed a new offtake agreement May 1, for over 150,000 tons of carbon removals over the next three years.
Workday’s climate targets have long been among the most ambitious in its industry, combining aggressive supply chain emission reductions with compensation for residual emissions via carbon credits, and support of projects beyond the company’s value chain that contribute to global net zero. It made its cloud carbon neutral in 2017. It began sourcing 100 percent renewable electricity in 2020, mitigated the company’s entire historical emissions in 2021, and now plans to transition its whole carbon credit portfolio to removals by 2031.
“The carbon removal part is where we are now but we’ve been on this journey for a long time… This is sort of the natural evolution of that journey,” said Erik Hansen, Workday’s chief sustainability officer.
Many projects with the potential to reduce greenhouse gas emissions or to remove carbon from the atmosphere — such as preventing landfill methane emissions, restoring native ecosystems, or building direct air capture hubs — require upfront capital to develop and scale. But that upfront investment can be hard to come by before projects have proven their ability to deliver verified carbon credits.
“Feasible financing terms are often unavailable to these projects without a demand signal,” said Brennan Spellacy, CEO & co-founder of Patch, a carbon credit marketplace. As a result, many climate projects spend years stuck in an endless cycle of chasing financing.
Offtake agreements help fill this climate finance gap. In these agreements, carbon buyers commit to future purchases of carbon credits from specific projects once those credits are verified. Often the agreements span years and help carbon buyers secure predictable, long-term carbon credit supply. With an offtake agreement in hand, guaranteeing an end buyer, carbon project developers are better positioned to secure development capital to get up and running.
While some carbon buyers with large sustainability teams source, vet and contract with early-stage carbon projects themselves, most carbon buyers don’t internally handle the entire offtake process. Instead, buyers either join offtake coalitions such as Frontier or use a third-party platform to facilitate the transactions.
Source: Patch
Patch, a carbon credit marketplace, is one such platform. It supports buyers throughout the offtake process, from evaluating and selecting projects to providing contracts, negotiating terms, processing payment and managing carbon credit retirement. It does not require a minimum investment and also facilitates offtakes with innovative project types for which there are not yet established methodologies.
Patch facilitated Workday’s most recent offtakes to be delivered over the coming six years. The company says that offtake agreements such as Workday’s are on the rise: Based on the volume of inquiries this year so far, Patch estimates that it will receive three times as many inquiries from carbon buyers about offtake agreements in 2024 as it did in 2023.
Workday has pursued carbon offtake agreements for three core reasons.
Stories of over-crediting and poor quality projects consistently plague the voluntary carbon market. That’s led many companies to wrestle with reputational concerns from using carbon credits in their climate strategies; some have backed away from mitigating their ongoing emissions altogether.
That has not been the case for Workday. “I think integrity is that north star that leads to that pathway of stakeholder trust,” said Hansen. As the company continues its science-based emission reductions, offtakes are its next step in supporting high-quality climate action, closing the climate finance gap while scaling catalytic projects that will move the planet toward a net zero future.
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