Carbon offsetting’s ‘unicorn’ wants to be an ultra-ethical social enterprise. Behind the scenes its deals with oil giants and authoritarian states are stirring dissent
In the summer of 2021, Renat Heuberger assembled his penguins.
The chief executive officer of South Pole, the booming carbon offsetting industry’s first ‘unicorn’ or billion-dollar company, was excited to brief them about his visit to Saudi Arabia and the prospect of lucrative contracts there.
Not all the ‘penguins’, as the self-styled “pioneering social enterprise” likes to call its employees, were pleased. How could a company committed to fighting climate change do business with a petro-state that executes journalists like Jamal Khashoggi, whose body was cut up by Saudi spies and smuggled out of its Turkish embassy, one asked.
There was nothing to worry about, Heuberger assured him, according to a ‘penguin’ who was there and spoke to SourceMaterial on condition of anonymity. The Saudis had their conservative side but were looking to the future, Heuberger said: on his recent trip, some of his tour guides had even been women.
“It was infantile,” said the ‘penguin’, who fears the progressive company they were once proud to work for is routinely signing “nasty-looking deals” to help “greenwash” some of the planet’s biggest polluters.
Zurich-based South Pole, which in 2022 had estimated sales of above $250 million and more than 1,000 employees, provides consultancy services to companies and sells them carbon credits to offset their fossil fuel emissions. Leaked documents seen by SourceMaterial detail previously undisclosed transactions with the oil majors TotalEnergies, Chevron and Shell, as well as the Saudi state-owned petrochemicals company Sabic and Russia’s Gazprom.
In October 2021, as tensions escalated between Russia and Ukraine, South Pole was in the advanced stages of a deal with Sakhalin Energy, which operates giant gas fields off Siberia, the documents show. A spokeswoman for South Pole, Isabel Hagbrink, said this deal was not completed.
“Communication from the CEO level is just embarrassing.”
Deals like these have provoked anger among South Pole employees that now threatens to simmer over into open revolt. SourceMaterial, working with the Dutch investigative journalism platform Follow The Money, found that a group of staff has confronted South Pole’s bosses to call for wholesale changes in how the company is run.
Among their demands, set out in a letter on behalf of over 80 ‘penguins’, is a call for the company to set up a task force to “re-centre” its decision-making process. Staff are also demanding that South Pole review the companies it works with.
Our investigation found that while putting some measures in place to allay employees’ concerns, South Pole soon appeared to be circumventing them—while continuing to work with controversial fossil fuel companies, often under non-disclosure agreements.
“The common view in the company is that this is really an indefensible position,” the ‘penguin’ said. “Communication from the CEO level is just embarrassing.”
In response to questions from SourceMaterial, its spokeswoman, Hagbrink, said that non-disclosure agreements are “a universal practice” and not specific to deals with oil and gas companies.
”South Pole’s mission, for the past 17 years, is and has always been to fight climate change and to empower the transition towards a fossil fuel free world,” she said. “Every day, we work to accelerate the transition away from hydrocarbons towards a low-carbon economy. But the bottom line is that we cannot be ideologically for keeping global warming within safe levels, and ideologically opposed to engaging with the oil and gas sector or other large greenhouse gas emitters.”
When Heuberger began his journey into offsetting, the idea was to put the planet above profits. In 2002 he founded myclimate, a not-for-profit seller of carbon credits. Before long, however, it became clear that there were healthy returns to be made in a market now projected by bankers Morgan Stanley to be worth $250 billion by 2050.
In 2006 he and four colleagues left to set up South Pole. Initially, the plan was for it to exist under the umbrella of myclimate, says Kathrin Dellantonio, managing director of myclimate Switzerland. But the board deemed this too risky, so Heuberger and his partners decided to go it alone.
Myclimate had “a start-up atmosphere”, and working for Heuberger was “inspiring”, Dellantonio says. Her recollections are a far cry from the situation described by the 80 ‘penguins’ in their letter to Heuberger and South Pole’s management.
“Towards the public, our message is: ‘true climate impact for everyone’, ‘improving the carbon market’, ‘more transparency’,” the letter reads. “We see less and less of this reflected in our core strategy and day-to-day actions.”
South Pole, understood to be owned by its small founding group alongside minority investors such as Salesforce Ventures and Temasek, Singapore’s sovereign wealth fund (company ownership data is not publicly available in Switzerland), is tightly controlled by Heuberger, sources say.
“South Pole has a very poor culture in terms of actual checks and balances. Everything is at the discretion of the CEO,” said the employee who described Heuberger’s views on Saudi Arabia.
“The company is private, it has no shareholders outside the private shareholders. It’s not publicly traded, it’s not making any financial statements that are publicly available. That makes it easier to drift into these murky areas. It’s really easy for it to lose any kind of ethical anchoring with what they’re doing. It’s bound to happen when money starts to be serious.”
Hagbrink, the South Pole spokeswoman, said:
“Part of our culture is continuous debate, both within our teams and with the wider climate community. This includes continually assessing and improving how we can credibly engage with the oil and gas sector in a way that drives measurable, positive climate impact for the world.”
Employees’ fears about South Pole’s choice of clients date back to at least spring 2020, when Heuberger held a question-and-answer session in which staff voted on what to ask him.
Among the most voted-for questions, according to a former employee who also requested anonymity, was whether the booming market meant South Pole could now afford to be more selective about the companies it worked with.
“Yes, of course,” Heuberger reportedly replied. “Whoever is not ready to spend money soon and just wants to talk, we will drop now.”
“South Pole has a very poor culture in terms of actual checks and balances.”
For many of the workers now pushing for change at the company, Heuberger was missing the point. What they were really asking was whether, with its income stream assured, South Pole would stop providing window dressing for polluters and authoritarian governments with no real interest in saving the planet.
“He didn’t even think that this might be a request from the employees to select on a purpose basis, not on a commercial basis,” the former employee said.
Carbon offsetting works by helping companies neutralise their climate impact. An airline, say, can offset the pollution its planes pump into the atmosphere by paying to plant trees or protect forests which will absorb an equivalent amount of carbon.
But policy documents seen by SourceMaterial show that South Pole has told employees to advise clients against making claims about carbon neutrality based on its offsets. Such statements could expose companies to negative media coverage and litigation, it warned.
“We strongly advise our clients not to make exaggerated climate claims,” South Pole said in response to questions. “We advise them to communicate their climate actions transparently and honestly.”
South Pole’s warnings have proven prescient. One of its clients, Delta Airlines, is now facing a lawsuit in the US. Plaintiffs say its claim of carbon neutrality based on offsets is “false and misleading”.
Inside South Pole, meanwhile, employees’ concerns have steadily increased, driven in part by a 2021 media report that it had sold offsets from a forest protection scheme in Zimbabwe to the oil giant TotalEnergies, which used them to claim that it had shipped “carbon-neutral liquified natural gas”. In January Follow the Money revealed that the Zimbabwe project was overstating its impact while drawing unusually high profits.
South Pole is sensitive about the threat this type of deal poses to its image, leaked documents show. Internal policy guidelines seen by SourceMaterial specify that counterparties shouldn’t mention that they have worked with South Pole if they could pose a reputational risk. (According to a company source, this policy is under revision and its current status is unclear.)
South Pole has signed non-disclosure agreements with companies including Total, Shell and state-owned Saudi Aramco, some as recently as last year, the documents show. They also reveal that in 2015, a year after Russia’s illegal invasion of Ukraine’s Crimean Peninsula, South Pole bought 100,000 carbon credits from Russian state-owned fossil fuel provider Gazprom.
In 2020, in response to employees’ concerns, South Pole established a committee to oversee, and veto when necessary, business with controversial companies.
Risky customers could include fossil fuel companies or arms manufacturers, according to a draft policy document seen by SourceMaterial, which uses a hypothetical example of a client selling cluster bombs or biological weapons: if the company makes more than 10 per cent of its revenue from such weapons, South Pole should rule out working with it, the document says.
“I would work with a fossil fuel company that’s very serious about phasing out fossil fuels. Not if they’re just fooling everyone.“
But the committee had not long been in place before South Pole’s leadership was moving to water down its influence. Managers drafted a policy change that would no longer classify most fossil fuel companies as risky. Only in cases where they were “state-owned by high-risk countries” or had lobbied significantly against pro-climate policies would the committee have a say.
In response to SourceMaterial’s questions, South Pole said that it is “firmly against greenwashing” and its policy is to stop working with fossil fuel companies if they don’t show a genuine commitment to moving towards cleaner energy.
“Ultimately, it is precisely the transformation of the large greenhouse gas emitters themselves, including their business models, that is an essential part of the solution to fighting climate change,” the company said. “Above all, we prioritise impact and so we work with clients who can credibly demonstrate their commitment to transition to clean energy. Where we do not see strong enough evidence of this, we will discontinue conversations and our engagement.”
It is unclear if this policy has had any effect on South Pole’s relationship with Total, which has been accused of cynically sowing doubt about climate science; with Shell, which funded lobbying for Trump’s fossil fuel finance rule; or with Chevron, which in 2021 topped a list of the world’s most obstructive companies on climate policy.
All of these companies have had relationships with South Pole for several years. Total signed a non-disclosure agreement with the offsetter as recently as 2022. South Pole did not comment on current ties.
For South Pole’s dissenting workers, it is exactly this distinction between fossil fuel companies trying to change and those seeking a paid-up greenwashing service that is key to the company’s future.
“I would work with a fossil fuel company that’s very serious about phasing out fossil fuels,” says one former employee. “Not if they’re just fooling everyone and trying to get away with doing business as usual.”
Headline picture: Ian Parker, Unsplash