In the absence of stringent government regulations mandating significant reductions in greenhouse gas (GHG) emissions, an increasing number of companies are adopting “net zero” targets. According to the Net Zero Tracker, more than a third of the world’s largest publicly held companies have committed to such targets. These commitments typically involve a combination of measures to reduce emissions and a pledge to offset remaining emissions by purchasing carbon credits.

As companies approach their net zero target years, many are turning to carbon credits. The carbon credit market is projected to experience exponential growth, reaching nearly $100 billion by 2030 and potentially $250 billion by 2050. However, navigating this market poses brand risks due to its complexity and immaturity, with variations in project types, developers, locations, and costs leading to challenges in quality, transparency, and credibility.

The Reputation Risks of Carbon Offsets

While companies routinely opt to purchase goods and services from external sources, the reliance on carbon offsets often draws scrutiny. Activists argue that excessive reliance on offsets may undermine genuine efforts to decarbonize operations and supply chains, leading to accusations of “greenwashing.” Moreover, the current carbon credit market size is insufficient to achieve the necessary emissions reductions to limit global warming to 1.5 degrees Celsius, as outlined by the UN.

Navigating Carbon Credit Quality

Despite these challenges, the voluntary carbon offsets market presents an opportunity to drive significant investment into climate solutions. However, determining the quality of carbon credits remains paramount for companies aiming to mitigate brand risk and ensure meaningful climate impact.

Attributes of High-Quality Carbon Credits

• Additionality: High-quality carbon credit projects demonstrate that emissions reductions or removals would not have occurred without the revenue generated from selling carbon credits. Thorough due diligence is essential to assess the additionality of projects and avoid potential accusations of greenwashing.
• Quantification: Accurate quantification of emissions reductions or removals is crucial for assessing the credibility of carbon credit projects. Understanding the methodology used and any deviations from standard approaches is essential for mitigating quantification risks.
• Leakage: Projects must address the risk of emissions shifting outside the project boundary, known as leakage. Evaluating how projects account for and mitigate leakage is essential for assessing their overall impact.
• Permanence Risk: There is a risk that emissions reductions or removals achieved through carbon credit projects may be temporary. Assessing the likelihood of reversals and implementing strategies such as insurance or overpurchasing can help manage permanence risk.
• Vintage: Purchasing carbon credits from recently issued projects increases the likelihood of supporting organizations actively innovating and adhering to rigorous certification standards.
• Co-benefits: Some carbon credit projects offer additional benefits beyond emissions reductions, such as improving public health, biodiversity, or creating jobs. Considering projects with co-benefits can enhance reputational benefits and diversify impact.

Navigating the Global Carbon Credit Markets

Navigating the complexities of the carbon credit market requires careful consideration of these attributes alongside broader sustainability objectives. Engaging with reputable standards bodies, registries, and carbon credit rating agencies can provide valuable guidance and transparency.

By prioritizing high-quality carbon credits and considering factors such as additionality, quantification, leakage, permanence risk, vintage, and co-benefits, companies can mitigate brand risk, demonstrate genuine commitment to climate action, and contribute meaningfully to global emissions reduction efforts.

Need a Carbon Offsetting Solution?

If your business is seeking out a simple, low-effort solution to reduce your carbon footprint without all the headaches of carbon footprint calculations, and more, then you should consider looking into CarbonCred today. CarbonCred is an online platform that makes it painlessly easy for businesses of all types and sizes to reduce their carbon footprint (for the business and their employees) simply by opting into a monthly carbon offsetting subscription plan. 

CarbonCred removes all the complexities common with other carbon offsetting tools and helps businesses offset their carbon emissions without the need for a full-time hire or potentially hundreds of hours of work. Within just a few minutes, anyone can offset their carbon emissions with ease using CarbonCred’s simple, yet intuitive carbon offsetting platform. 

Published by: Martin De Juan