Blog Editorial

Navigating Carbon Markets: A Guide for Corporations

Carbon markets are an important tool to help businesses mitigate their unavoidable carbon emissions. Now, a newly released report from the World Economic Forum offers corporates a playbook for their corporate climate action, including how to engage meaningfully with carbon offsetting.

As a project developer and provider of high-integrity carbon offsets, Quadriz offers a summary of how corporations can best navigate carbon markets and how they can be better regulated and supported to ensure the future of effective corporate carbon strategy.

Using carbon offsets for meaningful corporate climate action

Corporations and businesses have a significant role to play in reducing greenhouse gas emissions and limiting global temperature increases to below 1.5 degrees celsius.

This represents a huge challenge for many industries, particularly hard-to-abate sectors which have a higher proportion of unavoidable emissions. As a viable financial and ecological solution, carbon markets can help support communities and ecosystems by providing a direct channel to activate corporate capital for climate action that can be scaled rapidly.

But in order to achieve this, corporations must be able to confidently engage with the voluntary carbon market (VCM) and be clear about the results of their carbon investments.

Now, the WEF has laid out a systematic approach for corporations to deliver meaningful climate impact through the VCM using a four-track approach.

The four steps are broadly outlined below.

  • Defining the net-zero role for credits: corporations first must define a clear role for carbon credits on their path to net zero, in parallel to their wider decarbonisation efforts. This requires assessing their baseline emissions, setting science-based targets, developing a decarbonization pathway and defining how they will use carbon credits to offset their unavoidable emissions as part of an integrated, ongoing pathway, both during their transition and when they reach net zero.
  • Create value and recognition: The voluntary carbon market can create tangible value for corporations, and identifying and raising awareness of this value is a vital step to bolster their carbon strategy through highlighting the value carbon credits can provide. Through stakeholder engagement, corporates can reinforce their mission and sustainability credentials with carbon credits, take meaningful climate action by removing GHG from the atmosphere, and create valuable co-benefits such as conserving wildlife and biodiversity. Creating and communicating the positive outcomes of their carbon investments can add value for business, stakeholders and broader ecosystem by ensuring sustainable growth.
  • Tailor a portfolio: corporations can build a portfolio of carbon credits to boost their impact in their transition strategy. To do this, they must design a portfolio of high-quality credits that are tailored to their business. The short-term focus of this portfolio is on avoided emissions, while the long-term focus transitions towards carbon removal. The Oxford Offsetting Principles demonstrates the importance of mitigation beyond the value-chain and how it could evolve as global decarbonisation efforts move beyond avoidance towards nature-based and engineered carbon removal in the long term.
  • An orchestrated effort: companies are not only profit-making entities. They are also social actors and influencers. It’s suggested by the WEF that corporations use their organizational expertise and capacity to help optimize VCM participation in alignment with the broader social sustainability agenda. Their operating models should be consistent with their desired level of VCM participation and supported by engagement and incentivization of their employees.

Through this four-track approach, corporates can deploy their carbon strategy in the most effective way, accelerating their progress towards net zero.

Creating stronger international regulations and public support for carbon markets

While the WEF outlines in this report why carbon credits are a vital tool to mobilise finance for net-zero goals, they overlook obstacles that remain, preventing corporates, and the VCM, from achieving their potential in accelerating the transition.

One of the main obstacles currently holding companies back from unlocking the true value of carbon credits is lack of robust international regulations that lead to inconsistencies between regulators and standard setters. This has resulted in a frenzy of media criticism around greenwashing, and how carbon credits are allowed to be used.

Mistrust, opposing views, miscommunication and sensationalist articles surrounding carbon market controversies can be eliminated through the implementation of strong regulatory bodies. A trusted, transparent international regulator covering the VCM can contribute greatly toward curtailing uncertainties in the voluntary market and shore up confidence for future investors, and project developers.

Further to this, public support and consensus is also critical in the continued growth and scaling of the VCM. Proponents and beneficiaries of carbon markets must create coordinated communication and advocacy in support of high-quality carbon credits, to garner public and policy support and spur further corporate confidence in their carbon strategy.

Future-proof sustainable growth for corporations

The voluntary carbon market is becoming more established as an instrument capable of rapidly mobilising huge capital flows to projects that protect nature, reduce emissions, or remove atmospheric carbon dioxide.

It is vital for corporations to understand how to navigate carbon markets as part of their net-zero transition and achieve ambitious science-based climate targets. They must act using all available channels to scale their carbon offsetting efforts, and support others in their decarbonization efforts.

One this is clear: corporations working to enhance their carbon offsetting strategy have an opportunity to show leadership in sustainability that is urgently required from every sector of the economy and will only grow in importance as net zero regulations tighten.

Sales Enquiries, Contact: 

Christian Nielsen, 
Quadriz
Tel: +31 263 723 071
Mob: +34 619 12 9001
christian.nielsen@quadriz.com

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