It is common practice for companies that aspire to be climate neutral, to offset emissions that they cannot reduce themselves with emissions avoided or eliminated by external climate-positive projects, such as those that promote reforestation or carbon capture. This compensation is articulated through buying carbon credits generated by these projects, which are viable thanks to the income from the sale of credits.
The voluntary market for carbon credits is on the rise: it exceeded $2 billion in 2021 and is expected to grow more than 10 times by 2030. Nature-based solutions and renewable energy projects currently account for 90 % of total investment.
However, the credibility of offsetting as a climate action instrument is in question: does it drive greenwashing or genuine Sustainability? I highlight two reasons that motivate this questioning:
- There are companies that are doing an excessive use of these credits, offsetting with them emissions whose reduction they could manage directly.
- The quality of the projects is very heterogeneous and there is no objective framework for credit prices consistent with each project's impact.
In parallel to the necessary structuring and regulation of this market on a global scale, this context represents a great opportunity for companies that consider "compensatory" projects not in a transactional way, as mere credit providers, but strategically, as accelerators of competitive advantages and growth. For example:
- These projects can provide differential intelligence to enter adjacent businesses or grow in new geographies. This may be the case of biodiversity regenerative projects for companies in sectors such as agrifood, environmental services or biomaterials.
- Factoring carbon credits into company innovation projects can enable many of them that would not be profitable on their own. This approach would drive, for example, the development of new circular solutions.
A greater involvement of companies in the design, financing and execution of climate-positive projects would substantially improve their quality and transparency, facilitating the connection with the investment community. Companies with this mindset will multiply their positive impact, acting as promoters of a sustainable entrepreneurship ecosystem.