Advancing the Integrity of and Business Case for Carbon Markets
Advancing the Integrity of and Business Case for Carbon Markets: What to Ask Sellers of Nature-Based Carbon Credits
Our team recently hosted Nathan Truitt, the VP of Climate Funding at American Forest Foundation, to speak with our Corporate Affinity Network (CAN). Among his many invaluable insights, he shared a comprehensive framework to assist companies in selecting robust nature-based carbon offsets and credits.
First, he shared that selecting credits primarily based on price promotes a race to the bottom that undermines the overall integrity of the carbon market—which is not in companies’ interests.
Second, ask questions – and lots of them – of the sellers of carbon credits. Carbon markets are not neuroscience, and there are important, foundational questions that carbon credit sellers should be eager to answer. Among those are:
• Explain to me your approach to additionality?
• What’s your approach to permanence?
• How are you sharing revenue and profits with communities doing the land management?
• What are the co-benefits?
• How do nature and biodiversity factor in?
Nathan shared that there’s no right answer to the questions above. Instead, it’s an important positive sign if the sellers are ready and eager to share more. Companies need to ask these questions to see if the seller’s approach aligns with their values and stakeholder expectations, especially as skepticism of carbon markets increases.
Furthermore, sellers should be able to explain the above simply, doing the work to translate their methodologies into language that their corporate buyers can understand. There should be no mystery.
Bottom line, Nathan’s advice is to be curious and not apologize for asking many questions. You’ll protect your company while helping advance integrity in the carbon market system.
Lastly, why should companies pursue carbon offsets? Investors are increasingly concerned about corporate exposure to transition and policy risk as many companies, particularly those operating in heavier emitting sectors, are unlikely to meet their 2030 net-zero carbon emission targets. However, companies that invest in high-integrity carbon credits help mitigate these risks and, therefore, may gain a competitive advantage because they are signaling to investors that they have a robust plan to tackle their hard-to-abate emissions. Such a plan can assuage some investor concerns and lead to increased access to capital, better cost of capital, improved social license, and reputational benefits.
Related resources:
The Integrity Council for the Voluntary Carbon Market establishes high-integrity carbon credits.
The Voluntary Markets Integrity Initiative provides helpful guidance to companies on the claims they can make on carbon credits.
Future 500 is a non-profit consultancy that builds trust between companies, advocates, investors, and philanthropists to advance business as a force for good. We specialize in stakeholder engagement, sustainability strategy, and responsible communication. From stakeholder mapping to materiality assessments, partnership development to activist engagement, target setting to CSR reporting strategy, we empower our partners with the skills and relationships needed to systemically tackle today's most pressing environmental, social, and governance (ESG) challenges.
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