MONIKA STUKOVA, CFA Toward a Greener Future: Harnessing Voluntary Carbon Credits

Today, the growing problem of greenhouse gas emissions is causing serious environmental issues. As businesses, one critical method we can use to curb this crisis is the purchase of voluntary carbon credits, an effective solution that enables us to offset our carbon emissions and contribute to global sustainability efforts.

Demystifying Voluntary Carbon Credits

Voluntary carbon credits, also known as carbon offsets, are essentially tradeable certificates. Each represents the reduction, avoidance, or sequestration of one metric ton of carbon dioxide (CO2) or its equivalent in other greenhouse gases (GHGs). These credits originate from a variety of projects, including forest conservation initiatives, renewable energy projects, and methane capture endeavours. When we purchase these credits, we are effectively funding the valuable projects that lower carbon emissions worldwide.

These credits bear the title “voluntary” because, unlike in compliance or mandatory markets (such as those governed by the Kyoto Protocol or the Paris Agreement), their purchase is not a legal requirement. Businesses choose to invest in these credits as a proactive part of their Corporate Social Responsibility (CSR) strategies or to meet internal goals for reducing emissions.

Navigating the Purchase of Voluntary Carbon Credits

The journey to purchasing voluntary carbon credits is relatively straightforward and can be summed up in the following stages:

1. Carbon Footprint Assessment: We begin by understanding the company’s carbon footprint. This is achieved by conducting a greenhouse gas (GHG) inventory to quantify the emissions stemming from the company’s operations. This covers both direct emissions from owned or controlled sources and indirect emissions associated with the company’s activities.

2. Setting Emission Reduction Goals: After pinpointing their carbon footprint, businesses should set realistic yet ambitious goals to reduce their emissions. These reductions should stem from internal changes such as improving energy efficiency or transitioning to renewable sources, supplemented by purchasing voluntary carbon credits.

3. Finding a Reliable Credit Provider: The market hosts numerous carbon credit providers, each offering a diverse range of projects from various regions. It is crucial to opt for a reliable provider whose projects have undergone validation by an independent third party, using standards such as the Verified Carbon Standard (VCS) or the Gold Standard.

4. Purchasing and Retiring Credits: After selecting a provider, the company can proceed to purchase the required number of credits. These credits are then “retired” post-purchase to ensure they cannot be resold, thus maintaining the integrity of the credit system.

5. Reporting and Verification: Upon retirement of the credits, the company can claim the corresponding emissions reductions. These reductions should be reported in the company’s annual CSR report or equivalent and should be independently verified by an auditor to ensure transparency and credibility.

Striding Toward a Sustainable Future

Voluntary carbon credits offer a powerful tool for businesses aiming to offset their emissions and play their part in the global fight against climate change. By investing in these credits, businesses lend their support to projects that not only reduce greenhouse gas emissions but also deliver vital co-benefits to communities and ecosystems around the world. However, we must remember that offsetting is only a single piece of the larger sustainability puzzle, and businesses must also diligently work to reduce their emissions directly. Together, we can march toward a greener, more sustainable future.

Partnering with Aspen Waite Legacy for a Sustainable Future

At Aspen Waite Legacy, we’re committed to providing our clients with comprehensive solutions to their sustainability challenges. We’re here to assist you with emissions offset modelling to accurately measure and plan your carbon offsetting strategy. Moreover, we also help you source Gold Standard Voluntary Emission Reductions (GS VERs) which offer the assurance of a rigorous and comprehensive approach to offsetting. These credits not only represent a tangible reduction in carbon emissions but also contribute to the sustainable development of communities and ecosystems across the globe.

Monika Stukova, CFA Specialist in Corporate Finance Enthusiast for Environmental Sustainability