Business PickupBusinesses of all sizes and scope are using carbon credits as a component of their ESG strategy. Yet, there’s still confusion about what qualifies as carbon credits and how the carbon market is run. Here’s everything your company should know before purchasing carbon credits.
What exactly is a carbon credit?
A carbon credit represents ownership of one metric tonne of CO2 that’s been removed or prevented from entering the atmosphere. There are core carbon principles which state that the carbon must be real, measurable, permanent, and additional. This concept of additionality is especially important – it means that the activity for which the credit is awarded must go above and beyond normal business activities. In other words, if a company is legally required to do reclamation activities after removing trees, it would not qualify for carbon credits since it was already a mandatory activity.
Additionality should be considered before a project starts, instead of completing it and attempting to claim credits afterwards. It must also be verified through a third party. There are four main registries known for maintaining high standards: American Carbon Registry, Vera ACR, Climate Action Reserve (CAR), and Gold Standard. Before purchasing carbon credits, however, it’s important to know which market applies to your business.
What are the two types of carbon markets?
One area of confusion surrounding carbon credits stems from the fact that there are two carbon markets, which is an important detail most people are unaware of. First, there’s a mandatory (compliance) carbon market, which is set up by government regulators to keep large emitters of carbon at or under a certain threshold. Participation is required for large emitters. This can be at a state or federal level, but credits are non-transferable. A compliance credit in the system in British Columbia could not be used for the federal system, for example.
On the other hand, there is also a voluntary market, which is where some corporations, small businesses, and even individuals choose to purchase carbon credits. Often they do so to work towards net zero targets or similar ESG goals and claims. This voluntary market is growing, but as of now, it’s a bit of a “wild west,” where greenwashing can take place, which is the recent trend in which companies create the false impression that they are more environmentally friendly than they can prove. While there are standards in place to help minimize the issue, the space isn’t as heavily regulated as the mandatory market. It’s therefore critical to partner with trusted companies when pursuing ESG initiatives related to carbon emissions reduction.
How do carbon credits fit into the IT asset disposition space?
While some IT asset disposition companies sell carbon credits, others (including Quantum) do not. It’s our belief that our industry doesn’t satisfy the additionality requirement, since reuse and recycling of electronics has been “business as usual” for decades. Therefore, there is no substantive argument that ITAD would have happened without carbon credits being involved. Reuse and recycling of electronics certainly benefit the environment and reduce emissions, but these are practices that should be standard practices in businesses and therefore do not meet the “above and beyond” factor of additionality.
Why is it important to purchase legitimate carbon credits?
Does it really matter if your company purchases illegitimate carbon credits? After all, if there’s a less reputable registry that has looser standards, is there any harm in purchasing credits they’ve verified? In short, yes.
Failing to practice due diligence when purchasing carbon credits is risky for several reasons. For one, your company could be wasting money on credits that have no actual value. This is especially true in the voluntary market, which is loosely regulated compared to the mandatory market. For another, illegitimate carbon credits put your business at risk for reputational and legal consequences. Some companies have been sued by certain regulatory bodies for dishonest reporting, for example. If you’re making specific ESG claims, it’s important to back them with legitimate actions, which includes valid carbon credits.
What are some best practices for purchasing carbon credits?
Although it can be challenging to navigate the carbon market at first, you can minimize risk with a thoughtful, informed approach. When pursuing net zero targets and other ESG goals, start internally. Carbon credits can be challenging because it’s not always clear within an organization who should be responsible for them. In larger corporations, there’s often an appointed ESG or sustainability team to handle it. In smaller companies, it may fall on someone from operations or finance. Ideally, there should be multiple decision makers involved with carbon credit practices, and everyone should become educated on best practices.
Moreover, you can’t reduce carbon unless you know where you stand with emissions in the first place. Seek ways to reduce them as much as possible internally first. Then, focus on offsetting the hard-to-abate emissions through carbon credits.
Finally, companies must be especially careful with voluntary carbon credits. When you do choose to monetize emission reductions, make sure they meet the additionality requirement, and check that a reputable registry is used for verification. A best practice is to purchase carbon credits verified by one of the four internationally reputable registries: American Carbon Registry, Vera ACR, Climate Action Reserve (CAR), and Gold Standard.
Companies can trust Quantum to support their ESG initiatives without greenwashing through ITAD and e-waste recycling activities, as well as detailed and accurate GHG reduction reporting. Find out more about our services for businesses here.