Develop a Carbon Credit Strategy in 5 steps

Companies are increasingly adopting decarbonization strategies to reduce greenhouse gas (GHG) emissions and achieve net-zero commitments. However, every net-zero plan eventually needs compensation for residual emissions. This is where carbon credits come into play - allowing organizations to offset residual emissions by investing in projects that remove or reduce carbon from the atmosphere.

Sustainability managers are looking to incorporate carbon credits in their sustainability strategy, taking into account latest best practices and guidelines. We will go through the five steps to develop a carbon credit strategy. 

1. Define the decarbonization context
2. Define strategic goals
3. Research policy and regulatory compliance
4. Mapping the strategy 
5. Choosing a carbon credit portfolio

1. Define the decarbonization context

The first step is to define what the reduction goals for your company are and what has been done so far. For a carbon credit strategy to make sense, a clear reduction plan should first be defined. There are several guidelines for developing a reduction strategy, including the guidelines of SBTi and ISO. 

The reduction goals eventually end up in a net-zero state, meaning that residual emissions are compensated for by carbon removal. But credible reduction strategies also include near-term reduction targets. Once a reduction strategy is developed, your organization can proceed to the next step. ‍

2. Define strategic goals

Your organization can have several goals that can be reached through carbon offsetting, including but not limited to the following goals: 

• Mitigate residual emissions 
• Support progress towards net-zero targets
• Support projects in regions your organization operates in
• Secure long-term access of carbon credits
• Build a sustainable brand
• Stimulate technological innovation

Clearly defining these strategic goals together with internal stakeholders can help to create buy-in for your carbon credit strategy. It will also influence what type of carbon credits fits best for your organization. 

3. Research policy and regulatory compliance

Although carbon credits are part of a voluntary market (the Voluntary Carbon Market or VCM) there are guidelines and regulations to adhere to. For European companies two regulations are in most cases applicable: 

• The CSRD - The Corporate Sustainability Reporting Directive (CSRD) describes how companies should report on a broad range of sustainability topics, including the use of carbon credits. For carbon credits, reporting requirements include describing the quality of carbon credits used, the method of removal or avoidance and the carbon credit standard used. 
• The Green Claims Directive - The Green Claims Directive describes how companies should substantiate their sustainability claims by providing adequate supporting documentation. Also the claim itself should be clear and not misleading towards customers or the public. 

For each situation specific regulations or guidelines could be applicable, depending on industry, geography or type of claim made. After developing a clear framework on what regulation is applicable, companies can start mapping the carbon credit strategy. 

4. Mapping the strategy

The next step is mapping the actual strategy, where organizations can choose between existing carbon credit strategies or by defining its own company strategy. Existing strategies include the VCMI Silver, Gold, and Platinum Carbon Integrity Claims, which show different levels of commitment to funding climate action and taking responsibility for company emissions. 

As each company is different there are more ways to make a credible carbon credit strategy, which Cawa can help with. This step includes defining the carbon credit budget and making sure a specific claim or target can be reached within the budget. In any case, the strategy includes a multi-year approach to carbon offsetting, goals that the company intends to reach and how this ties into given regulation. 

5. Choosing a carbon credit portfolio 

Once a carbon credit strategy has been developed and a budget has been defined, you can look into which carbon credit portfolio fits best. A carbon credit portfolio should be aligned with the Oxford Offsetting Principles, which means:

• Cut emissions as a priority, ensure the environmental integrity of credits, and regularly revise as best practice evolves.
• Transition to carbon removal offsetting for any residual emissions (away from emissions avoidance or reduction) by the global net zero target date.
• Shift to removals with durable storage and low risk of reversal.
• Support the development of innovative and integrated approaches to achieving net zero.

All the portfolios developed by Cawa adhere to the Oxford Offsetting Principles, and we’re always able to make a portfolio specifically tailored to your needs. 

If you have any questions on how to develop a coherent carbon credit strategy, connect with us and plan a meeting with a carbon removal expert.