New research: Carbon credits are associated with businesses decarbonizing faster | Forest Trends’ Ecosystem Marketplace

INSIGHT by the Ecosystem Marketplace

Businesses purchasing voluntary carbon are more likely to report lower gross emissions year-on-year, and invest more in emissions reductions, than companies not engaged in carbon markets

New research published today suggests that companies that participate in voluntary carbon markets (VCM) are leading across a range of measures of robust climate action, accountability, and ambition—across the board, outperforming companies that do not buy carbon credits.

The new study by Forest Trends’ Ecosystem Marketplace indicates that not only are carbon credits purchases funding rapid climate action, but are also associated with companies that are already addressing climate change in their direct operations and throughout their value chains.

Findings include:

Companies engaging in the voluntary carbon market are reducing their own emissions more quickly than their peers.

〉They are 1.8X more likely to be decarbonizing year-over-year;

〉1.3X more likely to have supplier engagement strategies, an indicator that companies buying carbon credits are also actively working with suppliers, employees, and customers to address climate impacts; and

〉The median voluntary credit buyer is investing 3X more in emission reduction efforts within their value chain. They do so by investing in emissions reduction activities for their business and operations, including renewable energy consumption and the purchase of Renewable Energy Certificates (RECs).

Voluntary carbon buyers are more likely than non-buyers to have targets to address climate change, and their targets are more ambitious.

〉They are 3.4X more likely to have an approved science based climate target;

〉1.2X more likely to have board oversight of their climate transition plans; and

〉3X more likely to include Scope 3 Emissions in their climate target – notable given that Scope 3 emissions constitute the majority (91%) of carbon buyers’ emissions, and also are the hardest for companies to exert control over, as these emissions are generated by the company’s suppliers upstream, customers downstream, and other companies and organizations in the value chain.

The market has seen an uptick in demand for pricier, higher quality carbon credits. This suggests companies are willing to pay more to ensure supply-side integrity. The voluntary carbon market was valued at US$2 billion in 2021 and industry experts expect it to grow at least five-fold to between US$10-60 billion by 2030.

The report analyzes voluntary carbon markets transactions and corporate climate disclosures to the CDP (formerly, Carbon Disclosure Project)) by 7,415 organizations, on behalf of 590 institutional investor signatories with a combined US$110 trillion in assets, and 200+ major purchasers with over US$5.5 trillion in procurement spend.

Carbon credits represent a very small share of overall action: the analysis shows that the credits companies are buying represent on average just over 2% of their total emissions.

“Our analysis indicates that corporate voluntary buyers are using science to backstop their investments into a suite of climate solutions, including project-based carbon credits. As companies are being called on accelerate their efforts to do the hard, but necessary, work of addressing GHG emissions in their value chains and decarbonizing their operations, over the past decade our market analyses have shown remarkably consistent results: that companies investing in voluntary carbon markets are outperforming their peers across a range of key indicators.”

-Stephen Donofrio, Managing Director, Forest Trends’ Ecosystem Marketplace 

 “This research clearly shows that companies which are investing in carbon markets – far from being laggards or greenwashers – are using carbon credits as part of ambitious, holistic decarbonisation strategies. Participation in high integrity carbon markets is a credible action against climate change and nature depletion.”

-María Mendiluce, CEO, We Mean Business coalition

 “We are in a race against time, and the global scientific consensus is clear: we must invest in nature to combat climate change. Each and every one of us, from individuals to governments and the corporate sector, must play a role. Carbon credits offer an immediate way for businesses to reduce global emissions right now, and today’s report reaffirms what we’ve long known: carbon credit buyers tend to be leaders in taking climate action. Those criticizing them or lagging on the sidelines should take note.”

-Dr. M. Sanjayan, CEO, Conservation International

“Ecosystem Marketplace’s independent analysis of companies engaging with voluntary carbon markets shows that most buyers are using carbon credits judiciously and as part of a transparent, ambitious, and integrated carbon strategy. This will only accelerate progress towards global climate goals. Sadly, corporate leaders have become reluctant to ‘talk their walk’ about carbon market strategies for fear of being type-cast as green-washers but I hope this report will help dispel mistrust and encourage more CEOs to invest and disclose more about their carbon credit investments.”

-Mark Kenber, CEO, Voluntary Carbon Markets Integrity Initiative 

 “With time running short to cool the planet, we need all the effective climate solutions we can finance. The data is clear, corporate partners who are decarbonizing the fastest are also supporting mitigation activities. It’s time we give credit to these leaders that are embracing holistic climate solutions with real funding.”

-Dee Lawrence, Founder and Director, High Tide Foundation

Explore the report

All in on climate: the role of carbon credits in corporate strategies

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Ecosystem Marketplace, an initiative of the non-profit organization Forest Trends, is a leading global source of information on environmental finance, markets, and payments for ecosystem services. As a web-based service, Ecosystem Marketplace publishes newsletters, breaking news, original feature articles, and annual reports about market-based approaches to valuing and financing ecosystem services. We believe that transparency is a hallmark of robust markets and that by providing accessible and trustworthy information on prices, regulation, science, and other market-relevant issues, we can contribute to market growth, catalyze new thinking, and spur the development of new markets and the policies and infrastructure needed to support them. Ecosystem Marketplace is financially supported by a diverse set of organizations including multilateral and bilateral government agencies, private foundations, and corporations involved in banking, investment, and various ecosystem services.

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