Carbon credits & corporate strategy: What businesses need to do now

What are carbon credits?

In their simplest form, one carbon credit is equivalent to one metric tonne of carbon dioxide that is either removed from the atmosphere or prevented from being emitted, relative to a baseline. Credits exist in two main market segments, compliance markets and Voluntary Carbon Markets (VCMs).

Compliance markets are regulated systems operating under mandatory national, regional, or international carbon reduction regimes where governments require companies to cap or offset their emissions. Companies exceeding their emissions limits must purchase allowances, while those under limits can sell excess credits, creating a market-driven incentive to reduce greenhouse gas emissions. The most prominent example is the European Union’s Emissions Trading System (ETS) the world’s largest carbon market, and other regional schemes include the UK ETS, RGGI in the US, and China’s National ETS.

Carbon credits in the Voluntary Carbon Market (VCM) on the other hand, entail a cash transfer from one entity seeking credit for a decrease in emissions to another company proposing to achieve this emissions reduction. Sellers use them to pay for emission-reduction activities, and buyers use them to boost their environmental credentials. Credits can contribute to a net reduction in global emissions where they finance activities that would not otherwise have taken place. The fundamental idea is that offset credits are a means of transferring a net climate benefit from one party to another. The utility of offsetting rests on the premise that it is predominantly unimportant where GHGs are reduced because they mix everywhere in the atmosphere (in some cases, local emissions impacts cannot be ignored in cases where secondary pollutants are generated by the initial emission)

Compliance carbon markets remain the dominant force by volume and value, for example the EU ETS now covers around half of EU emissions and is on track to cover 62% by 2030[i]. Revenue from the scheme reached €38.3 billion in 2024, with total revenue now exceeding €250 billion, providing governments with funds explicitly earmarked for climate transition investments. Voluntary carbon markets (VCM) remain smaller at present, but strategically important.

From a business perspective, carbon credits increasingly function like strategic commodities, with price signals, quality differentiation and reputational consequences attached. More than 87 carbon pricing mechanisms are now in operation globally, with just over 29% of global greenhouse gas emissions worldwide covered by direct carbon pricing, according to recent data from the World Bank[ii].

Why carbon credits matter

As carbon markets evolve, their role within corporate strategy is also changing. Driven by tightening regulation, investor scrutiny, and supply chain decarbonisation pressures, carbon markets are reshaping how companies manage risk, cost, and long-term value. When used credibly and strategically, carbon credits can complement a business’ internal decarbonisation, as well as unlock flexibility in hard‑to‑abate areas and improve competitiveness.

In addition, carbon markets are maturing, with recent analysis from BeZero Carbon finding that more ‘high quality’ credits are being retired than ever before. The researchers found that businesses are moving away from low-quality credits and are instead seeking those with stronger climate integrity. Since 2022, data shows that the share of retirements rated ‘A’ or higher has more than doubled, while ‘C’ and ‘D’ rated retirements have almost halved[iii].

Sebastien Cross, co-founder and chief innovation officer at BeZero Carbon, previously said:

“Carbon markets today are incomparable with where we were three years ago. Our analysis shows that businesses are increasingly favouring higher-rated, lower-risk projects. Integrity is now shaping real market outcomes, whether in which credits are retired or how they are priced. Carbon ratings are a vital part of the information infrastructure needed to give corporate buyers the confidence to scale up investment in climate action.”[iv]

Carbon credits are becoming a board‑level issue

Several factors are pushing carbon credits onto the corporate agenda, including:

Regulation is extending beyond company boundaries - The EU’s Carbon Border Adjustment Mechanisms (CBAM) shifts carbon cost exposure directly onto supply chains. As of 1st January 2026, CBAM preparation is no longer optional for importers into the EU, and while it initially impacts six sectors (cement, iron and steel, aluminium, fertilisers, electricity and hydrogen), the goal is for it to expand to cover a wealth of products in the future. Therefore, companies must finalise robust emissions-data systems, map supply-chain carbon exposure with precision, and integrate carbon pricing into procurement and sourcing decisions. Those who treat CBAM as a narrow compliance task will be caught off guard. Those who treat it as a core strategic variable will be better positioned in a carbon-constrained global market. This makes carbon credits relevant not only for compliance entities, but for export‑oriented and manufacturing businesses seeking to protect margins and customer access.

Scope 3 emissions remain a significant challenge - For many companies, Scope 3 emissions account for 70–90% of their total emissions footprint yet lie largely outside direct operational control. In 2024, the Science Based Targets initiative (SBTi) acknowledged that, under defined guardrails, carbon credits and other environmental attribute certificates may play a limited role in addressing scope‑3 abatement gaps.

Capital markets are scrutinising credibility - Investors and lenders increasingly distinguish between credible climate transition strategies and reputationally risky offsetting. While poor‑quality credits raise greenwashing concerns, high‑integrity credits aligned with recognised standards can reduce reputational risk and support disclosures under ESG and sustainability reporting frameworks.

Where the opportunities lie & how companies should integrate carbon credits

Carbon credits offer a wealth of benefits for businesses. Companies operating in hard to abate sectors such as aviation, construction, steel, and chemicals face technological and cost barriers to rapid decarbonisation. For these industries, carbon credits (in particular high durability removals) offer flexibility while capital investments scale. Some companies are using carbon finance strategically, for example co-investing in supplier projects or nature-based solutions to reduce upstream emissions, improve resilience, and strengthen commercial relationships.

In terms of opportunities, purchasing credits now could help with risk management later. Forward purchasing, or long-term offtake agreements can hedge future carbon price exposure, in a similar way to energy procurement strategies. As compliance markets tighten caps over time, early action can reduce long‑term cost volatility.

Carbon credits are not a substitute for emissions reduction, but a complement to credible, science‑based decarbonisation. Companies that treat carbon credits as a strategic complement, rather than a shortcut, will be better positioned to manage risk, maintain market access, and demonstrate credible progress in a carbon constrained global economy.

To integrate carbon credits into their operations, businesses can do the following:

First, ahead of procurement, organisations must first fully understand the emissions across their value chain, before applying credits within a decarbonisation hierarchy to tackle residual emissions or as a tool aligned with net zero pathways. This includes measuring and reducing direct (Scope 1 & 2) emissions and engaging with suppliers to reduce Scope 3 emissions.

Companies should prioritise quality and integrity, aligning procurement with recognised standards such as the ICVCM’s CCPs, ensure robust monitoring, reporting and verification (MRV), and avoid claims that over‑state the role of credits.

A credible approach also requires governance. Sustainability teams need clear internal guardrails on when credits can be used, who approves purchases, what claims can be made, and how the organisation will report progress transparently. Finance, legal, procurement, communications and senior leadership all have a role to play. This is especially important as scrutiny of green claims intensifies. The UK Government’s voluntary carbon and nature market integrity principles emphasise that credits should be used in addition to ambitious value-chain action, that organisations should use high-integrity credits, disclose planned credit use and make accurate claims using appropriate terminology.

Finally, businesses should integrate carbon into financial and risk planning, where carbon pricing exposure should be treated as a material business risk, incorporated into capital allocation, procurement strategy and scenario analysis, particularly where regulatory expansion is expected.

While markets are still maturing, governance has improved markedly since 2023–2024, and the trajectory is clear: carbon will continue to be priced, scrutinised and embedded in business decisionmaking. It is therefore crucial that businesses act now to buy credits responsibly, allocate capital intelligently and accelerate real world decarbonisation.