How carbon credits can help you meet net zero targets
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What you need to know about measuring and reducing emissions, setting net-zero targets, and offsetting with carbon credits
According to the Intergovernmental Panel on Climate Change, humanity must reduce net greenhouse gas emissions to zero by 2050 in order to limit climate change to 1.5 degrees of warming and prevent the worst effects of climate change. If your business is considering or taking action to address climate change, you’re in good company — companies and cities representing over 25% of global CO2 emissions and over 50% of GDP, have pledged to be carbon neutral by 2050.
Here at Pachama, we help organizations and individuals take action towards their climate goals by enabling them to purchase carbon credits from high-quality forest projects backed by remote sensing and AI. Whether you’re just beginning to consider climate action or you’re ready to pledge net zero, this guide will show you how to take climate action and how carbon credits can fit into your strategy. It will highlight key resources and summarize what you need to know at each step, including:
- Measuring your emissions footprint
- Reducing emissions and setting goals
- Offsetting emissions with carbon credits and
- Iterating and improving over time to achieve (and maintain) net zero emissions
Before we dive in, let’s take a moment to clarify two terms used above — carbon neutral and net zero. Although the IPCC makes scientific distinctions between the terms carbon neutral and net zero, in practice, they are used interchangeably to describe a company’s commitment to achieve climate targets. More recently, the term Net Zero has been used to more comprehensively describe a company’s strategy for mitigating greenhouse gas (GHG) emissions, so that’s the term we will use here. Net Zero usually signals a company’s commitment to maintain a zero GHG emissions balance, typically through a combination of direct emissions reductions within its value chain and financing emissions reductions and removals elsewhere.
Measure your emissions footprint
The first step in pursuing net zero emissions is to measure all greenhouse gas emissions from your business. Measurement is important not only because it will help you know how much you have to reduce or offset to reach net-zero, but also because it can help you identify and prioritize specific opportunities to reduce emissions. Not sure what you should include in your measurement?
The Greenhouse Gas Protocol Corporate Accounting and Reporting Protocol provides detailed guidelines and outlines three scopes of emissions that you should include when measuring the emissions associated with your business:
- Scope 1 — direct operational emissions from your business’s facilities
- Scope 2 — emissions from the generation of electricity purchased by your business
- Scope 3 — indirect emissions related to your value chain, including from materials, shipping, and the product’s end of life
While there are well-established benchmarks and processes for measuring some types of emissions — such as those from electricity generation — there is less certainty around how to measure indirect emissions. In the absence of clear standards and regulatory requirements, the Greenhouse Gas Protocol states that “companies need to make a good faith effort to provide a complete, accurate, and consistent accounting of their GHG emissions.” It also outlines principles to be considered when making these measurements and disclosures.
In practice, companies choose different measurement methods based on the size and complexity of their emissions. For example, a small software company that primarily generates emissions through the use of purchased electricity may choose to use an emissions calculator. Although not as detailed as other methods, this could provide the relevant information needed for reducing and offsetting emissions as well as consistency since the measurement could easily be generated again in the same way.¹
Using an emissions calculator may be appropriate for a small office-based company, but this approach would not be as relevant, complete, or accurate for a larger company with a complex supply chain and varied emissions sources. A company like that should consider a thorough audit since their emissions come from diverse sources and the audit process would provide relevant information to guide decision-making by revealing opportunities for emissions reductions.
Regardless of how you choose to measure your emissions, it’s important to be transparent about how you do it. It’s challenging to find the perfect way to measure, but being open about what you are and aren’t including and how you are making your measurements creates a more credible program. While some companies have in-house capacity for emissions measurements, others may opt to contract services with a third party that specializes in greenhouse gas measurement, such as Emitwise or ClimateNeutral.
Reduce emissions as much as you can
Once you understand your organization’s greenhouse gas footprint, the next step is to use that information to help you reduce your emissions. For example, when last-mile delivery app Glovo audited their emissions, they found that their main sources of emissions were food waste, packaging, and transportation, and so they developed plans to reduce emissions in each of those key areas. Other companies identify electricity usage as their biggest source of emissions and opt to focus on energy efficiency measures or switching to renewable sources of energy. Many forms of emissions reductions actually help the bottom line by reducing waste, saving the company money, and generating good will among customers.
As you plan your organization’s climate action, you may want to set a target for when you aim to reach net-zero. A net-zero goal can help energize your organization and focus them on the target. Although the IPCC report urges that humanity must achieve net-zero emissions by 2050, the sooner we reduce net emissions, the less work we will have to do later to remove and store greenhouse gases or adapt to climate threats. That’s why many companies are opting to achieve net-zero for their operations well before 2050.
Companies also note other benefits and motivations, including:
- preventing and mitigating future climate harms to their business
- getting ahead of regulatory requirements that will likely come
- building goodwill among customers and investors
- showing leadership within the market, and
- attracting and retaining top talent.
In addition to setting a long-term emissions reductions target, we also recommend setting intermediary goals — like achieving net-zero for a specific part of your business — to help you stay on track and demonstrate near-term progress.
Although there is not one clear standard for setting emissions targets, there are resources you can refer to for help as you set your goals. Chapter 11 of the Greenhouse Gas Protocol Corporate Accounting and Reporting Protocol details important steps and considerations for setting targets. More recently, the Science-based Targets Initiative (SBTI) was formed to encourage private sector action. A partnership between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), SBTI has been formulating sector-specific guidance to help the corporate sector set emissions reductions targets.
Offset what you can’t reduce
Although you should prioritize reducing greenhouse gas emissions as much as you can, it may be infeasible to remove some emissions from your value chain given today’s technology and market conditions. If this is the case, you can offset remaining emissions by financing emissions reductions or removals elsewhere.
The UN introduced carbon credits as a market mechanism to allow those looking to offset emissions to purchase carbon credits from projects that avoid emissions or capture carbon above what would have happened in the absence of carbon finance. Each carbon credit represents one tonne of CO2 equivalent removed, reduced, or avoided, that can be bought, sold, or traded.
Once you make the decision to purchase carbon credits, you’ll then need to choose what type of carbon credits to buy. Projects that generate carbon credits from emissions reductions typically fall into one of the following categories: land use, agriculture, industrial gases, and organic waste management. Some projects also generate carbon credits by directly removing GHGs from the atmosphere, including nascent technologies as well as reforestation and other land use projects.
Compared with industrial gas and organic waste management, which are limited to point sources, or nascent technologies that capture carbon directly from the air, nature-based climate solutions can be deployed at large scale today. New research shows that nature-based climate solutions offer a cost-effective path for achieving 37% of the CO2 mitigation needed by 2030 to prevent warming above 2℃. Both private markets and federal policy recommendations signal the importance of nature-based climate solutions — forestry and land use carbon credit transactions accounted for 165% more value in 2019 than the next largest category, and forest restoration was the top U.S. policy recommendation for capturing carbon made by World Resources Institute (WRI) in 2020, with 6x more investment recommended for forest restoration than for any other carbon capture method.
Even though each carbon credit represents one tonne of CO2e, carbon credits are not equal in many other respects, even within the same category. We recommend that you consider the sources of carbon credits before purchasing so that you support projects that align with your values and deliver meaningful climate benefits. The Stockholm Environmental Institute’s Offset Guide provides detailed information about how to evaluate the quality of carbon credits. Expanding on guidance from the UN, SEI says that carbon credits should be:
- Additional, meaning they represent climate benefits above what would have happened otherwise
- Not overestimated
- Permanent, meaning greenhouse gases stored should be stored for a long time
- Not claimed by another entity
- Not associated with significant social or environmental harms
Here at Pachama, we review each forest project according to these criteria before deciding whether to include it on our platform. Historically, the globally dispersed nature of forest projects has posed challenges for verification and monitoring. That’s why we use satellite imagery combined with machine learning models to evaluate forest carbon projects at global scale. Forest projects can take a variety of different forms — some forest projects remove carbon from the atmosphere by restoring degraded forests, while others aim to prevent the destruction of existing old-growth forests and the release of carbon dioxide stored within them. Each project on the platform includes digestible information about the project and its benefits to guide you as you make your investment decisions.
In addition to helping you meet climate goals, supporting forest projects can also help you further other sustainability commitments. That’s because forest projects provide numerous co-benefits, including ecosystem services like habitat for biodiversity, water filtration, and protection against extreme weather. Many projects, like Brazil Nuts Concessions, work in partnership with local communities to improve the lives of local people because they recognize that creating compelling economic alternatives to deforestation is one of the best ways to prevent it. Whether you’re committed to improving water quality, empowering women or indigenous people, or engaging your supply chain, the Pachama platform makes it easy to learn about the co-benefits associated with each forest project so that you can choose to support projects that are aligned with your goals and values.
Iterate and improve
However you choose to reduce and offset emissions, remember that taking climate action isn’t a one-time exercise. That’s why many companies who are taking action now are beginning to build sustainability programs or teams into their business. As new technology develops, new opportunities for emissions reductions and carbon removal will become feasible. To go net-zero — and remain net-zero — companies need to regularly measure their emissions, explore new opportunities for emissions reductions, and offset their remaining emissions.
Ready to take the next step towards net-zero? The Pachama platform makes it easy for businesses and individuals to support forest projects through the purchase of carbon credits. Visit Pachama today to learn more about the forest projects on our platform or reach out to us at info@pachama.com.
[1] Even when using a third party emissions calculator, we recommend companies be prepared with citation information on the methodology behind the emissions calculators they are using in the interest of transparency.
