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Understanding carbon credits

What they are and how they work

What Are The Different Types Of Carbon Credits?

When businesses say they operate to a standard that’s carbon neutral or even carbon positive, it rarely means that they’re doing so with no harmful emissions at all as it’s near impossible. Instead, usually they offset the emissions they do incur with the purchase of carbon credits – and here, we explain what those are and how they work.

What are Carbon Credits and how do they work?

Carbon Credits are a way of companies or individuals purchasing the offset of emissions. Each ‘credit’ bought is invested into an initiative that permanently removes or avoids one tonne of GHG (Greenhouse Gas) emissions. This could be through land use change, the planting of trees or renewable energy production. Usually, such initiatives and projects are in rural areas and managed by companies who specialise in the regeneration of environments.

When a company can’t avoid emissions, they buy carbon credits to offset the negative environmental impact. If they buy enough of them, they may be able to claim carbon neutrality – that is, removing the equivalent all of the emissions they make.

How do Greenwashing and Carbon Credits interact?

The practice of ‘greenwashing’ is where businesses purchase carbon credits purely to meet sustainability targets or to enhance the reputation of their company as ‘green’; but without making tangible efforts to reduce their overall carbon emissions – leaving no net carbon benefit. This is considered an unethical practice as it does not demonstrate any real commitment to the ethical or environmental concerns of running a business, and simply shifts the impact of emissions from one place to another.

As such, carbon credit purchase should only ever form one part of a business’ sustainability strategy and should not be its sole effort.

Compliance Carbon Markets

In Compliance Carbon Markets, carbon credits are part of regulatory cap-and-trade systems. This is where national governments form GHG emission limits by industry, which creates a ‘cap’ on the total amount of emissions. When organizations in these industries reduce their emissions to below these caps, they earn carbon credits. These credits, which are then considered surplus, can be sold on to other organizations who are struggling to reduce their emissions to within the limits. This helps incentivize a kind of circular system within industries to reduce emissions overall.

Voluntary Carbon Markets

In Voluntary Carbon Markets, businesses (and sometimes individuals) choose to purchase carbon credits to offset their emissions through their own choice – and not because of any legal requirements or industry limits to do so. Most commonly, carbon credits are bought to enhance sustainability credentials, to work toward carbon neutrality and to support environmental efforts. Carbon credits in voluntary markets are created and sold by specific offset projects who either remove emissions or avoid adding more.

The Verification of Carbon Credits

It is critical that businesses ensure any purchase of carbon credits is authentic and that they truly are removing or avoiding emissions; otherwise, their purchase is fruitless and no move toward sustainability is made.

In the Compliance Carbon Market, credits tend to be allocated based on the company’s self-reported emissions data. This is audited by an independent third party to ensure the regulatory bodies sign them off, confirming that they are authentic and compliant with the industry standards as set by the government.

In the Voluntary Carbon Markets, the verification and validation of carbon offset programmes is also carried out by third party auditors but are compared to third party standards rather than anything government-approved. Such standards include the Verified Carbon Standard (VCS), the Gold Standard and the Carbon Footprint Standard (the latter of whom accredit Procurri’s operations). Verification occurs both when the project is initially launched and then periodically and sporadically throughout operations to ensure continued compliance.

How Can I Ensure My Business Operates Genuinely Sustainably?

Whether or not businesses choose to purchase carbon credits to offset their emissions, they need to ensure that sustainability is put at the heart of everything they do – and not just worked toward to put some notches next to a target. This includes, but is by no means limited to:

Working with Sustainable Suppliers

While an organization may feel its only responsible for its own operations, in truth to work with others is to endorse their working practices too. Check the sustainability credentials for suppliers and ask for their ESG reports. For example, Procurri are endorsed as Carbon Neutral by the Carbon Footprint Standard and publish their sustainability reports and progress toward UN programmes publicly.

Keeping Assets Operating for as long as possible

Tech is developing at an unrivalled pace, but all too often organizations jump to replace their existing assets with newer before it will result in value for money or is truly needed; encouraging overconsumption and the disposal of hardware unnecessarily. Services such as Third Party Maintenance allow for the maximization of asset value and avoids costly (and often environmentally unfriendly) replacement of tech before it’s really needed.

Ensuring the Disposal of Assets is completed Ethically

Where hardware and other tech assets do need to be disposed of, businesses have a tendency to sell on the equipment to a third party and transfer their feeling of responsibility in doing so – not knowing how or where ITAD (IT Asset Disposition) takes place. Such practices often result in environmentally unsafe disposal in third world countries, impacting negatively on already vulnerable populations and ecosystems. Instead, working with a zero-to-landfill ITAD provider provides the facility for businesses to promote recycling and refurbishment – boosting sustainability credentials and doing the right thing along the way.

You may be surprised by just how many small changes a business can make in their operations to improve sustainability and make a boost toward lowering emissions ahead of purchasing carbon credits. Looking to find innovative ways to do so in your organization? Get in touch with the Procurri team today!

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