Energy Transition

Why you should consider adding carbon credits to your climate action plan

Nature-based solutions face a $711 billion annual funding gap – which carbon credits can help fill.

Nature-based solutions face a $711 billion annual funding gap – which carbon credits can help fill. Image: Getty Images/iStockphoto

Max Scher
Senior Director, Sustainability Strategy and Innovation, Salesforce
Tim Christophersen
Vice-President, Climate Action, Salesforce
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Energy Transition

This article is part of: World Economic Forum Annual Meeting

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  • Though there is no substitute for reducing emissions, carbon credits can be crucial in reaching net zero.
  • Carbon credits can help offset organizations' residual emissions during their energy transition.
  • Careful third-party evaluation of carbon credits is needed to ensure they are effective purchases.

Carbon credits, which represent the avoidance, reduction or removal of greenhouse gases in order to compensate for emissions made elsewhere, can play an important role in our collective journey to a more sustainable and nature-positive future. When made and used well, carbon credits can be a key part of our efforts to reach the shared global goal of net zero – when the amount of greenhouse gases emitted into the atmosphere equals those removed from it.

Sadly, nature-based solutions face a $711 billion annual funding gap through 2030 to reach their potential for climate and biodiversity. Carbon markets can help close this funding gap, allowing organisations to financially support innovative nature-based projects worldwide by purchasing carbon credits.

Of course, we can’t “offset” our way to net zero. On a global scale, our first step must be to greatly reduce greenhouse gas (GHG) emissions. To avoid the worst impacts of climate change, we need to cut emissions in half by 2030 and to near zero by 2050.

However, reducing emissions will take time, and a company doing that alone may not be enough. Organizations should use all the tools they have – today – to work towards the global goal of net zero. One step organizations can take is to purchase carbon credits to help compensate for the emissions they haven’t yet reduced. This helps scale climate solutions globally.

Are your carbon credits contributing to climate action?

Reducing emissions throughout the full value chain should be an organization’s first priority. We have a way to go, as only about a third of the world’s largest 2,000 companies have set science-based climate targets. Each organization should set a 1.5°C-aligned science-based target, monitor that target and transparently disclose its progress.

With sustainability management solutions, organizations can reduce both costs and emissions – easily tracking, analyzing and reporting on carbon emissions and waste management data across their business ecosystem, including their value chain.

But even with deep reductions, some emissions will remain for decades. In the long term, organizations should compensate for those residual emissions with high-quality carbon removals. However, carbon removal technologies are currently in their infancy, so while working to scale them through efforts like the First Movers Coalition, organizations should also purchase credits from readily deployable options like those from nature-based solutions, which need to reach scale this decade. This is not the time to let the long-term ideal serve as an excuse for inaction today.

We’re at an “all of the above” moment for climate action. We need all strategies, executed in parallel, right now. So while you’re working on reducing emissions, you can also purchase carbon credits to provide critical funding to scale climate solutions.

Have you read?

Evaluating carbon credit criticisms

Today, there are two main criticisms of carbon credits:

1. Organizations will purchase carbon credits instead of reducing their emissions

2. The climate benefits some projects claim are inflated or simply incorrect

Organizations must address the first critique by purchasing carbon credits as part of a larger, comprehensive climate action strategy. That strategy begins with emissions reductions, with a clear plan to reduce emissions as far and fast as possible.

Next, by examining third-party ratings and other independent evaluations, organizations can understand the impacts of their carbon credit purchases and ensure that they meet or exceed quality standards. Not all carbon credits are equally helpful. If made poorly or used improperly, they can actually be harmful.

Doing this can help buyers ensure that the GHG impacts and specific co-benefits that matter to them – such as biodiversity and supporting the local economy – are satisfied.

Challenges on the path to net zero

Taking bold climate action takes determination, resources and innovation. But taking action can make organizations more successful and resilient.

The voluntary carbon market faces a few key challenges, including:

1. Buying high-quality carbon credits – and understanding their level of quality – is hard, and it shouldn’t be

Purchasing high-quality carbon credits means navigating the rapidly evolving voluntary carbon market, which can be very challenging. The path to purchasing carbon credits can be complex, and buyers want to trust that carbon credit projects have the positive impact they intend. To make carbon credit purchases more trusted, companies should look for third-party ratings that bring transparency to the complex voluntary carbon market. While quality standards are still being improved, independent third-party reviews are an indispensable tool for increasing transparency around carbon credit quality.

With this in mind, Salesforce built Net Zero Marketplace – a climate action hub for everyone and a site where organizations can purchase carbon credits offered by ecopreneurs. Net Zero Marketplace showcases detailed information, clear pricing, and third-party ratings for carbon projects, giving organizations information and tools to help identify projects that best align with their priorities and standards. If used responsibly and with integrity, carbon credits have the potential to be a powerful tool to fight climate change.

2. We need more high-quality carbon credit projects

Many of the projects offered in the voluntary carbon market today do not meet the requirements proposed in the draft Core Carbon Principles by the ICVCM. While these principles may be ambitious, they set an important standard for quality. We need more ecopreneurs, creating more carbon credit projects with greater quality and transparency than ever before.

The time for climate action is now

Reaching the level of decarbonization that science tells us is needed is dependent on societal, systemic changes that will take time. This means that while emissions reduction goals should be prioritized, to reach them, organizations must also seek to affect change outside their own operations. Carbon credits are one tool to that end, with a great deal of promise.

Today, Salesforce has net zero residual emissions across our full value chain and has reached 100% renewable energy for our global operations. Our Climate Action Plan serves as a guide that we hope is helpful to others as they chart their climate action journeys. We include ESG goals as part of our executive compensation programmes, have published a yearly Stakeholder Impact Report since 2011, and continue to advocate for decision-useful corporate climate disclosures. And in addition to our own net-zero journey and transparent ESG reporting, we are also focused on enabling our partners, customers and peers to get to net-zero emissions as quickly as possible with our sustainability solutions.

Discover

What's the World Economic Forum doing about the transition to clean energy?

Carbon markets are complex. Inevitably, some mistakes will be made along the way. But the worst thing to do is sit on the sidelines and wait. We’re in this together, and we must work together to create a future we can be proud of – starting now.

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Energy TransitionNature and BiodiversityForum Institutional
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