The Value of Carbon Credits: How Businesses Can Drive Sustainability and Profitability

As environmental stewardship becomes both a business and moral necessity, carbon credits are a way to ensure participation while driving profitability and sustainability for businesses. 

But how do carbon credits work and what are their true value and benefit?

To leverage the value of carbon credits for emission reduction targets, you must first understand the credits and offsets, the carbon market, and your role above and beyond credit purchases. 

Here’s a detailed guide to carbon credits, providing you with the information you need to meet your sustainability goals and foster business growth, now and into the future. 

How Do Carbon Credits Work?

Sometimes called carbon allowances, carbon credits are used to offset a business’ carbon emissions. While this may seem like a straightforward concept, there is some confusion about how carbon credits actually work. 

When purchased on the carbon market (the system in which carbon credits are bought, traded, and sold), a carbon credit allows a business to generate one tonne of CO2 emissions.

Broadly speaking, there are two types of carbon markets: the compliance market and the voluntary market. 

The compliance market is the result of national, regional, and/or international policy or regulatory requirements. The voluntary market is the selling, buying, and trading of carbon credits on a voluntary basis. 

The “cap and trade” market is perhaps the most commonly known. Cap and trade puts a hard limit or “cap” on allowable carbon emissions, but gives companies flexibility in how they meet this cap by allowing them to buy, sell, and trade carbon credits to help meet these caps.

Carbon credits are not designed to give businesses a licence to continue producing emissions. The idea is that businesses will take additional steps to reduce carbon emissions. These efforts are monitored by third-party evaluators. These evaluators ensure that any carbon reductions are clearly defined and documented and meet the additionality requirement. 

What is Additionality?

Additionality is the core of carbon offsets. They are reductions that go beyond what a business is normally doing. They are steps outside of the ‘business as usual’ state. 

This is where things typically become a little muddied. There are no specific tests to prove additionality nor are there specific additionality requirements. 

Without these specifications, it can be hard to know who is actually working to reduce emissions before offsetting them with carbon credits. 

Many businesses believe that IT Asset Disposition (ITAD) can meet their additionality requirement, however, this belief is misguided.

While ITAD practices do reduce emissions and help businesses reduce their carbon footprint, it is an action that is likely to have happened anyway so it does not constitute additonality. 

What is the Difference Between Carbon Offsets and Carbon Credits?

Carbon offsets and carbon credits are both strategies for reducing carbon emissions but there are differences in how they function. 

Carbon offsets are available to individuals, small businesses, and large corporations. They are used to fund and support specific projects that lower carbon emissions or “sequester” carbon, meaning they remove greenhouse gases from the atmosphere and store them. Carbon offsets are traded in the voluntary market. 

Carbon credits are traded by companies and governments in the cap-and-trade market, allowing entities the right to emit one ton of carbon. 

Together, these systems help businesses meet their reduction targets by creating permissible emissions as well as a way to offset emissions above the cap by supporting sustainability projects. 

The Business Benefits of Carbon Credits

Carbon credits offer a lot of financial and competitive benefits, making sustainability for businesses a worthwhile investment. 

Carbon credits can:

Demonstrate a Clear Commitment to Environmental Stewardship

In committing to carbon neutrality or efforts to reduce emissions, businesses can experience a significant reputational boost.

Not only are they helping the environment, but they are aligning with the values of a public that is demanding increased responsibility at the corporate level. It is not about putting out empty mission statements and taking action sometime in the future. 

Carbon credits demonstrate clear action now and allow for the development of greater efforts in the future. 

These reputational benefits can increase brand allegiance, attract new consumers or clients, and increase profitability. 

Increased Cost Savings

By purchasing carbon credits, businesses can meet their target carbon reductions without having to immediately invest in operational changes and technology upgrades.

This, of course, is not a long-term solution. Businesses should use carbon credits to meet current emission caps while they plan for long-term, permanent sustainability efforts. 

Regulatory Compliance and Risk Management

Purchasing credits and carbon offsets can ensure a business meets provincial, federal, and global regulatory requirements. Any emissions that exceed the regulatory limits can be balanced by purchasing offsets. 

Furthermore, changing and tightening regulations can lead to business risks like operational disruptions, failure to meet consumer preferences, and the expensive adoption of new technologies. 

With carbon credits and offsets, businesses can manage these risks, meet targets, minimize disruptions, and properly budget and plan for future initiatives. 

Create an Immediate Impact

Planning plays a significant role in sustainability for businesses. Carbon credits allow a business to make an immediate impact, reducing carbon emissions without having to cease operations and make a hard, and expensive, shift. 

These credits and offsets take pressure off a business by allowing it to participate in sustainability projects without prohibitive upfront costs and operational adjustments that result in closures or decreased production. 

Bolster Sustainability and Profitability with e-Cycle

While ITAD doesn’t meet additionality requirements, it is still a must for businesses participating in sustainability initiatives. 

At e-Cycle, we offer a wide range of e-waste management services designed to help individuals and businesses of all sizes meet their sustainability goals. 

We will pick up your devices, destroy the data on them, and then either recycle, refurbish, or resell the devices or components, keeping them out of landfills. 

Purchasing and trading carbon credits are only part of a robust sustainability plan for businesses. Contact e-Cycle for a quote and let us help you reach your emissions goals!