Carbon Credits Explained: A Corporate Guide to Net Zero

What Are Carbon Credits and Why Do They Matter?

A carbon credit represents one tonne of greenhouse gas emissions either removed from the atmosphere or prevented from entering it. They fund projects like tree planting, soil carbon storage, or advanced technologies such as direct air capture.

But here’s the key point: credits don’t replace the need to cut emissions. They complement reduction efforts by addressing the emissions you simply can’t eliminate. Every company aiming for net zero will need carbon offsets. Frameworks like the Science Based Targets initiative (SBTi) now expect businesses to explain why they aren’t using offsets, rather than why they are.

A carbon credit is simply a financing mechanism for organisations to purchase, which finance that activity, either from scratch or the ongoing maintenance and monitoring of it, and the ongoing expansion of that activity.

Not All Credits Are Equal

Andy explained three main types of credits:

•  Removals
•  Reductions
• • Avoidance

Removals, such as tree planting or direct air capture, are generally considered highest integrity because they physically take carbon out of the atmosphere. Avoidance projects, like preventing deforestation, still have value but face greater scrutiny.

Quality depends on factors like permanence (how long carbon stays locked away), additionality (would the project happen without your investment?), and governance. There’s no perfect project, but transparency on trade-offs and diversification through portfolios can reduce risk.

How to Engage Smartly

The biggest mistake? Treating offsets as a last-minute purchase. Reactive buying exposes businesses to price volatility and supply shortages. Instead, Andy recommends planning ahead: buy forward, lock in supply, and align projects with your values and locations. Building a diversified portfolio, mixing nature-based solutions with engineered removals, spreads risk and amplifies impact.

You need to be reducing those emissions. It’s not okay to just to go, Hey, whatever. I’ll just offset everything to be carbon neutral, make sure you are reducing.

Looking Ahead

Demand for high-quality removals is rising fast, and prices are predicted to climb sharply through the 2030s. Meanwhile, regulation and voluntary frameworks are converging on one message: measure, reduce, and offset as part of an integrated strategy. As Andy put it, Carbon credits are fundamental to undoing the damage already done and mitigating what’s still to come.