How Carbon Credits Are Shaping the Future of Corporate Sustainability
1. Introduction
Sustainability is now borne by boardrooms everywhere. From the European Union's Corporate Sustainability Reporting Directive (CSRD) to India’s Business Responsibility and Sustainability Reporting (BRSR), regulators are pushing companies to provide transparency and accountability. In addition, investors and customers are seeking greater action from companies. To CEOs and boards, one thing is clear: sustainability is integral to the long-term success of business.
The rise in carbon neutrality and net-zero commitments
Over the last decade, thousands of companies have committed to carbon neutrality or made a bold commitment towards establishing ambitious net-zero goals. This is having a striking influence on corporate strategy, and it is having that impact especially in industries with hard-to-abate emissions. As climate risks become more prominent, companies within sectors are learning that reducing emissions is no longer simply a compliance issue - it is about competitiveness, resilience, and trust.
What are carbon credits, and what role they play in corporate strategy
A carbon credit is one metric ton of carbon dioxide (or carbon dioxide equivalent greenhouse gas) removed or reduced from the atmosphere. Companies can purchase the credits to offset their emissions through projects such as reforestation, new renewable energy, or carbon capture technology. While carbon credits alone do not replace any reduction in emissions, they provide an important strategy to play a vital role in helping businesses manage hard-to-abate emissions and achieve net-zero targets. Increasingly, they are becoming part of corporate sustainability roadmaps worldwide.
This blog will cover different ways in which carbon credits are influencing the future of corporate sustainability. We will cover what they are, why businesses are adopting them, the (economic) value of carbon markets, and the distinction between nature-based and technology-based options. Additionally, we will present challenges including verification and greenwashing. We will show how global and Indian regulations are moving the ESG reporting practice even further, and then we will look to the future of carbon credits and how companies can start preparing today to be in a low-carbon economy.
2. Understanding Carbon Credits
Simply put, a carbon credit is a reduction or removal of a metric ton of CO₂ (carbon dioxide) or its equivalent in greenhouse gas emissions.
1 carbon credit = 1 ton of CO₂ limited or removed. Carbon credits come from verified carbon offset projects, i.e., reforestation, renewable energy, and methane capture. Companies then purchase carbon credits in a market in order to offset their emissions, which is part of their pathway to net-zero.
A common question is, what is the difference between a carbon offseting and a carbon allowance? Offsets are bought from specific projects that reduce or capture emissions, and purchased on the voluntary carbon market. Allowance are then permits issued under compliance systems (like the EU Emissions Trading System) that grant companies the right to emit a certain amount of CO₂. Both play a role in global carbon trading, but they function in different contexts.
2.2 How Do They Work?
The carbon credit lifecycle consists of multiple phases:
Project Development—Efforts including renewable energy facilities, forest restoration projects, or methane capture activities are developed.
Validation—Independent third parties provide validation that the project has achieved measurable emissions reductions.
Issuance—Credits are generated and tracked in a registry.
Exchange—Credits can be traded on carbon exchanges.
Retirement—When a credit is used by a company, it is retired for good and cannot be sold, which assures it has been retired and cannot be traded again.
This ensures the credit reflects substantive, verifiable climate action.
2.3 Types of carbon credits
Carbon credits fall into two categories:
Compliance Markets: These are mandates of government regulation, such as the European Union Emissions Trading Scheme (EU ETS) or California Cap-and-Trade, where companies will need to purchase allowances or credits in order to meet legally mandated emissions caps.
Voluntary carbon markets (VCM)—Where companies and individuals have voluntarily purchased credits in order to offset emissions equal to or separate from regulatory emissions requirements, often in an effort to enhance corporate sustainability ambitions or demonstrate leadership toward climate change.
The two differ in pricing and acceptance.Credits that comply with a government standard tend to be more expensive because they are subject to several regulatory requirements.The voluntary market provides more flexibility, but prices vary greatly based on the type of project and the standard for third-party verification.However, consumers will need both prices to scale appropriate global climate action.
3. Why Businesses Are Turning to Carbon Credits
The fast transition towards ESG adherence is changing the dynamics of business operations. For many companies, carbon credits are a vital resource to satisfy regulatory demands, protect brand value, and manage risks over the long term.
3.1 Growing ESG and Regulatory Pressure
Governments worldwide have steepened disclosure requirements. The EU Corporate Sustainability Reporting Directive (CSRD), combined with the European Sustainability Reporting Standards (ESRSs), will require thousands of companies, including non-EU companies with European divisions, to report on climate-related risk and performance. In the United States, the SEC's climate disclosure rules will likely require disclosure of scope 1 and 2 greenhouse gas emissions and climate-related financial risks. In addition to these initiatives, international frameworks like the ISSB standards are driving towards consistency and comparability in sustainability reporting.
This regulatory wave has shifted carbon accounting to the boardroom. Organizations are under pressure to not only measure and reduce emissions but also demonstrate credible paths to net-zero. The use of carbon credits is being seen as an immediate practical means of enabling organizations to do this with hard-to-abate emissions while implementing long-term decarbonization strategies.
3.2 Reputation and Brand Value
Carbon credits serve as a response to changing market expectations, going beyond compliance. Consumers are intentionally searching for green products and green services, and brands that ignore climate risk may face significant reputational damage. On the other hand, investors are prioritizing ESG-complying companies when providing or allocating capital. Showing measurable progress on emissions reduction, offsetting progress, and using high-quality credits can enhance corporate reputation, enhance shareholder confidence, and improve competitive position.
3.3 Risk Management and Financial Implications
Carbon credits also support the management of climate risk. With both businesses and communities facing increased operational and financial risk as a result of climate mobilizations and extreme weather events, business is becoming more fragile. Investing in credits tied to renewable energy, reforestation, or carbon capture can help mitigate exposure to climate risks, and contribute to the climate resilience of the globe.
In addition, there is a strong financial aspect to consider. Many industries are linking access to sustainable finance for businesses to climate/ESG performance of the company, which may include green bonds or favorable funding from investors. Companies that integrate credits into their sustainability decisions are more often in a position to receive needed capital, create better financing opportunities, and lower longer pay-out costs associated with climate change impacts.
4. The Role of Carbon Credits in Corporate Net Zero Strategies
4.1 Beyond Internal Reductions
While internal decarbonization is the cornerstone of any legitimate net zero pathway, carbon credits offer an important resourcing step—especially for hard-to-abate sectors like aviation, cement, and steel. These sectors are challenged by technological, financial, and operational factors, making a full and infeasible short-term emissions removal option. In these contexts, high-quality credits can confirm that companies can continue to offset residual emissions and develop parallel innovation. The takeaway: credits are a supplement to decarbonization, not a substitute.
4.2 Carbon Credits and Corporate Climate Strategy
To develop a credible climate strategy, companies need to assess emissions across Scope 1 (direct emissions), Scope 2 (energy-related emissions), and Scope 3 (supply chain emissions). Organizations like the Science Based Targets initiative (SBTi) lay the groundwork for companies to responsibly commit to emissions credits: companies take deep cuts first, and then address any residual unavoidable emissions with a certified carbon offset. By attaching credits to governance, procurement, and reporting, businesses can embody climate goals while maintaining credibility with operational realities, providing a valid path towards net zero.
4.3 Case Studies
Microsoft: Committed to becoming carbon negative by 2030, the company has invested significantly in soil carbon projects as well as significant forestry restoration, showing how credits can serve as a means toward looking at remediation efforts in the longer term.
Delta Airlines:With elevated residual emissions from aviation, Delta has relied on offsets to balance its impact. Although this is a complex and practical virtue, it illustrates how credits can play an interim role in certain reaches of the landscape of limited decarbonization activity.
5. Economic Impact of Carbon Credits
5.1 Carbon Markets as a Growing Economy
Carbon markets are becoming a major economic ecosystem. The voluntary carbon market could increase from $2 billion in 2021, to $50 billion in 2030, according to McKinsey & Company. Meanwhile, the World Bank noted considerable traction within compliance markets like the EU Emission Trading system (ETS), the largest and most advanced.
Regional dynamics present some clear differences:
EU: Highly regulated ETS with significant pricing and strong corporate involvement.
US: Fragmented state led schemes (California Cap and Trade, RGGI) with private voluntary market activity.
Asia: Quick ramp up, highlighted by China's national ETS, now the largest by emissions covered, and developing markets in Singapore, Japan, and South Korea.
This covers carbon markets emerging not just as a means to improve climate mechanics, but as a driver for global green finance.
5.2 Price Volatility and Market Challenges
Compliance credits: EU ETS hovering €80 - 100 per ton price point, supported by regulatory authority.
Voluntary credits ranging from $2 ‐15 per ton, depending on project type - forestry, renewable energy, community-based
The principal components affecting prices carbon credits are:
Supply and demand due to corporate net zero commitments.
Type of project; nature-based removals usually carry a premium due to co-benefits.
Verification standards (Verra, Gold Standard, SBTi alignment), which provides market confidence and drives a premium.
Some buyers shun volatility, but it is indicative of the increasing sophistication and diversity of carbon finance.
5.3 New Business Models Emerging
As carbon markets progress, new models are changing the dynamics- Trading platforms like Xpansiv and AirCarbon Exchange are developing transparent, liquid markets for carbon credits.
Corporate partnerships with project developers build the supply of high-quality, long-term credits and create carbon credits to support nature and technology solutions.
Financial innovation. Increasingly, carbon is being treated like an asset class as institutional investors, banks, and funds enter the market with new products such as carbon-linked ETFs and derivatives.
These shifts suggest carbon credits are a tool for offsetting; they are emerging as a necessity in corporate action on climate and a foundation of sustainable finance.
6. Blended Portfolios
Since there is no ideal option for carbon removal, progressive companies use a blended portfolio of NbS and tech-based carbon removal credits. The rationale is as follows:
Risk diversification: Mixing lower-cost, higher-risk NbS with higher-integrity, tech-based credits hedges the price, permanence, and scalability equation. Trellis
Scalability & aspiration: NbS has the potential to expand more quickly in the near term, while more scalable tech removal options (e.g., DAC) have the ability to become plausible at scale in the future.
Credibility & durability considerations: assuming proper management, tech removals will provide better assurances of permanence and offset some of the risk of NbS reversals.
Investor signaling: the audience is signaling here that they are not making a singular bet; they are signaling they are serious about achieving long-term negative emissions or being taken seriously.
Market evolution & flexibility: blending allows for continuity of adaptation as technologies evolve and projects and costs continue to be dropped to the market.
A good blended portfolio would have a core share of NbS credits early on (for cost effectiveness and co-benefits) and shift over time to tech removal as they evolve faster and costs decline.
7. Challenges and Criticisms of Carbon Credits
Carbon credits are a significant tool in global climate action, but the use of carbon credits encounters multiple criticisms and challenges. At the core of the debate is carbon credit quality, integrity, and transparency.
7.1 Quality and Verification Issues
The most important problem mentioned is the existence of “phantom credits,” which are credits generated and issued that do not result in real and additional emission reductions. This can occur when a project exaggerates its impact by claiming a reduction when it has not achieved real and additional emission reductions, it double-counts reductions, or the emission reduction is not permanent (i.e., a forest may burn down the next year). In response, independent carbon verification bodies and registries developed methodologies to measure, report, and verify projects (e.g. Verra, the Gold Standard). However, even verification systems have received criticisms stating that methodologies can vary and may not accurately measure reductions based on the best climate science available. Despite these efforts, verifying that every credit a buyer purchases is a real and measurable reduction continues to be a major challenge.
7.2 Risk of Greenwashing
An additional common complaint is the greenwashing risk associated with offsets. Some companies purchase credits instead of actual decarbonization efforts, practicing high-emission while claiming to be “carbon neutral.” This decreases trust in the general population and diminishes the need for real emission reduction efforts. A few high-profile examples of companies relying almost entirely on offsets sparked calls to create additional guardrails—requiring companies to disclose how they are using offsets in a much larger science-based reduction strategy. Many experts argue that companies should only use credits for residual emissions after the majority of internal reductions have already been realized.
7.3 Market Transparency and Accessibility
The carbon market itself suffers from transparency and fairness related to carbon. Large multinational companies usually have the tools available to obtain high-quality credits and project developers. Small businesses often report the market as fragmented, opaque, and inaccessible. Price could differ from project to project, and there is no global accepted reporting framework. There have been recent efforts to establish core principles for transparency and comparability by groups like the Integrity Council for the Voluntary Carbon Market (ICVCM), but adoption of common principles is slow across the wider market.
In conclusion, carbon credits are a part of corporate climate initiatives, but they must focus on ensuring quality, reducing greenwashing, and building a marketplace that is transparent and inclusive. Failing to make these changes may undermine the potential of carbon credits as a conduit to net zero through a lack of faith and misuse.
8. The Future of Carbon Credits in Corporate Sustainability
Carbon credits are quickly moving from being an emergency measure to an integral component of corporate sustainability developments. As regulatory schemes and market opportunities continue to change, businesses will need to reevaluate how credits fit into their long-term climate change strategies.
8.1 Evolving Regulatory and Standards
One of the most prominent developments shaping the future of carbon credits is the rise of standardized, global efforts. The Integrity Council for the Voluntary Carbon Market (IC-VCM) are attempting to develop a Core Carbon Principles framework to ensure that credits will meet consistent quality thresholds. Developing more consistent standards related to carbon credits will be important to counteract concerns raised earlier on Challenges and Criticisms of Carbon Credits.
Technology will also be an important factor. The use of blockchain carbon credits is gaining traction due to their ability to allow secure, transparent, and traceable transactions. The distributed ledger technology enables companies to reduce double counting risks and build stakeholder confidence in the credits they purchase.
8.2 Corporate Adoption Trends
There's an expectation of more corporations utilizing credits as they start to leverage credits toward longer-term ESG strategies. Early programs that were primarily focused on claims to short-term neutrality are now programs where participants are embedding carbon finance into their short AND long-term supply chain planning and decision-making.
Aviation and shipping: Hard-to-abate sectors where credits are still apart of a pathway to net zero (see Beyond Internal Reductions).
Energy: Electric utilities are finding utility in layering credits with renewable energy projects to balance residual emissions.
Consumer brands: Many brands are leveraging credits in tandem with nature-based solutions (see Nature-Based Solutions) to represent biosensitivity and community co-benefits.
This transition reflects a shift away from tactical credits use and toward the usage being strategically aligned with sector-wide decarbonization.
8.3 Toward a Net Positive Future
Moving forward, we now see companies advancing from pledges of “carbon neutral” commitments to regenerative business models that support ecosystems and social value. There will rise a new class of carbon removal credits... from reforestation to direct air capture (see Tech-Based Solutions). As the costs to remove carbon go down and there is a determinable level of credence to carbon removal methodology, removal credits will offer a viable carbon solution for contributions to net zero and may be an acceptable carbon practice for net positive strategies.
In this future, carbon credits are no longer simply a compliance mechanism but a tool for companies to demonstrate leadership in climate action, resilience, and regeneration.
9. Hestiya’s Role in Advancing High-Integrity Climate Solutions
With greater emphasis and commitments from businesses and the public sector around net zero, companies like Hestiya are instrumental in bridging the gap between net zero ambitions and net zero actions. It is hard-to-abate sectors, such as aviation, shipping, cement, and steel, that are battling technological and financial barriers to realizing immediate full decarbonization. This is where Hestiya acts, by introducing high quality and transparent carbon credits to allow businesses, and other organizations to address residual emissions, while they pursue internal longer term reductions.
Hestiya's role, however, goes beyond simply being a seller of credits. Hestiya ensures the high integrity of the market and the credits we purchase by sourcing projects that create climate benefits and that can be measured and reliably reported. These projects could deliver benefits through reforestation, soil carbon sequestration, renewable energy expansion, or new technologies for carbon removal. In doing so, Hestiya's rigorous due diligence follows consistent standards such as the Science Based Targets initiative (SBTi), enabling clients to procure credits to help them offset their remaining emissions, in addition to their internal decarbonization efforts.
Lastly, Hestiya is much more than simply procuring credits as a client. Hestiya carbon market place can act as a partner to help businesses develop their corporate climate strategy, applying data insights, governance support, and reporting tools that are compatible with the increasing regulatory framework around global disclosure standards for carbon emissions and benchmarking reliable investment opportunities. This helps clients build trust and confidence with investors, their own customers, and regulators.
In summary, Hestiya carbon market place is not just about carbon offsetting. It is about empowering businesses to lead the next stage of their corporate climate strategy, with high integrity and enthusiasm in the evolving carbon market, and working towards the next stage towards credible net zero.
10. Conclusion
Carbon credits are not a cure-all, but they remain a vital bridge to a sustainable future. When used responsibly, they enable businesses to compensate for unavoidable emissions while investing in solutions that restore ecosystems, support communities, and scale innovative technologies. As discussed in Business Takeaways, their true value lies in complementing—not replacing—internal decarbonization efforts.
The message is clear: carbon credits are most effective when part of a holistic approach to sustainability. Organizations that act now, with transparency and ambition, will not only meet rising expectations but also secure a competitive edge in shaping the markets, innovations, and partnerships of the future.
By treating carbon credits as one piece of a larger transformation, businesses can accelerate progress toward net zero and play a decisive role in creating a more sustainable and regenerative global economy.
