Why Transparency Matters in Carbon Credits, and How to Get It Right
1. Introduction
Climate commitments are accelerating worldwide. More companies than ever are pledging net-zero targets, investing in decarbonisation, and publicly aligning with global climate goals. Yet, at the very same time, trust in carbon markets is falling. Headlines about flawed carbon credit projects, inflated climate claims, and unverifiable emissions reductions have created a credibility gap that is hard to ignore.
Carbon credits still play a crucial role in corporate net-zero strategies. They help organisations address hard-to-abate emissions, support climate innovation, and channel finance into essential environmental and community projects. When used correctly, high-quality credits are a powerful bridge that enables companies to make real climate progress while long-term decarbonisation plans are still underway.1,2
But today, the carbon market is facing a crisis of confidence. Critics point to greenwashing, overstated climate impact, opaque methodologies, and inconsistent verification standards. Many businesses want to invest responsibly, but the lack of transparency makes it difficult to know which credits genuinely help the planet and which only look good on paper.
This is why transparency matters. It is the foundation of trust, integrity, and measurable climate impact. Without clear, traceable, and verifiable information, carbon credits cannot fulfil their purpose, and companies cannot make confident, credible climate claims.
In this blog, we’ll explore why transparency is essential in carbon markets, what’s currently going wrong, and how organisations can buy, use, and report carbon credits the right way. From common pitfalls to best practices, we’ll break down actionable steps that help companies build integrity into their climate strategy from the start.
2. The Carbon Credit Landscape Today
2.1 Voluntary vs. Compliance Markets
Definition and Difference
Compliance Carbon Markets (CCMs):
These are government-regulated markets where companies must legally meet emissions limits or purchase credits/allowances to comply with binding climate policies.
Examples include the EU Emissions Trading System (EU ETS), California Cap-and-Trade, and China’s National ETS.
Allowances are capped, tracked, and strictly enforced by law.
Voluntary Carbon Markets (VCMs):
These are markets where companies voluntarily buy carbon credits to compensate for unavoidable emissions, support climate projects, or achieve net-zero goals.
No legal obligation, purely driven by corporate climate commitments, stakeholder pressure, or ESG expectations.
Projects follow standards like Verra’s VCS, Gold Standard, Puro.earth, ACR, and CAR.
Key Difference:
Compliance markets are mandatory and regulated; voluntary markets are flexible, market-driven, and project-diverse.
Why Voluntary Markets Are Growing Faster
According to analyses by McKinsey, ICVCM, and Ecosystem Marketplace, the voluntary market is expanding rapidly due to:
1. Corporate Net-Zero Pledges Surging
Over 5,000+ companies have made net-zero or science-based targets. Many need carbon credits to compensate for emissions during the transition period.3
2. Rising Investor and Consumer Pressure
Stakeholders expect companies to demonstrate climate action beyond compliance, especially in hard-to-abate industries.
3. More Project Diversity
VCMs include nature-based, engineered, and community-centric projects, far broader than the narrow scope of compliance markets.
4. Flexibility and Innovation
Voluntary standards allow for new methodologies (like engineered carbon removal or blue carbon), driving innovation that compliance markets are slower to adopt.
5. Greater Global Participation
VCMs allow companies from any country to participate, unlike compliance markets that are region-specific.
2.2 Types of Carbon Credits
Avoidance vs. Removal
Avoidance Credits:
These credits prevent future emissions from being released.
Examples include:
Protecting forests from deforestation (REDD+)
Clean cookstove projects
Renewable energy projects in developing countries
Limitation: They don’t remove CO₂; they just prevent additional emissions.
Removal Credits:
These credits physically remove CO₂ from the atmosphere and store it in biomass, soil, oceans, or engineered systems.
Examples include:
Reforestation and afforestation
Soil carbon sequestration
Biochar
Direct Air Capture (DAC) with geological storage
Why they matter:
SBTi and IPCC emphasize long-term removals as essential for achieving net-zero, especially beyond 2050.4,5
Nature-based, Technology-based, Renewable Energy Credits
Nature-Based Solutions (NBS):
Credits generated from natural ecosystems.
Forest conservation (REDD+)
Mangrove restoration
Reforestation
Improved forest management (IFM)
Peatland restoration
Technology-Based Solutions:
Engineered or industrial carbon removal or reduction.
Direct Air Capture (DAC)
Bioenergy with Carbon Capture and Storage (BECCS)
Enhanced rock weathering
Waste-to-energy projects
Methane capture from landfills
Renewable Energy Credits:
Credits generated by replacing fossil-based electricity with renewable sources.
Solar farms
Wind energy
Small hydro projects
Geothermal energy
Note: Major standards (like Verra) have become stricter on renewable energy credits due to additionality concerns in middle-income countries.
2.3 Why Companies Use Carbon Credits
1. Bridging Short-Term Gaps to Net Zero
Even with aggressive internal reductions, most organisations face operational, financial, or technological limits.
Hard-to-abate sectors (aviation, cement, shipping, steel) cannot eliminate emissions overnight.
Carbon credits act as a transition tool while low-carbon alternatives mature.
SBTi guidance: Companies should prioritise internal reductions but may use high-quality credits to address residual emissions.
2. Supporting Climate Innovation and Community Benefits
Carbon finance helps channel money into high-impact climate solutions that wouldn't otherwise receive funding, especially in developing regions.
Benefits include:
Supporting early-stage technologies like DAC or biochar
Funding forest conservation and biodiversity protection
Improving livelihoods through cookstoves or clean energy access
Creating green jobs and community co-benefits
This aligns with UN SDGs, making carbon credits a tool for broader sustainable development.
3. Managing Hard-to-Abate Emissions
Many emissions cannot currently be reduced because:
Technology doesn't exist at scale (e.g., zero-carbon cement)
Costs are too high in the short-term
Supply chains lack low-carbon alternatives
For these unavoidable emissions, companies use carbon credits to:
Maintain climate progress
Offset residual Scope 1, 2, and Scope 3 emissions
Demonstrate accountability to stakeholders
This approach is widely supported by ICVCM, SBTi, and IPCC, provided credits are high-integrity.
3. The Transparency Problem: What’s Going Wrong?
Despite the growing interest in carbon credits, the market continues to face a trust deficit. Many of the issues stem from one core challenge: a lack of transparency. Without clear, consistent, and verifiable information, it becomes nearly impossible to know whether a credit truly represents a real reduction or removal of emissions. Below are the main areas where transparency breaks down.4,5
3.1 Opaque Project Methodologies
Lack of clarity on how emissions reductions are calculated
Many carbon projects rely on complex methodologies that the average buyer, and sometimes even experts, struggle to understand. The assumptions, formulas, and data used to calculate carbon reductions are often buried in technical documents or not shared publicly.
This makes it difficult for companies to evaluate whether a project’s emission claims are scientifically sound or based on outdated or weak methods.
The problem of baseline inflation and unverifiable assumptions
One of the most common issues is baseline inflation, overestimating the emissions that would have occurred in the absence of the project. For example:
Forest conservation projects may assume unrealistically high deforestation rates.
Cookstove projects may exaggerate the amount of fuel saved.
Renewable energy projects may assume fossil-based alternatives that are no longer relevant in that region.
When baselines are inflated, the project appears to deliver more carbon reduction than it actually does. Since these assumptions are rarely disclosed in transparent detail, buyers have limited ability to verify the legitimacy of the credit.
3.2 Verification Gaps
Issues with third-party verification and inconsistent standards
Carbon credits rely on third-party verifiers to validate project performance. However, verification quality varies widely across standards and regions.
Some verifiers are over-stretched and conduct only surface-level checks.
Different registries have different thresholds for additionality, leakage, permanence, and monitoring.
Verification cycles may be delayed for years, leaving outdated information in public registries.
The result: two projects claiming similar reductions can differ drastically in integrity simply because one followed weak verification processes.
3.3 Double Counting and Double Claiming
Countries vs. companies claiming the same removal
A major issue arises when both a host country and a corporate buyer claim the same carbon reduction in their climate reporting.
For example, a project generates credits that a company purchases, but the host country still counts the emissions reduction toward its national targets under the Paris Agreement.
Why this destroys environmental integrity
Double claiming means the atmosphere gets only one tonne of reduction, but two entities report the benefit.
This undermines:
The accuracy of global climate reporting
Corporate net-zero claims
National decarbonisation plans under Article 6
If credits are not backed by corresponding adjustments or transparent registries, the same climate action gets counted twice, eroding trust in the entire system.
3.4 Low-Visibility Supply Chains
Complex intermediaries make it unclear where money goes
The carbon market often includes multiple brokers, traders, and resellers who mark up the price along the way. Without transparency, buyers have no idea how much of their money:
Reaches the actual project developer
Supports local communities
Funds verification or monitoring
Is absorbed by middlemen
This reduces accountability and can distort the perceived value of a credit.
Difficulty tracing credits back to actual climate impact
In many markets, credits pass through so many hands that it becomes nearly impossible to trace their origin.
Buyers struggle to access:
Project documentation
Field monitoring updates
Verification reports
Serial number data or retirement records
This lack of traceability makes it harder to assess whether a purchased credit is legitimate and retired properly, one of the biggest reasons companies hesitate to commit to long-term carbon purchasing.
3.5 Limited Disclosure on Co-Benefits
Community, biodiversity, and social impact sometimes exaggerated or unproven
Many projects highlight co-benefits such as:
improved livelihoods,
protection of endangered species,
water security,
gender empowerment.
However, these claims are not always supported by robust, measurable data. In some cases, co-benefits are framed more as marketing narratives than verified outcomes.
Without transparent metrics or independent validation, companies cannot confidently claim positive social or biodiversity impact, even when projects are genuinely beneficial.
4. Why Transparency Matters: The Business Case
As companies work toward ambitious net-zero goals, the role of carbon credits is becoming increasingly strategic. Yet the effectiveness of these efforts depends on one element above all: transparency. Transparent carbon credit practices do more than strengthen environmental claims, they create tangible business value, reduce risk, and build trust in an era of intense scrutiny.
4.1 Builds Corporate Credibility
Companies today face rising expectations from customers, employees, media, and regulators to demonstrate real climate action, not symbolic gestures or offsets used as shortcuts. When carbon credit purchases are transparent, clearly disclosing project type, methodology, verification details, and retirement records, it signals authenticity and accountability.
This level of clarity helps organisations avoid accusations of greenwashing, which can be reputationally damaging and costly to recover from. Transparent reporting creates confidence that climate commitments are backed by measurable, verifiable impact.
4.2 Attracts Investors and ESG-Driven Capital
Capital markets have shifted. Investors now demand more than broad sustainability statements, they expect science-aligned, audit-ready climate data. Clear disclosure of carbon credit use, quality, and impact helps companies meet ESG expectations from institutional investors, asset managers, and sustainability-linked lenders.
For organisations seeking green financing, sustainability-linked loans, or favourable ESG ratings, transparent carbon practices can be the differentiator. Investors want proof that climate commitments are not only strategic but credible.
4.3 Protects Brand Reputation
With growing media investigations, NGO reports, and watchdog platforms tracking climate claims, opaque carbon credit practices pose a genuine brand risk. Companies that lack transparency may face public criticism, even if their intentions are good.
Transparent use of high-integrity credits helps companies stay ahead of scrutiny. It signals that climate claims can withstand external evaluation, reducing reputational vulnerability and strengthening stakeholder trust.
4.4 Enables Better Decision Making
Transparency isn’t only external, it benefits internal decision-making as well. When leaders have access to accurate, traceable carbon credit information, they can allocate budgets more effectively across reduction efforts and offsetting strategies.
Clear visibility into project performance and long-term impact helps teams avoid low-quality credits, select reliable partners, and optimise spend based on outcomes rather than assumptions.
4.5 Supports Long-Term Sustainability Strategy
Transparent carbon data is foundational to long-term climate planning. It feeds directly into:
internal carbon pricing models
Scope 3 reduction pathways
supplier engagement programs
net-zero roadmap milestones
sustainability reporting frameworks (ISSB, GHG Protocol, CSRD)
When carbon data is robust and transparent, companies can set more accurate targets, track progress with confidence, and build a sustainability strategy that is resilient, auditable, and aligned with global best practices.
5. What Transparency Looks Like in Carbon Credits
High-quality carbon credits are built on transparency. For companies to make credible climate claims, they must clearly understand where their credits come from, how carbon reductions are calculated, and whether the impact is real and lasting. Transparency transforms carbon credits from abstract numbers into verifiable climate action. Here’s what it looks like in practice.
5.1 Clear Project Information
Transparency begins with a complete picture of the project itself. Buyers should have access to key details such as:
Location and project type (forest conservation, renewables, carbon removal, etc.)
Methodology used to calculate reductions
Baseline assumptions that determine what emissions would have occurred without the project
Permanence risks, such as wildfire, leakage, or land-use change
When this information is readily available, companies can evaluate the credibility of the project and ensure it aligns with science-based climate strategies.
5.2 Traceable Supply Chains
A transparent carbon market allows organisations to follow a credit from project generation to final purchase. This traceability ensures that:
Credits are authentic and not resold multiple times
Buyers know who generated the credit and under what conditions
Every intermediary step is documented
To strengthen traceability, many emerging systems use ledger-based or blockchain-backed registries. These provide immutable records of ownership, transfers, and retirement, reducing the risk of fraud or double issuance.
5.3 Verified Emissions Reductions with Open Documentation
Transparency also requires open access to independent verification. Companies should be able to review:
Monitoring reports
Third-party verification audits
Methodology documents
Field data and performance updates
This documentation enables buyers and stakeholders to confirm that the emissions reductions claimed by the project are real, measured, and validated over time, not assumed or outdated.
5.4 Clear Financial Flows
One of the most overlooked aspects of transparency is understanding where the money goes. In many cases, multiple brokers and intermediaries sit between the buyer and the project developer. Transparent projects disclose:
The percentage of funds reaching project owners
Fees charged by intermediaries
How revenue supports community and conservation outcomes
Clear financial flows help buyers ensure that the majority of their investment supports real climate impact rather than administrative overhead.
5.5 Long-Term Impact Measurement
A transparent project doesn’t stop reporting after issuing credits. Instead, it provides ongoing updates on:
Carbon sequestration performance over time
Leakage risks (emissions shifting outside project boundaries)
Community benefits, such as jobs or access to clean energy
Biodiversity outcomes
Long-term monitoring ensures that buyers can trust the durability and ongoing effectiveness of the project.
5.6 Clear Retirement and Avoidance of Double Counting
Finally, transparency requires a clear record of credit retirement. High-integrity markets use:
Publicly accessible registries
Unique serial numbers for each credit
Time-stamped retirement entries
Corresponding adjustments when required under international frameworks
This ensures the same credit cannot be claimed twice, by two companies, or by a company and a host country, preserving environmental integrity.
6. How Companies Can Get Transparency Right
For companies committed to credible climate action, transparency isn’t just an ethical choice, it’s a strategic one. Ensuring high-integrity carbon credit use requires structured processes, reliable partners, and a clear understanding of global standards. Below are practical steps organisations can follow to get transparency right and build long-term trust.
6.1 Start With High-Integrity Frameworks
The first step is aligning carbon credit strategies with globally recognised integrity frameworks.
ICVCM Core Carbon Principles (CCPs):
These principles set a global benchmark for high-quality credits, covering additionality, permanence, robust quantification, sustainable development benefits, and transparent governance. Choosing credits labelled under the CCPs, or aligned to them, ensures foundational quality.
SBTi Guidance on Neutralization vs. Compensation:
The Science Based Targets initiative distinguishes between:
Neutralization: Using long-term removals to address residual emissions at net zero.
Compensation: Using high-quality credits to support mitigation beyond a company’s value chain.
This guidance helps companies use credits responsibly while prioritising emission reductions.
Established Standards:
Registries like Verra, Gold Standard, Puro.earth, and American Carbon Registry (ACR) offer robust methodologies, third-party verification, and transparent project documentation. Starting with these standards gives companies a strong integrity baseline.6,7
6.2 Conduct Rigorous Due Diligence
Before purchasing credits, companies should conduct a detailed evaluation of the project.
Key Due Diligence Checklist:
Additionality: Would the project happen without carbon finance?
Methodology: Is it up-to-date and scientifically robust?
Verification frequency: Are audits recent and credible?
Permanence: Are buffer pools realistic? How are reversal risks managed?
Community and biodiversity impact: Are claims verified?
Registry status: Is each credit uniquely serialized and publicly traceable?
Red Flags to Watch For:
Undefined or overly optimistic baselines
Excessive buffer pools masking weak permanence models
Lack of third-party monitoring data
Missing or inconsistent co-benefit reporting
No access to project-level financial transparency
These signals often indicate projects that may not deliver reliable or measurable climate impact.
6.3 Demand Full Project Documentation
Transparency depends on documentation. Companies should request access to:
Monitoring, Reporting, Verification (MRV) reports8
Verification audits from independent third parties
Methodology papers outlining calculation models
Field performance updates, imagery, and impact reports
A credible project will willingly share this information. Consistent documentation ensures that claims of carbon reduction or removal are backed by data, not assumptions.
6.4 Adopt Technology for Traceability
Technology is rapidly transforming transparency in carbon markets.
Blockchain registries offer tamper-proof records of issuance, ownership, and retirement.
Digital MRV systems automate data capture from sensors or field devices, reducing human error.
Satellite-based monitoring provides real-time visibility for land-use, forestry, and conservation projects.
AI-driven verification models can validate field data, detect anomalies, and improve accuracy.
By adopting these tools, companies can verify impact more reliably and reduce the risk of fraud or double counting.
6.5 Engage With Project Developers Directly
Buying directly from project developers reduces reliance on intermediaries and gives companies clearer visibility into:
How project decisions are made
How revenue flows through the value chain
How communities benefit from carbon finance
How monitoring and performance updates are handled
Direct engagement also builds long-term partnerships that strengthen accountability and lead to more meaningful climate outcomes.9
6.6 Integrate Credits Into Broader Climate Strategy
Carbon credits should complement, not replace, internal emissions reductions. High-integrity strategies integrate credits into a larger sustainability framework by:
Following a reduction-first approach, prioritising operational and value-chain decarbonisation
Linking carbon credit use to internal carbon pricing, creating stronger financial incentives for reduction
Disclosing credit use transparently in ESG or sustainability reports, including project details, verification dates, and retirement records
This integration ensures credits support long-term climate goals while maintaining transparency and credibility.
7. The Future of Transparency in Carbon Markets (150 words)
The future of carbon markets is moving toward deep, data-driven transparency. Digital MRV will become standard as remote sensing, IoT devices, drones, and AI automate how carbon reductions are monitored and verified.10 This shift will reduce manual errors, lower verification costs, and provide near real-time climate impact data.
At the same time, interoperable registries will connect today’s fragmented systems, allowing credits to be tracked across platforms and significantly reducing the risk of double counting.
Regulation will accelerate this change. Article 6 rules are tightening, requiring clearer records of corresponding adjustments, while emerging corporate reporting frameworks, CSRD, SEC climate disclosures, and ISSB, are mandating credit-level traceability, quality disclosure, and transparent reporting.
Ultimately, transparency will push the market toward quality over quantity, with buyers prioritising credits that demonstrate permanence, strong additionality, and reliable removal. This evolution will build trust and strengthen the integrity of global climate action.
9. Conclusion
Transparency is no longer optional in carbon markets, it's the backbone of credibility, trust, and real climate impact. As companies adopt net-zero targets and rely increasingly on carbon credits to bridge hard-to-abate emissions, the scrutiny around quality, integrity, and authenticity will only intensify. Opaque methodologies, unverifiable baselines, and fragmented tracking systems can no longer be ignored.
Organisations that commit to clear, verifiable, and traceable carbon credit practices will not only strengthen their own climate strategies but also help elevate the integrity of the entire market. Transparent credits empower businesses to make responsible decisions, meet investor expectations, and communicate climate progress with confidence.
The future of carbon markets will reward those who embrace high-integrity standards, digital MRV, interoperable registries, and rigorous due diligence. Companies that act now, prioritising disclosure over opacity and quality over volume, will lead the way in building a credible, efficient, and impactful carbon ecosystem. In a world where trust is the currency of climate action, transparency is the only path to lasting change.
References:
“Core Carbon Principles & Assessment Framework.” Integrity Council for the Voluntary Carbon Market (ICVCM), 2023, https://icvcm.org/core-carbon-principles/.
Ecosystem Marketplace. State of the Voluntary Carbon Markets 2023. Forest Trends, 2023, https://www.ecosystemmarketplace.com/.
Gold Standard Foundation. Gold Standard for the Global Goals – Requirements. Gold Standard, 2023, https://www.goldstandard.org/.
Intergovernmental Panel on Climate Change (IPCC). Climate Change 2023: Synthesis Report. IPCC, 2023, https://www.ipcc.ch/report/ar6/syr/.
McKinsey & Company. “A Blueprint for Scaling Voluntary Carbon Markets.” McKinsey Sustainability, Jan. 2021, https://www.mckinsey.com/.
Puro.earth. Carbon Removal Standard and Methodologies. Puro.earth, 2024, https://puro.earth/.
Science Based Targets Initiative (SBTi). Foundations for Net-Zero Claims. SBTi, Oct. 2021, https://sciencebasedtargets.org/.
United Nations Framework Convention on Climate Change (UNFCCC). “Article 6 of the Paris Agreement.” UNFCCC, 2022, https://unfccc.int/.
Verra. Verified Carbon Standard (VCS) Program – Rules and Requirements. Verra, 2023, https://verra.org/.
World Bank.State and Trends of Carbon Pricing 2024. World Bank, 2024,https://carbonpricingdashboard.worldbank.org/.
