The Voluntary Carbon Market Invites Businesses To Get Ahead Or Fall Behind

The business case for companies to reduce their carbon emissions is becoming widely accepted. As of this year, 41% of the world's 2,000 largest companies have committed to significantly reduce emissions from operations. Decarbonization is a way for businesses to run more efficiently, create more value, and position themselves to outperform competitors in the long-run. But not all companies see the value of enhancing this work by purchasing carbon credits. How could investing in carbon projects outside a company’s operations improve its competitive advantage?

Businesses gain competitive advantage by leveraging two fundamental levers: reducing costs and creating superior value. The greatest advantage comes when both levers are pulled together, and companies integrating carbon credits into a broader decarbonization strategy understand this. For forward-thinking organizations, purchasing carbon credits through the Voluntary Carbon Market (VCM) is not a needless expense but a strategic multiplier that can reduce costs while simultaneously enhancing value.

Buying High-Quality Carbon Credits Reduces Costs By:

Getting ahead of internalizing the cost of carbon.

While this speaks to the broader business case for decarbonization, it also supports why buying carbon credits makes sense. Even if emissions aren’t priced locally, global supply chains expose companies to carbon costs elsewhere. Today, roughly one in four tons of global emissions (28%) is subject to government pricing, and that share is likely to grow.

At best, buying high-quality carbon credits now can help reduce exposure to, or in some cases, might count toward future regulatory obligations. At worst, it forces companies to build the systems and practices to internalize carbon costs before they’re unavoidable. In either case, addressing ongoing emissions alongside decarbonization efforts helps establish an internal carbon price, which incentivizes internal reduction efforts, thereby lowering future costs of compliance.

Securing favorable prices, before supply tightens.

High-quality credits are heading toward a future state of constrained supply and higher prices, especially as more of the projects generating these credits are locked into long-term offtake agreements with other buyers. As AlliedOffsets warns, “firms that wait risk paying more for lower-integrity supply, or missing high-integrity supply altogether.” Simply put, if a company plans to use carbon credits as part of its decarbonization strategy, the best time to act, from a purely financial perspective, was yesterday.

Attracting cheaper capital.

Companies with best-practice climate strategies—which include purchasing carbon credits, as supported by the new SBTi Corporate Net Zero Standard Draft—are viewed as lower risk. That perception can unlock cheaper, long-term financing and turn today’s climate investments into a future advantage. Specifically, MSCI research indicates top quintile ESG performers can benefit from about 0.7% lower weighted average cost of debt and 0.4% lower weighted average cost of equity.

Buying High-Quality Carbon Credits Increases Value By:

Responding to customer preferences.

The majority of global consumers (up to 80%) say they are willing to pay more for sustainable produced or sourced goods, with premiums up to 12%. This is true across both B2B and B2C contexts. By investing in high-integrity carbon credits, companies turn their products into choices that reflect the values of their customers, capturing more value than rivals.

Positioning your company as a market leader.

Eight of the world’s ten most valuable brands already use, or plan to use, carbon credits. They’re doing this to protect their brand, respond to customer expectations, and establish leadership in a competitive market. Investors notice as well. Research shows that stock prices rise when companies retire high-quality carbon credits credits—importantly, driven by the quality of the credits, not the quantity.

Strengthening stakeholder trust.

High-integrity participation in the VCM signals that your company is taking real climate action now while committing to long-term decarbonization internally. Nate Truitt, Executive Vice President of Climate Funding at The American Forest Foundation, calls this an “assurance mechanism”. It is a way for a company to substantiate its promise to change, where it is otherwise hard to observe from the outside. That assurance builds trust, helping win customers, attract and retain talent, and unlock more investor capital. 

The VCM is a path for companies to secure a competitive advantage on the road to net-zero. When done correctly, integrating high-quality carbon credits is a proactive, strategic decision that allows for superior cost management and value creation. Companies that recognize this today aren’t just going to do good, they’re going to do well. 

The VCM is inviting companies to get ahead. RSVP with Funga.