Read more in the August 1 edition of Invert Insights.
Over the last four years, the number of companies committing to net-zero emissions has surged (up 175% among Fortune 2000 companies). Yet despite this impressive wave of ambition, only 16% are currently on track to meet those targets by 2050. As 2030 climate deadlines close in, a hard truth is emerging: internal decarbonization efforts alone won’t deliver the speed or scale of emissions reductions needed to meet global climate goals.
In response, The Nature Conservancy (TNC) has released a science-backed framework for how carbon credits – when used within specific guardrails – can accelerate genuine climate progress. Their findings, shared in Bending the Curve: The Role of Carbon Credits in Corporate Net Zero, don’t let companies off the hook for internal reductions but instead offer a flexible but disciplined roadmap for how credits can fill critical gaps, support nature-based solutions, and restore trust in the voluntary carbon market.
In addition to making the case for high-integrity carbon credits to accelerate decarbonization, the report emphasizes the importance of critical funding for natural climate solutions (NCS) as a vital and underleveraged opportunity to accelerate climate action while delivering critical environmental and social benefits. The Intergovernmental Panel on Climate Change (IPCC) has repeatedly recognized the imperative of NCS, which can provide up to 14 gigatonnes of CO₂ mitigation annually, yet remain significantly underfunded, receiving only a third of the financing needed to meet global climate, biodiversity, and land restoration targets. High-integrity carbon credits offer a powerful mechanism to channel private finance into NCS, supporting efforts such as forest conservation, peatland restoration, and Indigenous land stewardship.
Rather than limiting carbon credits to post-2050 clean-up duty, TNC outlines four practical use cases for integrating credits throughout the corporate net-zero journey:
Close the Near-Term Emissions Gap (2024–2035): Companies should be allowed to use high-quality credits to compensate for emissions they can’t yet feasibly reduce, especially Scope 3. This use case acts as a bridge, allowing them to stay on a net-zero trajectory while investing in the internal systems and supply chain solutions needed for long-term reductions.
Address Unabated Emissions (2035–2050): Once companies are on track for science-aligned targets, they can use credits to go above and beyond their fair share. This use case aligns with “beyond value chain mitigation” (BVCM) and the Voluntary Carbon Markets Integrity Initiative (VCMI)’s Carbon Integrity Claims, giving companies a credible way to demonstrate leadership.
Neutralize Residual Emissions (2050+): By mid-century, most companies will still face a small share of unavoidable emissions. At this point, carbon removal credits can be used to neutralize what remains. This is the “net” in net zero. This use case is fully aligned with existing SBTi guidance.
Take Responsibility for Historical Emissions (2050+): The most forward-leaning use case, this allows companies to invest in the removal of emissions they generated in the past, demonstrating climate leadership and accountability beyond compliance. Few companies have embraced this to date, but organizations like Microsoft are leading the way.
In partnership with MSCI, TNC estimated the climate and financial potential of these use cases across more than 4,000 publicly listed companies. Their findings are eye-opening:
TNC’s vision proposes using carbon finance as a catalyst – not a crutch – for decarbonization, while channeling resources into nature-based projects that deliver climate, biodiversity, and community benefits.
Invert Insights.
💡 Without a shift in how we approach carbon credit use, the voluntary carbon market will remain stagnant, natural climate solutions will remain underfunded, and companies will struggle to maintain momentum on their climate commitments. Used strategically, carbon credits offer critical flexibility in early years of the net-zero transition, keeping companies on track while internal mitigation capacity catches up.
💡 The current voluntary net-zero frameworks, particularly SBTi, emphasize a sequential mitigation hierarchy: reduce all emissions internally first, then use removal credits to neutralize what remains by 2050. While scientifically sound in principle, this approach is too narrow for the messy, transitional realities of the corporate world, especially in sectors with complex supply chains, limited access to green technologies, or regulatory barriers. Through a phased, use-case driven framework, TNC proposes a vision aligned with emerging thinking from the VCMI and SBTi’s upcoming standard revisions. It offers pragmatic flexibility without compromising environmental integrity which is a necessary balance if we’re to unlock the full potential of private-sector climate action.
💡 TNC’s report highlights how voluntary carbon markets have historically been one of the few mechanisms channeling private finance into nature-based mitigation. But with recent market stagnation the critical flow of funding to nature is at risk. TNC proposes that expanding the allowable use of credits (with strict quality guardrails) could reinvigorate demand for high-integrity, nature-based credits, thereby funding projects that not only reduce emissions but also protect biodiversity, support Indigenous and local communities, and enhance climate resilience. These co-benefits are increasingly valued by buyers, yet they remain undercompensated in today’s credit-constrained frameworks. Supporting nature is not optional if we’re serious about a livable climate future and carbon markets are a crucial part of the solution.
