Read more in the July 25 edition of Invert Insights.
Carbon markets are crucial for mobilizing private capital, accelerating decarbonization, and promoting both environmental and social outcomes, particularly in emerging and developing economies. Yet since 2022, credit retirements have plateaued. With global temperatures already breaching 1.5°C, this stagnation poses a significant threat to climate progress. Businesses remain critical actors in this space, but are holding back due to a lack of confidence, clarity, and demonstrated value.
In their latest report, A Confident Carbon Market: Business Perspectives, VCMI outlines key findings on what’s needed to scale the carbon market, gleaned from in-depth research with over 65 businesses, 20 experts, and 60 market reports.
Findings suggest that the strongest motivator for companies remains meaningful progress toward climate targets and being able to address residual emissions more quickly, especially when those interventions also help demonstrate action across broader social and nature goals.
The number one most challenging barrier being faced by organizations is concerns over credit quality, transparency, and integrity. The report strongly emphasizes that clear, aligned, and stable rules on how and when to use carbon credits are critical to stimulating market engagement. Without these clear guidelines, whether from regulatory bodies or recognized voluntary frameworks, businesses struggle to build a strong internal business case and justify investments. This directly impacts the ability to secure internal support from stakeholders, particularly CFOs, who are increasingly demanding tangible financial returns on sustainability investments, and necessitates framing carbon credit purchases in terms of ROI, risk mitigation, and competitive advantage. While long-term interventions, such as clear rules, are in development, businesses must proactively identify measurable value from carbon credit investments in the short term, including financial benefits, risk avoidance, and a competitive advantage.
The importance of third-party endorsements and peer influence cannot be overstated. Endorsements from governments, NGOs, and scientific bodies help validate market participation and mitigate reputational risk. Similarly, collective action and leadership from industry peers can set precedents and reduce perceived risks for others, fostering broader market engagement. As sustainability professionals, fostering these collaborative efforts and advocating for clear, pragmatic frameworks will be essential to rebuilding confidence and unlocking the full potential of voluntary carbon markets.
A growing number of companies now value co-benefits, such as forest restoration and community development, as a reason to act, especially when a hard financial business case is lacking. Verified co-benefits help sustainability leaders build trust, demonstrate measurable impact, and align with broader ESG strategies.
CFOs increasingly expect credit purchases to be justified in terms of cost efficiency, risk mitigation, or strategic advantage. This creates pressure to reframe climate-related spending in ways that connect with broader corporate priorities. The report suggests positioning credits as a hedge against future regulatory costs, a way to mitigate operational risks (e.g., deforestation near supply chains), or even as a market differentiator in services or product offerings.
Across all focus groups, the most commonly requested solution was clarity on how and when carbon credits should be used, both within a net-zero strategy, for compliance, or as part of supply chain due diligence. This reinforces the sentiment that in order for carbon credits to be adopted as a meaningful and measurable tool to step up decarbonization efforts, businesses need clarity on eligible uses of credits in climate targets, alignment between frameworks (e.g., ICVCM, SBTi, VCMI), and stability to support long-term planning and procurement. Rules don’t need to be rigid; they can be phased, tiered, or follow compliance models, but without them, many companies will delay or downsize credit use.
Invert Insights.
💡 The consequences of fragmented and evolving standards are becoming increasingly visible, as some organizations begin to step back from their net-zero commitments. In many cases, this retreat stems not from a lack of intent but from the difficulty of aligning long-term climate goals with today’s market realities. When frameworks require actions that are not yet economically or operationally viable, even well-intentioned companies may find themselves unable to comply, highlighting the urgent need for clearer, more flexible guidance that reflects the complexity of real-world implementation.
💡 CFOs are no longer passive stakeholders in sustainability; they’re critical decision-makers. According to the report, sustainability teams must now frame carbon credit purchases in financial terms to secure internal buy-in, which aligns with research showing that sustainability is becoming a finance and legal issue rather than being siloed in the sustainability department. CFOs are now being expected to evaluate carbon credit purchases like any other investment based on ROI, risk, and strategic fit. This signals the importance of working with the right partner who can help derisk climate investments with strong project planning and due diligence. Book a discovery call with Invert’s team of experts to learn more.
