Creating a Successful Corporate Carbon Strategy

The carbon challenge we face is monumental: to remove carbon at 10-20 times the scale that oil was originally produced but in just a quarter of the time. 

As this urgency grows, the voluntary carbon credit market has emerged as a key tool. It offers a way to mitigate environmental impact while also providing market participants with a viable investment opportunity and the potential for financial returns. It’s become one of the most scalable avenues for directing capital toward impactful climate solutions. However, the lack of established best practices has led to confusion and complexity, making it difficult for companies to make informed decisions and take meaningful action. 

In a recent panel discussion at our 2024 Carbon Markets Summit, industry experts from McKinsey, Salesforce, and Chevron shared their insights on the challenges and best practices in carbon markets. They highlighted the importance of transparency, effective communication, and their own experience with balancing the role of offsets in corporate strategies aimed at achieving net-zero goals.

The Panel: 

The panel discussion, hosted by Adrienne Gormley, focused on navigating the complexities of setting and implementing impactful and effective carbon market strategies amidst market uncertainty. 

The Challenges: 

Overarching challenges in the carbon market, such as transparency, governance, and compliance, contribute to a general lack of confidence in corporate carbon strategy.

Marisa Hamsik from Chevron highlighted the difficulties buyers face in determining the right balance between internal emissions reductions and the use of offsets (and how to communicate that), expressing the need for internal alignment. There’s currently no guidance out there, so it can be hard to explain this to business leadership. 

Of course, the carbon credit market is suffering from a supply and demand challenge, as Max Sher from Salesforce raised. From a supply perspective, he emphasized the difficulty in defining what constitutes high-quality carbon offsets. This challenge is especially pronounced for early-stage projects, where the quality and permanence of offsets can be uncertain.

On the demand side, Max pointed out the complexities surrounding how companies receive credit for their carbon reduction efforts. He noted a growing uncertainty about how to label or communicate these initiatives effectively, leading to confusion about their impact.

Sean Kane from McKinsey & Co. highlighted the challenge of ‘speaking to the converted’ within the carbon space, and how communicating the urgency to those less knowledgeable, or who frankly care less, is a real challenge. Getting people to understand will require even more stark articulation of both the economic impact and the impact on human life. 

The Key Takeaways: 

We’ve seen ambitious targets set by visionary CEOs, or due to pressure from the board, land on the CFO's desks for sign-off – without taking the right steps to position the costs and intended impact. Building a business case that shows clearly the needs and the expected outcomes, taking the care to build a business case without the assumptions that just because we are looking at benefits that we might see the true outcome of over time, we don’t need to be concrete in how we measure short term impact.  

Enhancing transparency in carbon data and strategies is important. Clear visibility helps stakeholders make informed decisions and builds confidence in carbon market participation. Try to develop robust communication plans that articulate the risks and opportunities associated with carbon investment. This includes framing carbon initiatives in familiar business contexts to align internal stakeholders. It’s okay to share the realities of carbon market complexities with leadership and internal teams to build credibility and trust, framing sustainability as a key to long-term business viability.

Although there might be altruistic elements, to why and how many companies are pursuing a net zero strategy, shaping and implementing a carbon strategy often comes down to setting realistic expectations.  

When communicating a carbon strategy to your C-suite or board, it's crucial to strike a balance between skepticism and optimism. Avoid presenting an overly rosy picture, but also acknowledge that many asset classes started with uncertainty. Highlight the fact that there are uncertainties in how regulations will be implemented and explore and unpack your view of your company’s business case for a scalable carbon strategy, particularly in terms of customer retention and long-term viability. Position carbon market activities as not only ethical choices but essential for long-term business sustainability– to give your board confidence in investing.

Companies have the opportunity to be leaders, or at least fast followers in this space. There is ample information and guidance available – Microsoft and Frontier’s plans are good reference points, easily accessible with a quick online search. It’s also worth noting that prices are rising, making early action even more critical. We need to paint the bigger picture around the risk of not succeeding in net zero. 

Another tip is to promote learning and engagement across the organization regarding carbon markets. This can be through workshops or collaborations with experts to enhance understanding and practical application. Education is a big part of promoting a carbon strategy and gaining buy-in internally. You can also engage with other companies and stakeholders within the carbon market to share insights, challenges, and successes, facilitating a community approach to overcoming common obstacles.

Conclusion: 

By following the panellists’ recommendations, organisations can more effectively navigate the challenges of their carbon strategy and enhance their strategic positioning in the pursuit of net-zero goals. Thanks to all our panelists for their expert insights. You can watch the full discussion here. 

At Sylvera, we help buyers invest in high-quality projects with real climate impact through our carbon credit ratings and detailed analytics. Interested in learning how we can support your carbon strategy? Talk to our team today.