In the quest for sustainability and carbon neutrality, many food & beverage companies are turning to carbon credits as a strategic tool. With over 25% of the world’s largest food & beverage companies committing to net-zero targets (based on the Net Zero Tracker data including 4,056 food & beverage companies), the carbon credit market is projected to grow exponentially. However, the journey towards sustainability is fraught with challenges, particularly in navigating the complex carbon credit landscape.

Carbon credits are a way for companies to compensate for their greenhouse gas (GHG) emissions by investing in projects that reduce or remove an equivalent amount of emissions elsewhere. Food & beverage companies can buy these credits from projects that either prevent emissions (avoidance) or remove them from the atmosphere (removal). Each credit typically represents the reduction of one metric ton of carbon dioxide equivalent.

As global awareness of climate change intensifies, companies are setting ambitious targets to combat greenhouse gas emissions.

Net Zero aims to balance the amount of greenhouse gas emissions released into the atmosphere with the amount removed. Achieving Net Zero, as defined by SBTi, involves prioritizing direct action through sequestration and reduction activities. While SBTi discourages reliance on offsets, it allows up to 10% offsetting for validation due to the acknowledged difficulty of complete avoidance.

Carbon Neutrality implies achieving a state where the total carbon emissions associated with the production and supply chain activities are entirely offset or balanced by measures that remove or reduce an equivalent amount of carbon dioxide from the atmosphere.

Carbon credits are generated from projects that either avoid the generation of greenhouse gas emissions or remove greenhouse gases from the atmosphere. These projects encompass “nature-based solutions” like reforestation and regenerative agriculture, as well as “engineered solutions” such as carbon capture and storage. Understanding the nuances of these projects is essential for companies aiming to make informed choices.

Project that maximize co-benefits to extend beyond emissions reduction are recommended. Companies can strategically select projects that not only achieve carbon neutrality but also deliver broader environmental and social advantages. By supporting initiatives that contribute to biodiversity, enhance water quality, empower communities, and improve health, businesses can not only fulfill carbon reduction goals but also enhance brand reputation, build stakeholder trust, and align with broader sustainability objectives.

Navigating the market involves interacting with various entities, including carbon credit registries, standards bodies, verifiers, brokers, marketplaces, and ratings agencies. Understanding their roles and assessing the credibility of each player is crucial for effective participation.

Companies must carefully choose their carbon credit strategy to align with industry practices, sustainability goals, and risk tolerance. While high-quality credits reduce the risk of negative publicity and greenwashing, incorporating co-benefits can enhance reputational benefits.

As companies embark on the journey of sustainability through carbon credits, informed decision-making is paramount. By understanding the market dynamics, assessing project attributes, and aligning with industry standards, food and beverage companies can contribute to a more sustainable future while meeting their carbon reduction goals.