As climate action becomes a top priority, many small and medium-sized enterprises (SMEs) find themselves facing a steep learning curve when striving for net zero. This is especially true when exploring the voluntary carbon market (VCM).
Complex terminology, diverse options, lack of price transparency, and the need for due diligence can make participation feel overwhelming. However, by focusing on a few key strategies, SMEs can confidently engage with the VCM and take meaningful steps toward net zero.
The complexity of the market
Suffice to say: the carbon market is complex. There are thousands of projects in the 10 largest registries alone. Across these, there are over 13 million different project data points, including 3.5 million data points on quality alone.
What’s more, the market has come under sustained criticism for certain projects not delivering against the climate impact claimed. Much of this criticism is justified and has played a role in lifting quality standards in the market. Yet some of the negative claims have been falsely reported have resulted in reduced financing of climate-saving, and socially uplifting projects.
As such, it’s no surprise that the carbon market seems daunting for the people driving sustainability in corporations, especially SMEs with relatively fewer resources than larger organisations.
Breaking Down Carbon Credits for SMEs
SMEs often lack the resources for comprehensive due diligence, but that doesn’t mean they can’t make informed decisions. Here’s how SMEs can evaluate carbon credit quality without stretching their resources:
- Choose reputable standards: Opt for well-established standards like the Gold Standard and Puro.Earth, which have proven track records and robust methodologies for evaluating project impact.
- Leverage rating agency scores. Rating agencies have emerged as key players in the market – providing assessments on the likelihood of projects achieving the climate outcome. BeZero’s data, for example, covers hundreds of projects and is free.
- Speak to your carbon advisor. Speaking to external advisors, like Thallo, who have experience in navigating the market is important in making informed decisions. It’s even better if the advisor you’re speaking to has no bias in what you purchase (beware of advisors selling you their inventory!).
Carbon Credit Portfolios: Not Just for Big Players
Carbon credit portfolios are a tool in which buyers purchase a bundle or mix of different carbon projects. Due to the diversity of the assets included, organisations can spread risk and manage down average costs, helping to maximise impact and minimise risk. A common misconception is that carbon credit portfolios are exclusive to large corporations. In reality, SMEs can benefit from portfolios in several ways:
- Diversify risk: By selecting credits from a mix of project types and geographies, SMEs can reduce the impact of any single project’s underperformance.
- Align with sustainability goals: Portfolios allow SMEs to support specific causes, such as biodiversity conservation or community development, tailoring their strategy to their values.
- Optimise costs: Combining credits from different projects and vintages can help SMEs secure cost-effective solutions while still achieving their carbon mitigation targets
Importantly, because there is no minimum purchase amount and huge breadth of projects available, Thallo allows you to easily build carbon portfolios without breaking the bank.
Key Considerations for SMEs
The first steps of any carbon journey are—ofcourse—measuring carbon emissions and decarbonization. Once these steps have been taken, carbon credits can be used to compensate for residual emissions.
Before diving into the VCM though, SMEs should define a clear strategy around these factors:
- Budget: Establish a realistic budget based on internal carbon pricing, industry benchmarks, and overall sustainability goals.
- Timeframe: Identify a specific timeline for achieving offsetting milestones, whether tied to an annual target, product lifecycle, or event.
- Transparency: Clearly communicate your carbon offsetting activities, including the credits purchased, goals, and impact, to build trust and accountability.
By taking these steps, SMEs can overcome initial barriers to entry and actively contribute to global climate action. With a thoughtful approach, the VCM becomes a powerful tool for driving sustainability while aligning with business values.
Ready to take the first step – reach out to one of the team and explore how platforms like Thallo can help your SME navigate the carbon market with confidence. Together, we can build a more sustainable future.
