GreenBiz24 left me with more conviction in the voluntary carbon market (VCM) than ever before, counterbalanced by fresh concerns about the nearterm outlook for individual participants. Here’s why credit buyers and sellers are speaking cross purposes — and how carbon insurance bridges the gap.
Every year, the GreenBiz Sustainability Conference brings together the who’s-who of sustainability. In many ways, 2024 was no different than its predecessors: Leaders from Delta to Coca-Cola, MetLife to Allbirds, converged on Phoenix for three days of networking and learning. There was, however, one notable shift. Though still in the spotlight, the VCM attracted less vocal support from corporate buyers than we usually see. Expert panels dissected best practices and risk management for a corporate audience that was conspicuously quiet, if not thinner than in previous years.
It was clear that the controversies of 2023 — an annus horribilis that most in the VCM would rather forget — are going to be hard to shake off. Can credit sellers recover? To find out, we asked the buyers.
THE CSO OFFICE IS EVOLVING
It’s not just the VCM that’s changing. As it becomes less of a marketing and more of a core compliance function, corporate sustainability — and CSO pressure points and priorities — also look very different today.
That much was evident from the topic at the top of the GreenBiz24 agenda: financial reporting. Sustainability teams are treading water trying to balance evolving regulatory requirements with escalating internal demands. Stretched thinner than ever, they must master EU and California disclosures with one hand and, with the other, enigmatic Scope 3 data across sprawling supply chains. Unsurprisingly, the average CSO has less time.
As their remit gets bigger — and net-zero targets, closer — corporate decarbonization is also growing harder, politically and economically. As one attendee told me, “we’ve picked all the low-hanging fruit.” Sustainability strategies now require a rubber stamp from a growing cross-section of governance-related departments: from investor relations, to audit, to finance.
If those (typically risk-averse) functions don’t buy the benefits of offsetting relative to the risks, their answer to “should we buy credits?” will be “no” or “not until we have to.”
Among my conversations, exceptions were few and far between. Despite expressing in-principle support for high-quality solutions, plenty of CSOs admitted to deprioritizing nearterm offsetting due to mounting obstacles and limited resources. It prompted us to ask: What would incentivize a company to buy credits?
INSURANCE IS ECONOMIC ASSURANCE
To paraphrase Allbirds’ Aileen Lerch, who spoke at the conference, behind every purpose-driven business is a sustainability professional who has made the economic case for sustainability. To take that one step further, behind every carbon credit-adopting business is a sustainability professional who has made the economic case for carbon credits.
The events of 2023 compounded the burden of proof for buyers as well as sellers. That’s not a problem for the Microsofts of this world, which have armies of scientists dedicated to project due diligence. But most don’t.
GreenBiz was peppered with carbon brokers, project developers, and rating agencies talking up vital risk reduction measures — dynamic baselines, Measurement, Reporting, and Verification (MRV) technology, more frequent audits — but those won’t immediately convert a CSO who lacks the bandwidth to engage with individual projects on their technical merits.
It’s not enough to indicate that certain issuing projects could be lower risk today, or that the VCM will be lower risk in the future. Credits must be lower risk, today. Carbon insurance makes them so. To the resource-strapped CSO, it communicates due diligence is taken care of, and to the CFO — who doesn’t know their MRV from their CCP — it promises that risk is off the table. Insurance makes the economic case on behalf of the sustainability professional, and a low-hanging fruit of carbon credits. In essence, an insured credit becomes more valuable to all constituents.
BRIDGING THE BUYER-SELLER GAP
In a B2B market, particularly one directed at such an ambitious goal, it’s easy (and tempting) to overlook the very human challenges facing your customer. In-person events such as this are an invaluable reminder of their practical and personal circumstances — if you’re willing to have the necessarily honest and, at times, uncomfortable conversations.
I left Phoenix with mixed feelings. In principle, corporate representatives need offsetting to meet their decarbonization targets, reinforcing my long-term market conviction. In practice, however, companies are adopting a ‘wait-and-see’ approach, with 2023 controversies still front of mind and plenty of time remaining before 2030 deadlines.
Many conversations with sellers brought to mind the old Wall Street saying: “The market can stay irrational longer than you can stay solvent.” How many of the existing players will still be operating when the VCM rebounds? I suspect the question is answered by another: How many can promise their customers risk-protected credits today?
