The Role of Carbon Credits in Corporate Decarbonization Plans

In the past few years, carbon credits have faced reputational problems. Some companies used them as a “get out of jail free” card in an attempt to buy their way out of real decarbonization, and certain projects were accused of falsely representing their impacts. 

However, according to the IPCC, the world’s leading climate body, carbon credits are a vital and necessary tool to tackle “residual emissions” (the pollution we can’t yet eliminate) and help finance real-world climate action that might otherwise struggle to get funded. The IPCC’s mitigation assessment shows that limiting warming to 1.5°C requires deep, aggressive cuts to our own carbon footprints and some level of carbon credit-financed Carbon Dioxide Removal (CDR) to cross the finish line.

A Quick Definition of Carbon Credits

If you strip away the jargon, a carbon credit is just a tradable certificate. It represents one metric ton of CO₂ (or equivalent) that was either kept out of the atmosphere or pulled back down from it.

Not all credits are the same, and it’s important to understand the difference.

• Avoidance and Reduction Credits: These stop emissions from happening in the first place. For example: a project that installs clean cookstoves in a village to replace wood-burning fires. You’re preventing “new” smoke from hitting the atmosphere.
• Removal credits (CDR): Physically remove CO₂ from the atmosphere and lock it away. This includes nature-based solutions like planting forests and high-tech methods like Direct Air Capture (DAC) where carbon is stored permanently underground. Other CDR examples include biochar, enhanced rock weathering, DAC with durable storage, or biomass capture with geological storage.

What does this mean for corporate decarb plans? Companies often invest in avoidance credits in the short term to support global climate goals, but they rely on removal credits for the long term to “neutralize” whatever emissions they just can’t get rid of.

Credits in Net-Zero Plans

Even if a company is doing everything right, they will eventually hit a wall. Whether it’s the massive heat required for industrial glass-making, the complexities of international shipping, or the methane from deep in a supply chain’s agricultural roots, some emissions are incredibly difficult to eliminate.

This is exactly where climate science is clear. In the IPCC’s assessments, modeled pathways that reach net-zero CO₂ emissions rely on a “balance” of remaining emissions and removals. While it is not a substitute for deep emissions reductions, CDR is required to achieve net-zero globally.

Corporate standards echo this logic. The Science Based Targets initiative (SBTi) Net-Zero framework requires companies to reduce value chain emissions in line with 1.5°C pathways, and then neutralize residual emissions at the net-zero target year, explicitly pointing to permanent removal and storage to address whatever is left. 

How corporations are using carbon credits in practice right now

1) Buying the Future: Tech Giants are Betting on CDR

In the last year or two, we’ve seen a massive shift. High-profile companies (think Microsoft, Google, and Stripe) aren’t just buying credits for today; they’re essentially “pre-ordering” the carbon removal industry of 2030. The motivation is both climate and practical: if removals will be needed for net-zero, companies want to help scale the market early.

Microsoft is one of the most visible examples. Its environmental reporting describes a strategy built around reducing emissions, moving to carbon-free electricity, and scaling carbon removal as part of its “carbon negative” ambition. In 2025, they signed massive deals for millions of tons of removal, including one of the largest-ever forest carbon offtake agreements. Google publicly reported contracting more than $100 million in carbon removal credits in 2024 and framed the spending as a way to accelerate solutions the company and the world desperately need.

2) Funding Action Outside the Business

The old way of thinking about credits was, “We emitted X, we bought Y, so now we’re ‘neutral’.” However, that logic is more of a fantasy than a reality. 

The industry is moving toward Beyond Value Chain Mitigation (BVCM), meaning that companies, while committed to cutting their own emissions as fast as they can, are also donating/investing in climate projects elsewhere because the world needs the help.

New rules like the VCMI Scope 3 Action Code (launched in early 2025) encourage this. It allows companies to be the “good guys” who fund global progress without making the misleading claim that their own carbon footprint has magically hit zero. BVCM is an “and,” for companies, not an “instead of.”

3) Supplier and Customer Programs

A major hurdle in the climate fight is Scope 3, or a company’s upstream and downstream activities. If you’re a giant like Amazon, your carbon footprint is also made up of thousands of smaller companies that don’t have a sustainability department.

To fix this, Amazon recently launched a service that lets its suppliers buy vetted, high-quality carbon credits through Amazon’s own platform. This uses the giant’s massive buying power to get better deals on high-integrity credits for smaller businesses. Amazon only lets you in if you’ve already committed to a real net-zero target and are reporting your emissions publicly. It’s a way to ensure that credits are a supplement for the hard work, not a way to avoid it

What a Good Strategy Looks Like

If you’re looking at a company’s climate plan, or building one yourself, these are the “green flags” that signal a strategy is rooted in reality, not just PR.

1. A “Me First” Approach to Cutting Carbon

Before a company even mentions credits, they should show how they are cleaning up their own house. This means real, messy operational changes: swapping gas boilers for heat pumps, switching to 100% renewable energy, and leaning on suppliers to do the same. If they aren’t reporting their Scope 1, 2, and 3 emissions transparently, the credits they buy don’t really matter.

2. Using Credits as a “Safety Net,” Not a Crutch

Credits should only be used to handle what’s left over (residual emissions) or to fund climate projects that wouldn’t happen otherwise. The goal is high-integrity credits vetted by groups like the Integrity Council in order to ensure they actually represent real, permanent carbon reductions.

3. Moving Toward Removals

Since we know from the IPCC that we can’t hit net-zero without physically pulling carbon out of the air, serious companies are starting their CDR procurement processes now. By investing in things like DAC or biochar, they’re making sure the technology is mature and affordable when they need it most in 10 or 20 years.

4. Honest Marketing

The days of slapping a “Carbon Neutral” sticker on a product solely based on cheap offsets are largely over. A good plan uses honest language. Instead of saying “Our footprint is gone,” they say “We’ve cut our emissions by 60% and invested in these specific projects to help the rest of the world.”

Credits Help When They’re Honest

Decarbonization has to be a company’s primary focus, and carbon removal is a necessary partner to those cuts, not a replacement for them. At the end of the day, the credibility of a climate strategy isn’t about the flashy headline or label. It’s about the details: what you cut, what you couldn’t cut yet, and how you proved the credits you bought actually made a difference. Carbon credits aren’t magic, and they aren’t a get out of jail free card, but when used correctly, they are a powerful tool.

OBATA can help your team integrate high-integrity carbon credits into a credible decarbonization and reporting strategy. To schedule a call, click here.