Blockchain can help us fight climate change – Here’s how to do it.

90% of companies now see sustainability as a crucial part of their organisation’s strategy. But turning recognition of the importance of sustainability into concrete action is often easier said than done. Notably, only 60% of organizations actually have a sustainability strategy in place – representing a 30% gap between the number who see this as important and the number who actually take action.

As part of the effort to get more companies to adopt environmentally conscious initiatives, carbon credits have become an increasingly important part of the modern sustainability narrative. But challenges remain for the effective adoption and use of carbon credits. But with digital carbon spurring a new wave of green entrepreneurship, this is poised to change.

Read on to learn more about digital carbon credits and how they can potentially play a role in your own efforts to go green.

Related: Digital ads are creating a climate disaster. Take these steps to offset industry’s hidden toll on our planet.

So, what are carbon credits?

Firstly, it is important to understand what carbon credits are and what their role looks like in today’s business environment. Carbon credits are designed to compensate for greenhouse gas emissions from companies and nations.

There are two main types of carbon credits. The first is often referred to as a “permit to pollute” or “legislative credits”, where a company essentially buys carbon credits equal to the amount they exceeded the allowed rate. As Investopedia explains, companies are given a specific number of credits, with each credit allowing the emission of one tonne of carbon dioxide.

These credits are designed to decrease over time, and companies can sell or trade their excess credits. Essentially, the idea is that having credits for “limiting” carbon emissions will create a financial incentive for businesses to reduce their emissions.

For example, a country can require companies to limit their greenhouse emissions to 50,000 tonnes per year. A business that previously produced 70,000 tonnes of emissions per year must either buy carbon credits or find a way to reduce its emissions. Even for smaller businesses, these guidelines can serve as a good way to assess how you can reduce your emissions over time.

The second type of credit (known as “voluntary offset credits”) is obtained when a company compensates for its own emissions through its voluntary participation in an environmental project. An organization that invests in a project in areas such as renewable energy or forestry can then obtain carbon offset credits as a way of quantifying their environmental impact.

Related: Sustainability in business: why change is needed now

How digital carbon improves the existing carbon credit market

At the moment, the standard market for the creation, sale and trading of carbon credits leaves a lot of room for interpretation. “Permit to pollute” credits are issued by governments – but in many parts of the world participation in these carbon credit exchanges is relatively limited.

For example, the United States has only two state-based ETS programs. These are the Regional Greenhouse Gas Initiative (RGGI), which is limited to emissions from the power sector in several northeastern states, and California’s AB-32 Cap-and-Trade Program.

Because of this, most businesses only participate in the voluntary market for carbon offsets – earning carbon credits by investing in sustainability projects. However, offset credits are not regulated by the authorities, which can create challenges for the sale, trade and verification of carbon offsets. How can your business manage carbon credits effectively without a clear system in place?

This is where digital carbon can help level the playing field, improve accessibility and streamline processes. As a report by Changeblock reveals, digital carbon offers digital credits that represent proportional ownership of climate-backed tokens. A central digital platform allows these tokens to be aggregated as a single asset that can be easily traded. Instead of having to buy individual tokens from different sellers or marketplaces, digital carbon credits can represent one ton of emissions from multiple offset projects.

With blockchain management, each digital carbon credit comes with a comprehensive data package that describes the transaction. This includes details of emissions reductions quantity and pricing. In some cases, it can even provide transparent access to raw data from sensors such as gas chromatography units, scales, pressure monitoring systems and more to verify the amount of carbon offset associated with each digital credit.

This actionable insight and the accessibility of a digital platform helps bring offset carbon credits to a significantly wider audience, stimulating more organizations and individuals to participate in climate change. Digital carbon credits open this concept to the masses – so even if you are “too small” for a traditional carbon credit program, you can still access digital credits.

Key benefits of digital carbon

Digital carbon offers several notable benefits that, when properly implemented, allow carbon credits to become more effective in driving the transition to a global net-zero economy.

By using a digital platform as a central location for tracking and trading carbon credits, these processes will naturally become more efficient and transparent. For organizations looking to sell, trade or verify their carbon credits, this provides a much-needed layer of confidence in what remains a largely unregulated industry.

A digital platform also increases the potential for organizations to offset emissions on a global scale by being able to support and obtain carbon credits for sustainability projects anywhere. This also makes carbon credits more readily available to individuals and organizations that may not have the capacity to undertake carbon reduction projects on their own. For example, you can partner with another sustainability organization, donating whatever money or resources you can, rather than needing to spearhead a sustainability project on your own.

In many ways, digital carbon is set to support a significant expansion in new sustainability-focused partnerships around the world by making it easier for companies of all sizes to invest in environmental projects of varying scope and focus.

Related: 3 ways you can bring sustainability to your workplace

Creating the future of sustainability

The demand for carbon credits is only expected to increase in the coming years. As businesses and governments seek to mitigate their impact on the environment, the ability to efficiently create, track and trade carbon and other environmental credits will become even more important.

With the rising tide of digital carbon initiatives, much-needed transparency and efficiency can make these efforts more effective than ever before. As you consider how your own business can become more environmentally friendly, don’t overlook the potential value of digital carbon.