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For organisations that have begun measuring their emissions and setting reduction targets, the question of what to do with residual emissions — those that cannot yet be eliminated through operational changes — becomes increasingly pressing. Carbon credits and International Renewable Energy Certificates (I-RECs) are the two principal instruments used by companies in the voluntary carbon market to address these residual emissions. This guide sets out how each instrument works, how to select the right supplier and standard, and how to ensure the purchase is executed correctly.
Carbon Credits and I-RECs: What They Are and When to Use Each
The foundational rule is straightforward: one carbon credit represents one tonne of CO2 equivalent sequestered or avoided, while one I-REC represents one megawatt-hour of renewable electricity generated. The two instruments serve different purposes within a corporate emissions strategy. Carbon credits are used to offset Scope 1 and Scope 3 emissions — those from direct combustion, process emissions, and value chain activity. I-RECs address Scope 2 emissions, providing market-based evidence that electricity consumption has been matched by renewable generation. Companies operating outside regulated compliance markets purchase these instruments voluntarily, either to improve scores on external sustainability ratings such as EcoVadis or CDP, to fulfil commitments made in annual sustainability reports, or to demonstrate progress against net-zero targets during the period in which operational reductions are still being implemented. February through April typically sees the highest purchase and retirement volumes, as organisations align credit retirement with their annual reporting cycles.
Measuring Emissions and Selecting a Supplier
Before any purchase, organisations need two things: a credible measurement of their carbon footprint, conducted using a recognised standard such as the GHG Protocol or ISO 14064, and a clear decision on which emissions they intend to offset — whether Scope 1 and 2 only, or a broader Scope 3 commitment. Precision here matters: purchasing credits against an unmeasured or poorly scoped footprint undermines both the credibility of the offset claim and the value of any external certification built on it. Suppliers of carbon credits span a range of market participants. Project originators sell credits directly from the source — giving buyers the strongest narrative link to the underlying project. Brokers and traders provide market liquidity and access to a wider range of project types. Specialist consultants, including The Carbon Collective Company, help organisations match credits to their specific scope requirements, certification obligations, and storytelling needs. I-RECs are available through official I-REC marketplaces, renewable energy generators, brokers, and consultants. When evaluating suppliers, organisations should consider long-term cost, reliability of supply, and — critically — why the supplier is selling those particular credits.
Quality Standards and What They Mean
Not all carbon credits are equivalent in quality, additionality, or permanence. Verifying that credits meet a recognised standard is non-negotiable for any organisation making public offset claims. The most widely used standards include Gold Standard, which focuses on sustainable development co-benefits alongside carbon reduction; the Verified Carbon Standard (VCS), the largest voluntary carbon market by volume; and Puro, which specialises in carbon dioxide removal (CDR) credits from engineered pathways. For organisations operating in the MENA region, the Global Carbon Standard (GCS) is the first voluntary market standard developed specifically for that geography. For renewable electricity certificates, the I-REC Standard applies in markets without established local REC systems. European Guarantees of Origin (GOs), North American Renewable Energy Certificates (RECs), and China's Green Electricity Certificates (GECs) serve equivalent functions in their respective jurisdictions. The choice of standard should be driven by the organisation's reporting framework requirements, the expectations of the certification body or investor audience being addressed, and any specific regulatory guidance applicable in the organisation's operating markets.
Completing the Purchase and Retiring Credits Correctly
Once credits are purchased, they must be formally retired in a public registry to constitute a valid offset claim. Retirement removes the credits from circulation and creates a permanent, auditable record that the organisation has claimed the associated environmental benefit. Some organisations choose to publicly disclose their credit purchases, linking retirement records to their sustainability reports — a practice that materially strengthens the credibility of offset claims and provides a verifiable audit trail for third-party reviewers. The quantity of credits purchased and the timing of retirement should be calibrated against external obligations: the organisation's annual reporting period, the requirements of any active sustainability certification, and any third-party ESG performance ratings that incorporate offset data. Misalignment between purchase timing and reporting periods is a common error that can create gaps in disclosed sustainability performance. A structured approach — ideally guided by a consultant with direct experience of the relevant certification and reporting frameworks — ensures that the offset programme delivers its intended effect on both the environmental and commercial outcomes it is designed to support.