This article first appeared in the Q2 2026 issue of the SID Directors Bulletin published by the Singapore Institute of Directors.
Written by Oi-Yee Choo, CEO, Climate Impact X
Carbon markets are professionalising quickly, with clearer quality benchmarks and more rigorous assessments, reshaping what “high quality” means. For boards, the task is to demand strong due diligence, robust controls and careful claims as integrity becomes the defining differentiator.
Once viewed as a niche mechanism for offsetting emissions, carbon credits are increasingly recognised as a strategic lever in the global transition to net zero. This shift is being driven not only by corporates and investors, but also by governments actively shaping the rules and infrastructure of carbon markets.
As scrutiny intensifies and stakeholder expectations rise, boards must take a clear-eyed view of how credits can be used credibly to deliver real climate impact while supporting long-term business value.
Why boards should pay attention
Carbon credits are becoming an integral part of corporate decarbonisation. For boards, this is not simply a discussion about offsets. It is about positioning companies for resilience, relevance and growth in a carbon-constrained economy.
From a Singapore perspective, the direction of travel is clear. Carbon pricing is rising, disclosure expectations are tightening, and regional frameworks are taking shape across ASEAN.
Governments are also moving beyond isolated national policies towards coordinated action. A notable example is the Coalition to Grow Carbon Markets, a first-of-a-kind government-led effort to strengthen voluntary demand for carbon credits. Co-chaired by Singapore, Kenya and the UK, alongside founding members France and Panama, such initiatives signal a clear intent: carbon markets are being positioned as a core tool of climate policy, not a peripheral one.
Globally, mechanisms such as Europe’s Carbon Border Adjustment Mechanism are beginning to influence trade flows and supply chains. At the same time, investors are sharpening their focus on credible climate action, not just stated ambition.
Boards that remain disengaged risk falling behind, not only on compliance but on competitiveness.
Even with the most ambitious decarbonisation plans, residual emissions remain a reality, particularly in sectors such as aviation, shipping and heavy industry. Carbon credits, when used responsibly, offer a pragmatic way to address these emissions while longer-term solutions scale. In 2024, more than 182 million tonnes of carbon credits were retired in the voluntary carbon market (VCM), signalling that many companies are already using them to bridge the gap between ambition and operational reality.
That said, hesitation persists. Concerns around credibility, transparency and reputational risk have understandably led some organisations to adopt a “wait and see” approach. But the market is not standing still. Standards are improving, and best practices are emerging.
What are carbon credits
At a basic level, a carbon credit represents one metric tonne of greenhouse gas emissions avoided, reduced or removed from the atmosphere. These credits underpin two related markets: compliance markets and the VCM.
Compliance markets are regulated systems such as emissions trading schemes or carbon tax regimes, in which companies must purchase credits to meet legal obligations. The VCM, by contrast, is driven by corporate commitments. While participation is optional, voluntary credits are increasingly used to address residual emissions and demonstrate mitigation efforts that go beyond the value chain.
Importantly, these markets are beginning to converge. Governments are actively exploring how the VCM can complement national climate targets, particularly through cross-border cooperation under Article 6 of the Paris Agreement. This policy momentum is raising the bar on integrity, transparency and standardisation across the ecosystem.
Credits also vary significantly in nature. Some focus on avoidance (preventing emissions that would otherwise occur) or reduction (lowering emissions intensity), while others involve removals (extracting carbon from the atmosphere). Projects may be nature-based, such as forest or mangrove restoration, or technology-based, which includes engineered solutions like carbon capture and storage. Each comes with different risk profiles, time horizons and co-benefits.
For boards, these distinctions are not technical details, they are material considerations. Not all credits are created equal, and their credibility depends on additionality, permanence, verification and alignment with corporate sustainability goals. Sound governance requires understanding these differences and making informed choices.
Credibility and risk in an evolving market
Credibility remains the defining issue for carbon markets. Directors are right to be cautious. Past concerns about low-quality credits, weak additionality and over-claiming have eroded trust.
The market response, however, has been swift. Governments are supporting the development of clearer guardrails, while independent bodies have stepped in to define what “high quality” means in practice.
The Integrity Council for the Voluntary Carbon Market has introduced the Core Carbon Principles, creating a global benchmark for quality. Independent rating agencies such as BeZero and Sylvera are providing clearer assessments of project risk and impact, bringing carbon markets closer to the level of rigour boards are accustomed to in financial markets.
But that progress does not eliminate risk. Reputational exposure remains real if credits are poorly selected or communicated. Regulatory frameworks will continue to evolve, and market dynamics, such as price volatility and supply constraints, will persist.
These trends point in one direction: the future of carbon markets will be defined by integrity. Boards that insist on rigorous due diligence and strong internal controls will be far better positioned to manage risk and capture value. For companies, this means being deliberate about how they access the market and prioritise trusted platforms that offer transparency, governance and reliable market infrastructure over fragmented channels. In a market still maturing, working with credible partners is becoming a critical safeguard and material governance decision.
Making carbon credits work within corporate strategies
Carbon credits should never be a substitute for decarbonisation. But they can be a valuable complement when embedded within credible transition strategies and broader sustainability agendas.
Leading companies globally are pairing ambitious internal decarbonisation targets with the selective use of high-quality credits. Many are also choosing projects that deliver broader benefits, from biodiversity conservation to community development, aligning climate action with the UN’s Sustainable Development Goals.
Examples such as Airbus, which complements investments in sustainable aviation fuel with engineered removal credits, or Microsoft’s long-term commitment to nature-based removals, demonstrate this integrated approach. In each case, credits are used to strengthen, not replace, core decarbonisation.
For boards, the message is clear. Carbon credits should not sit in isolation or be treated as a public relations exercise. When governed properly, they can support innovation and enhance business resilience.
A call to action for directors
As stewards of strategy and governance, directors have a critical role to play in shaping how their organisations engage with carbon markets.
Three questions should guide board-level discussions:
- Are credits integrated into our broader sustainability and growth strategy?
- Are we using carbon credits with clear intent and due diligence?
- Do we have the capability to monitor evolving policy, regulatory and market developments?
Carbon markets are on a path of continuous improvement, and they are professionalising quickly. Boards that engage early and thoughtfully are better equipped to manage risk and seize opportunity.
The transition to net zero will reshape markets, supply chains and capital flows. Carbon credits, when used responsibly, are not a distraction from this journey. They are a pragmatic tool within it. Directors who understand this landscape will be better positioned to guide their organisations with clarity – and to turn climate action into a source of long-term competitiveness.
