With climate concerns and corporate accountability on the rise, companies now face a critical question: How to reduce emissions drastically through comprehensive climate action while simultaneously engaging with carbon markets to compensate for unavoidable residual emissions.

Even as they work to answer this question, however, another challenge emerges: incorporating carbon credits into their environmental, social and governance (ESG) reporting. This complexity stems from a mix of constantly evolving regulations, varying reporting frameworks, and significant quality differences among carbon credits — all of which can add up to a multi-layered reporting challenge that directly impacts how stakeholders evaluate a company's climate commitments and progress.

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Key carbon market terms

Additionality A carbon project’s emissions are considered "additional" if they would not have occurred without carbon credit revenue

Permanence A carbon project’s ability to keep carbon sequestered for long periods, typically decades or centuries, without reversal

Vintage year The year in which the emissions reduction or removal activity occurred and the credits were issued

Registry Organizations that track carbon credits from issuance to retirement to prevent double-counting

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Navigating ESG reporting challenges

ESG reporting is no longer optional but an essential requirement for corporate transparency and sustainability. Carbon credit integration is a critical component of the governance aspect of ESG, requiring companies to establish robust systems for consolidating and communicating their climate activities to stakeholders with accuracy and integrity.

While carbon credits primarily address environmental impacts, many high-quality projects deliver significant social co-benefits that contribute to the "S" in ESG. These can include improved healthcare access, educational opportunities, economic development for local communities, and gender equality initiatives. Companies using carbon credits should integrate reporting on these social impacts into their broader ESG frameworks, highlighting how their carbon strategy delivers benefits beyond just emissions reductions.

Today, investors, regulators, and consumers are demanding more than just promises. They want verifiable evidence of action and accountability. When it comes to reporting on carbon reduction and carbon credit strategies, this means companies must align with established reporting frameworks while also maintaining a high level of transparency and integrity in how both activities are governed, measured, and disclosed.

One of the biggest impediments to ESG reporting is regulatory fragmentation. Different countries and regions each have their own disclosure requirements, making global compliance challenging. 

Further complicating matters, each reporting framework has a different way of integrating carbon credits into reporting practices, making comparability difficult — not to mention inconsistencies in accounting methodologies, among other questions, which can result in credibility risks for companies.

For example, companies operating in both the EU and the U.S. face different regulatory approaches to carbon credit reporting. The European Union's Corporate Sustainability Reporting Directive (CSRD), for one, requires detailed disclosure of how carbon credits complement — rather than replace — emissions reduction efforts, with specific reporting on credit quality, permanence, and double counting. Meanwhile, California's climate disclosure regulations focus more narrowly on quantifying the percentage of emissions offset by credits and verifying their certification standards. 

Despite such differences, opportunities exist for strategic alignment. Companies can build a unified carbon credit reporting approach by mapping overlapping requirements, prioritizing the highest verification standards across jurisdictions and clearly separating carbon credit usage from direct emission reduction activities in all disclosures. This streamlined approach can help reduce compliance burden while meeting the core transparency expectations of all regulatory frameworks.

Here, we break down how companies can ensure integrity and clarity across key ESG frameworks, report accurately on their carbon credit strategy — and of course, how CEEZER can help.

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ESG reporting regulations

CSRD

If your company does business in the EU, it’s important to know that its reporting obligations under the Corporate Sustainability Reporting Directive (CSRD) may be changing significantly. The EU's proposed Omnibus package, released in February 2025, would dramatically scale back CSRD requirements by raising reporting thresholds and eliminating many disclosure mandates.

Under the proposed changes, EU-based companies would only need to comply if they have at least 1,000 employees (up from 500) and either €50 million in revenue or €25 million on their balance sheet. For non-EU companies, the threshold would increase to €450 million in overall revenue (up from €150 million) and either €50 million from an EU branch or one large EU subsidiary. According to some experts, these changes may reduce the number of in-scope companies by more than 80 percent.

Despite such rollbacks, however, CSRD will still require double materiality assessment, meaning companies must still evaluate and report both their financial impact from sustainability measures and their impact on society and the environment.

While these changes await final EU approval, sustainability experts recommend companies continue preparing their emissions inventories and climate risk assessments. National-level regulators across the EU are responsible for CSRD enforcement. Under the current CSRD, companies are required to report actual emissions separately from carbon credit purchases, with the directive continuing to emphasize that companies should prioritize emissions reductions first. 

To meet compliance requirements, companies are increasingly strengthening internal controls for emissions tracking, while also investing in digital tools and third-party audits to verify required ESG data. Many organizations are turning to specialized carbon market experts like the CEEZER Impact team to navigate this complex regulatory landscape and ensure proper integration of carbon credits into their CSRD reporting. 

AB 1305 (California's Corporate Climate Data Accountability Act)

In the U.S., California is a leading player in the push for more climate transparency. To that end, AB 1305 is one of the country’s strictest climate disclosure laws, requiring large corporations to report their emissions in full. If your company operates in California and makes more than $1 billion annually, you’re on the hook for disclosing scope 1, 2, and 3 emissions.

Scope 3 reporting is where things get complicated. Since it includes emissions outside a company’s direct control, businesses need detailed supply chain data and strong tracking systems to stay compliant. This requirement has sparked debate, as it forces companies to be transparent about emissions they may not have previously measured.

The California Air Resources Board (CARB) oversees enforcement, with the power to audit companies, issue fines, and take legal action. Penalties for non-compliance can be steep, with potential civil penalties ranging from $1,000 to $10,000 per day.

As with CSRD, AB 1305 requires companies to report on carbon credits separately from actual emissions data, maintaining transparency about a company's true carbon footprint. Companies must disclose detailed information about any credits, including project types, verification standards, vintage years, registry information, and retirement records. The law also prohibits claims of "net zero" or "carbon neutral" that rely primarily on the use of carbon credits rather than emissions reductions. Additionally, companies must provide contextual information about how carbon credits fit within their overall climate strategy. (Read more about AB 1305 here.)

EU-GCD (European Green Claims Directive)

If your company markets itself as "carbon neutral" or touts other environmental claims, the European Green Claims Directive (EU-GCD) is something you can’t afford to ignore. Expected to be finalized in mid-2025, this proposed regulation is designed to combat misleading sustainability messaging and prevent greenwashing, ensuring that corporate climate claims are backed by real, verifiable data.

Under the current EU-GCD proposal, companies making carbon neutrality claims would need to obtain third-party verification of their carbon compensation strategies. However, merely using credits from major certification bodies like Verra or The Gold Standard does not automatically guarantee high quality. These standards provide a baseline framework, but comprehensive due diligence requires much deeper analysis and forward-thinking companies are implementing sophisticated risk assessment methodologies that evaluate carbon projects across hundreds of factors, including project-specific implementation risks and safeguards, geopolitical conditions and vintage year considerations. 

That’s why at CEEZER, our proprietary risk assessment considers more than 400 factors per carbon project as part of our rigorous and robust approach to carbon project evaluation. Simply put, relying solely on certification labels without comprehensive due diligence no longer meets evolving regulatory and stakeholder expectations.

If you'd like to learn more about our approach to risk, check out our white paper on the topic through this link.

Voluntary reporting standards, frameworks, and guidelines

Carbon Disclosure Project (CDP)

When it comes to voluntary climate disclosures, CDP is one of the most influential frameworks out there. It gives investors, businesses, and policymakers a clear picture of corporate environmental impact, helping them assess climate risks and sustainability performance. More than 13,000 companies report through CDP, while 680-plus financial institutions representing $130 trillion in assets use CDP data to guide investment decisions.

When it comes to carbon credit disclosures, CDP requires companies to report the total volume of carbon credits purchased, disclose the types of projects supported, and confirm whether credits are registered under major carbon crediting standards such as Verra's VCS or the Gold Standard. CDP also asks for information regarding credit quality, including additionality, permanence, leakage, and risk of double counting. However, this is not mandatory and the content of the reporting does not significantly impact the CDP rating.

However, it's important to recognize that as with regulatory frameworks, registration under these standards alone doesn't automatically guarantee high integrity for voluntary standards like CDP. Historical evidence has shown that projects under major standards, including Verra, can vary significantly in quality and impact. The only acceptable approach is to integrate carbon credits responsibly into a well-defined net-zero transition plan.

Beyond investors, CDP data is shaping climate regulations worldwide. The EU’s CSRD and the SEC’s proposed climate disclosure rule incorporate elements of CDP-aligned reporting, demonstrating that CDP isn’t just a voluntary initiative anymore, but a stepping stone to regulatory compliance. (Note: In February 2025, the SEC announced that it will not defend its year-old climate disclosure rule.)

Voluntary Carbon Markets Integrity Initiative (VCMI)

As demand for voluntary carbon credits grows, so does the need for clear standards and best practices to ensure they actually contribute to global decarbonization. That’s where VCMI comes in.

VCMI is a global initiative designed to help companies, investors, and market participants navigate the voluntary carbon market while avoiding greenwashing. The framework is closely aligned with international climate standards, including the Paris Agreement and the Science Based Targets initiative (SBTi) to help ensure that businesses following VCMI’s guidance remain credible in the eyes of investors, regulators, and stakeholders.

At the core of VCMI’s framework is its Claims Code of Practice, which lays out guidelines for companies using carbon credits as part of their emissions reduction strategies. Companies purchasing carbon credits and wishing to comply with VCMI’s claims code must disclose the origin and type of credits purchased, the certification standard, and how the credits fit into their broader sustainability commitments. To make these claims, companies must adhere to VCMI's foundational criteria, meet quality thresholds set by ICVCM's Core Carbon Principles, and follow the VCMI Monitoring Reporting and Assurance (MRA) Framework for disclosure requirements and third-party verification. 

VCMI also encourages businesses to invest in high-quality credits — such as those eligible under such frameworks as the ICVMI’s CCPs — such that contribute to long-term climate benefits. By reinforcing transparency and accountability, VCMI aims to help build trust in the voluntary carbon market and strengthen corporate sustainability claims.

Want to dig into VCMI and claims a bit more? Check out our joint webinar through this link.

Practical strategies for integrating carbon credits into reporting

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Your ESG carbon credit reporting plan

Assess and map. Determine which frameworks apply based on your company size, location, and industry and map their overlapping requirements to create efficiency

Establish and measure. Note baseline emissions data across all scopes before determining your carbon credit needs

Evaluate and integrate. Assess carbon project quality using comprehensive evaluation criteria and clearly separate direct emissions reductions from compensation through credits

Verify and validate. Ensure third-party verification of both emissions data and carbon credit claims

Review and renew. Watch for evolving requirements, particularly with the EU Omnibus package and similar regulatory shifts

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The foundation of effective climate strategies begins with thorough emissions measurement and accounting. Companies must first establish accurate carbon footprint baselines across scope 1, 2, and 3 emissions, implementing robust systems to track emissions data consistently over time. This measurement foundation provides the essential insights needed for strategic decision-making.

Only after these direct reduction opportunities are maximized should companies define a carbon procurement strategy for addressing residual emissions — those that cannot be eliminated through operational changes. 

This sequenced approach ensures carbon credits serve their appropriate role as a complement to, rather than replacement for, actual emissions reductions. A well-structured carbon procurement strategy should align with the company's overall climate commitments while establishing clear criteria for project selection, quality assessment and portfolio diversification.

This is where CEEZER can help. Ready to strengthen your ESG reporting with a robust carbon credit strategy? Our team of experts is here to guide you through every step of the process. 

Contact CEEZER today to schedule a personalized consultation where we'll assess your current reporting approach and demonstrate how our enterprise-grade platform can streamline compliance, enhance transparency, and optimize your carbon portfolio. Learn more here.