Carbon credits are increasingly showing up on procurement dashboards and boardroom agendas—but for material suppliers, trading them isn’t as simple as buying your way to net zero. Understanding what’s legally allowed, what’s credible, and what’s greenwashing is critical.
From steel service centers looking to offset furnace emissions, to plastics compounders interested in marketing carbon-neutral resins, suppliers across the raw materials sector are being pulled into the carbon credit conversation. Whether you’re considering investing in carbon offsets or selling credits from a renewable energy or reforestation project tied to your operations, it’s essential to know the legal and regulatory guardrails—or risk financial penalties, reputational blowback, and customer loss.
Here’s what material suppliers need to know about carbon credit trading in 2025: what’s allowed, what’s under scrutiny, and what to steer clear of.
What Are Carbon Credits—and Why Suppliers Are Getting Involved
A carbon credit represents one metric ton of CO₂ (or CO₂ equivalent) that has been either removed from the atmosphere (e.g., via reforestation or carbon capture) or avoided (e.g., through renewable energy or improved efficiency). These credits are sold in two primary markets:
Compliance Markets: Government-regulated systems like the EU Emissions Trading Scheme (ETS) or California’s Cap-and-Trade Program, where large emitters must buy credits to stay under legal caps.
Voluntary Markets: Where companies buy credits to meet voluntary climate goals, enhance ESG performance, or appeal to sustainability-conscious buyers.
Material suppliers are participating in both ways:
Purchasing credits to claim carbon neutrality for their operations or products.
Generating and selling credits through activities like renewable energy adoption, methane reduction, or sustainable land management.
But not all credits—or claims—are created equal.
What’s Legal: Credible Participation in Carbon Markets
For U.S. and Canadian material suppliers, participating legally and credibly in carbon credit trading generally means:
1. Buying Verified Offsets from Reputable Registries
If you’re purchasing offsets, stick to recognized registries such as:
Verra (VCS)
Gold Standard
American Carbon Registry (ACR)
Climate Action Reserve (CAR)
These registries ensure projects are:
Additional (wouldn’t happen without the credit revenue)
Permanently removing or avoiding CO₂
Third-party verified
Traceable and unique (no double-counting)
This matters because purchasing a discredited offset—such as from a forest project that later burns—can backfire both legally and reputationally.
2. Disclosing Offset Use Transparently
If you’re claiming carbon neutrality, best practice (and emerging legal standard) is to:
Specify what emissions are being offset (Scope 1, 2, or 3)
Provide details about the projects behind the offsets
Avoid using offset purchases to distract from ongoing emissions
In Canada and the U.S., false advertising claims tied to environmental performance are governed by the Federal Trade Commission’s Green Guides (U.S.) and Competition Bureau Canada’s Environmental Claims Guide. In both cases, carbon neutrality claims must be clear, accurate, and substantiated.
What’s Under Scrutiny: Risky Territory for Suppliers
As carbon markets grow, so do legal gray areas. Material suppliers should approach the following with caution:
1. Bundling Offsets with Products Without Clear Accounting
Example: A supplier markets “carbon-neutral steel sheets” by purchasing offsets for the average emissions of their plant, then allocating them across product sales. Without a clear LCA (life cycle assessment) or product-specific emissions data, this can mislead buyers and trigger legal challenges.
The U.S. FTC has already investigated companies for product-level carbon neutrality claims that lacked verified carbon footprints or credible offset purchases.
2. Double-Claiming Emissions Reductions
If your supplier in Brazil, India, or China claims to have reduced emissions—and sells you credits—but those reductions are also counted by the host country in its national inventory, you’re violating carbon accounting rules under Article 6 of the Paris Agreement.
Only credits with corresponding adjustments (meaning the host country waives its claim) are legally sound in international trade contexts.
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What’s Not Legal (or Credible): Avoid These Practices
Some practices may seem tempting—but are either outright illegal or rapidly becoming red flags in ESG and procurement circles:
1. Unverified Credits from “Gray Market” Projects
Projects that aren’t registered with a known body, lack third-party validation, or promise unusually cheap credits ($1–2/ton) often fail to meet baseline quality and permanence standards. They may not be illegal, but they carry regulatory and reputational risk—especially if you’re making public claims.
2. Marketing Offsets Without Addressing Primary Emissions
Claiming carbon neutrality while continuing to emit at high levels, with no reduction plan, is known as “greenwishing” or greenwashing.” In 2024, lawsuits in the U.S. and EU targeted companies who made “net-zero” claims based solely on offsets.
If your company is not actively reducing Scope 1 or Scope 2 emissions, then relying on carbon credits alone—without disclaimers—may cross the line into deceptive environmental marketing.
3. Reselling Credits Without Regulatory Licensing
In some jurisdictions, reselling carbon credits at scale—especially in compliance markets—requires broker registration or financial licensing. If you’re planning to generate and sell credits from a landfill gas capture project or biochar kiln, consult legal counsel first to ensure compliance with state or provincial regulations.
How Material Suppliers Can Build a Legitimate Carbon Strategy
Start with Accurate Carbon Accounting
Before offsetting, calculate your Scope 1 and Scope 2 emissions with credible tools (e.g., GHG Protocol, ISO 14064). For distributors, include emissions from warehousing, freight, and packaging.
Prioritize Internal Reductions
Switch to renewable energy, electrify material handling equipment, or improve transportation efficiency. Then—and only then—fill the gap with offsets.
Buy Only Verified Credits—and Share the Proof
Every credit should come with documentation: project name, location, registry ID, and third-party validator. Include this in customer documentation if you’re marketing low-carbon materials.
Avoid Blanket Net-Zero Claims Without Specificity
Say: “We’ve offset 100% of our Scope 2 emissions from electricity using wind energy credits from the Midwest Wind Reserve, certified by Gold Standard.”
Don’t say: “Carbon neutral operations.” Unless you can back that up in full.
Final Take: Credibility Is the Currency in Carbon Trading
For material suppliers navigating new sustainability expectations, carbon credits can be a powerful tool—when used transparently and legally. But the bar for integrity is rising, fast. Customers, regulators, and stakeholders don’t just want to see carbon credits—they want to see your plan, your progress, and your proof.
Use carbon markets strategically. But build your carbon credibility first.
