This system allows companies to purchase the environmental benefits of sustainable practices, such as reduced greenhouse gas emissions or water usage, even if the physical product they receive isn’t directly derived from that specific sustainable source. For example, a company buying palm oil can purchase credits representing sustainably produced palm oil, even if the actual oil they receive comes from a conventional source. This separation of physical supply and sustainability claims is managed through a “bookkeeping” system that tracks and balances these credits.
Decoupling physical supply chains from sustainability claims offers several key advantages. It expands access to sustainable materials for companies with complex or geographically limited supply chains. It incentivizes sustainable production by creating a market for environmental attributes, even if the physical product faces logistical barriers. This market-based approach can accelerate the adoption of more sustainable practices across industries. Historically, tracing physical materials through every step of the supply chain has been a significant challenge. This system provides a more practical and flexible alternative, allowing for wider participation in sustainability efforts.
