Decarbonization (or carbon mitigation) is the removal of greenhouse gas (GHG) emissions, including carbon dioxide, from human activity, usually accomplished by changing processes that generate or use energy.

As a physical factor in addressing the global environment, decarbonization sits comfortably among other familiar imperatives: don’t litter, don’t pollute, don’t destroy. Traditionally, we accept the moral and social value of these principles even if there’s a cost to carrying them out.

What if it didn’t have to be that way?

As global markets for carbon credits and voluntary offsets have become larger and more standardized, they’ve begun to offer ways to turn a need into a profit. Demand for carbon credits and carbon monetization may grow to 15 times its current level by 2030, and 100 times by 2050. Voluntary offset transactions that totaled about $320 million in 2019 may approach $200 billion in 2050.¹

Trading on carbon isn’t the only way to find value. Consumers reward companies that pursue decarbonization in their processes and products and may pay a price premium if the actions and benefits are clear.

This means the audience for an organization’s carbon strategy will go beyond government regulators and climate monitors to investors and other stakeholders as it becomes a bottom-line P&L factor. This casts the CFO in a lead role, giving them an opening to identify decarbonization opportunities, apply a cost/benefit calculus, and lead internal efforts to monetize the most feasible decarbonization policies.

Decarbonization remains something your organization ought to do. Depending on your industry and regulatory environment, it may be something you have to do. Now, it can also be something you pursue not only out of concern for the planet, but also to realize tangible benefits.

Today’s CFO is not only an operator, but also a steward and catalyst for evolution. Their past role in approving funding for sustainability work elsewhere in the organization is changing—now finance is where that work can live. And the critical levers are ones the function already touches.

Physical carbon reduction.

Operational changes to take carbon out of the business might involve restructuring contracts, changing supply or distribution chains, or taking a fresh look at the real estate portfolio. Inputs, outputs, and benefits—home turf for the finance operation. Remember, a company’s carbon footprint involves more than the offsets. It can also include insets that prevent some emissions from happening in the first place.

Identifying and realizing tangible value.

What role can carbon offsets play? Piecemeal transactions may provide value, but a large-scale carbon monetization strategy requires looking across the enterprise. What changes are consistent with overall strategy? What working groups, such as a sustainability command center, can define and carry out decarbonization measures? What contract structures can deliver the value made possible? Carbon doesn’t “trade” the way other commodities do; it may behave more like a repo, without standard definitions of basis risk.

Finance can also help identify and develop value sources adjacent to existing operations. For example, a company that operates a fleet may switch to electric vehicles, then build a new business offering around its power generation and recharging infrastructure.

Measurement and reporting.

Setting carbon goals and tracking progress against them remains a must-do, especially with new global and US reporting standards in effect and the potential requirement to report Scope 3 emissions from external value-chain partners.

But the metrics of decarbonization also contribute to the carbon monetization “plus side”. Realizing value through tradeoffs and credits is intrinsically quantitative and may require new tools. The same applies to how companies express carbon progress to consumers clearly and credibly—and to charting the “green premium” in revenue that companies can realize.

One way to prioritize your path to carbon monetization is degrees of urgency: what you must do, what you can benefit most by doing, and everything in between.

Some core requirements surrounding decarbonization are clear, current, and mandatory. Those are the moves you need to make to survive. Less urgent but more promising are the approaches that can set you on the path to monetization—to drive toward making carbon a source of value. Finally, an organization should reach for aspirational strategies that allow it not merely to keep up but to thrive in doing so.