Suppliers can recover value from the emissions reductions they pay for
Customers and investors co-fund the emissions reduction, and the supplier recovers the cost through credits issued to it after verification. Future credits can raise the money from validation, before the work is done.
The supplier pays for the reduction, while its customers report the benefit.
When a supplier switches fuel, electrifies heat or changes a process, the lower emissions flow into the Scope 3 inventory of every customer that buys from it. The supplier carries the capital cost and the operating risk, while the customers record the improvement without paying for it. As a result, a reduction that is technically ready can stall at the investment decision when energy savings alone do not repay it. Customers have Scope 3 targets, but rarely a structured way to fund one specific project at one specific supplier and receive a verifiable record of their share.
What a supplier gains
An emissions reduction that was a cost for the supplier and a benefit in its customers’ reports becomes a funded project with an asset attached.
A new asset from a new project
The credits come from a new emissions reduction project that is scoped and validated before it is implemented. Reductions already made are not relabeled as credits. Each credit is one verified tonne, held in the supplier’s name on the Carbon3 registry until it is allocated or sold.
Deeper relationships with downstream buyers
Co-funding turns a price negotiation into a joint project. Customers that pay a share have a direct stake in the project’s success over the whole crediting period, and both sides report from the same verified figure.
Part of the cost recovered
Co-funding can be paid up front or against milestones, which reduces the capital the supplier commits before the project earns anything. Credits for the supplier’s own share can be sold to other buyers in the chain or to investors.
Evidence that stands up to assurance
The validation and verification reports, the monitoring data and every transfer stay attached to each credit. The same record answers customer questionnaires and assurance requests.
Future credits: finance before the reduction happens
Future credits are the supplier’s way to finance a project early. Realized credits follow once the tonnes are verified.
Raise the money before the work starts
Once the validation report confirms the project, future credits can be issued to the supplier, which sells them to customers or investors. That money can pay for the implementation, so the supplier does not carry the whole cost until verification.
Future credits
From validation- For a planned reduction that has not happened yet.
- Issued to the project developer once the validation report confirms the project.
- Labeled Future on the Carbon3 registry.
- The holder carries the delivery risk, so they are usually priced lower.
Realized credits
After verification- For a reduction that has already happened.
- Issued to the project developer, one per tonne in the verification report.
- The independent verifier has confirmed the tonnes.
Both kinds are issued to the project developer and recorded on the Carbon3 registry. Every credit shows its category, so it is always clear which kind is held.
How a supplier turns an emissions reduction into credits
The process has seven steps, and scoping and project definition happen together. The independent verifier writes two reports. Credits are issued to the supplier and recorded on the Carbon3 registry, future credits after validation and realized credits after verification.
- 1Supplier, co-funders, Carbon3
Scoping and project definition
The supplier describes the change (a fuel, equipment or process), the site, the baseline emissions and the customers it affects. Customers and investors agree their shares of the cost, how and when they pay, and the credits each will receive. Carbon3 sets up the project account with draft documents.
- 2Independent verifier
Validation report
An independent verifier reviews the project design and issues a validation report confirming the scope, baseline, methodology, additionality and monitoring plan.
- 3Supplier
Implementation
The supplier installs the change and records the data set out in the monitoring plan, such as meter readings, fuel invoices or lab results.
- 4Independent verifier
Verification report
After the monitoring period, the verifier checks the data and issues a verification report stating the verified reduction in tonnes of CO₂e.
- 5Project developer, on the Carbon3 registry
Issuance to the project developer
Realized credits, one per tonne in the verification report, are issued to the supplier and recorded on the Carbon3 registry. Future credits can also be issued to it earlier, once the project is validated. They stay labeled Future, and buyers who take them carry the delivery risk.
- 6Supplier
Allocation
The supplier transfers credits to each co-funder in proportion to its contribution, as fixed in the co-funding agreement. Every transfer is recorded.
- 7Supplier, co-funders
Sale or retirement
Co-funders retire their credits for Scope 3 reporting. The supplier can sell the credits for its own share to other buyers in the chain or to investors.
What validation and verification need
There are seven items in three groups. Carbon3 helps prepare the project documents, and the two reports come from the independent verifier.
Project documents
Prepared by the supplier with Carbon3 during scoping.
Project scope description
What changes, at which site, from when, and which emissions sources are inside the project boundary.
Project development plan
Timeline, budget, responsibilities, the methodology and the monitoring plan: which data is measured, how often and by whom.
Legal organization of the business
The legal entity that owns the project and will hold the credits, with its registration and ownership details.
Co-funders
Who contributes, how much and on what terms, and the share of credits each receives.
Integrity test
Shown in the project documents and checked at validation.
Additionality
Evidence that the reduction would not happen without the project funding, and that it is not required by law or already credited elsewhere.
Independent reports
Written by the independent verifier, never by Carbon3.
Validation report
Issued before implementation. Confirms the project scope, baseline, methodology, additionality and monitoring plan.
Verification report
Issued after each monitoring period. States the verified emissions reduction in tonnes of CO₂e, which sets the number of credits.
From scoping to first credit revenue
The phases of one project in order. Bar lengths show how long each phase tends to take relative to the others. They are illustrative, not a schedule.
- Project work
- Independent check
- Credits and revenue
- 1
Scoping and project definition
What changes, where and from when; the baseline, the methodology, the monitoring plan, the co-funders and the legal set-up. Carbon3 prepares the project account.
- 2
Validation
An independent verifier reviews the design and issues a validation report confirming the project scope. From here future credits can be issued to the supplier to raise finance before the reduction happens.
- 3
Implementation and monitoring
The supplier installs the change. Meters, fuel records or lab results build the data for the first monitoring period.
- 4
Verification
The verifier checks the monitoring data and issues a verification report stating the verified tonnes.
- 5
Issuance and allocation
Realized credits for the verified tonnes are issued to the supplier, recorded on the Carbon3 registry and allocated to co-funders by share.
- 6
Sale or retirement
Co-funders retire credits for reporting. The supplier can sell the credits for its own share.
Assumptions
- One project at one site, with one monitoring period before the first verification.
- The length of the monitoring period is set in the validated monitoring plan.
- Real timing depends on the project, the methodology and the verifier’s schedule.
- Co-funders can pay up front, before any credits exist.
The supplier keeps the asset
Credits are issued to the supplier first. Co-funders receive theirs by transfer.
Supplier
Implements the project at its own site
Customers
Downstream buyers of the supplier’s products
Investor
Fund, lender or corporate treasury
Credits are issued to the supplier first. It then transfers them to each co-funder in proportion to what each paid, as fixed in the co-funding agreement before implementation.
A die-caster funds part, its carmaker customers fund the rest
An aluminum die-casting plant that supplies two carmakers replaces gas-fired holding furnaces with electric induction furnaces on contracted renewable power. It keeps the credits for its own share and sells them.
Who pays what
| Funder | Share | Pays | Credits, years 1 to 5 | Of which future credits (years 1 and 2) |
|---|---|---|---|---|
| Supplier (sells its credits) | 40% | €320,000 | 6,720 t | 1,920 t |
| Customer A (carmaker) | 35% | €280,000 | 5,880 t | 1,680 t |
| Customer B (carmaker) | 25% | €200,000 | 4,200 t | 1,200 t |
| Total | 100% | €800,000 | 16,800 t | 4,800 t |
Future and realized credits in this example
1At validation
The 4,800 tonnes planned in years 1 and 2 are bought as future credits, so the money funds the implementation and the holders carry the delivery risk.
2After each verification
The 12,000 tonnes verified in years 3 to 5 are issued as realized credits, one per tonne in the verification report.
Cost per verified tonne
Spread over 5 years of credits, the project cost comes to €48 per verified tonne, a figure to compare with the internal carbon price or with the CBAM certificate cost an importer faces. Real prices are not shown.
Assumptions
- Project cost €800,000.
- Full rate of 4,000 t a year from year 3.
- The supplier funds 40% and keeps those credits to sell.
- Credits are split in line with what each funder paid.
- One credit equals one verified tonne of CO₂e.
- No real companies, prices or projects. Fees are not shown.
- Illustrative split: the credits for years 1 and 2 are bought as future credits at validation; later years are taken as realized credits after each verification. The real split is agreed project by project.
Credits the supplier can hold or sell
Per year by holder, with the running total.
Credits per year, in tonnes
- Supplier (sells its credits) (40%)
- Customer A (carmaker) (35%)
- Customer B (carmaker) (25%)
- Future credits, bought at validation
16,800 t in total over 5 years
Assumptions
- Same project and shares as the worked example.
- No sale price is assumed. Prices are still forming.
- Real results depend on verification.
- Illustrative split: the credits for years 1 and 2 are bought as future credits at validation; later years are taken as realized credits after each verification. The real split is agreed project by project.
What customers can claim
Customers inside the supplier’s chain and companies elsewhere in the industry are treated differently. Each card shows both.
GHG Protocol: Scope 3 Standard
- What the standard is
- The Greenhouse Gas Protocol sets the accounting rules most companies use for their emissions. Its Corporate Value Chain (Scope 3) Standard, published in 2011, covers the emissions in a company’s value chain in 15 categories, from purchased goods and transport to the use of sold products. It has no market-based method for Scope 3, so purchased certificates or credits do not change the Scope 3 figure, unlike electricity in Scope 2.
- A reduction in the company’s own supply chain
- A reduction at a supplier the company buys from lowers its Scope 3 inventory when it shows up in the data the company uses, for example a supplier-specific emission factor for the goods it purchases. A spend-based average will not show it.
- One in its industry, outside its chain
- A reduction at a producer outside the company’s own supply chain is not part of its inventory under any method. It can be disclosed separately as an action, not as a lower Scope 3 figure.
- What an inset credit does
- When a supplier in the buyer’s own chain reduces emissions, the buyer’s Scope 3 goes down through lower supplier emissions data. The inset credit is the proof of that emissions reduction and who funded it, and it is not counted a second time. An emissions reduction outside the buyer’s own chain is reported separately, not as a lower Scope 3 figure. The GHG Protocol’s Actions and Market Instruments workstream is developing a market-based approach for Scope 3. A consolidated draft is expected for public consultation in the second quarter of 2027, and the revised standard in the fourth quarter of 2028. Each Carbon3 credit records the supplier, project, baseline and verification report, so it can be reported under the current rules and reassessed under the new ones.
Science Based Targets initiative (SBTi)
- What the standard is
- The SBTi validates whether a company’s emissions reduction targets are consistent with climate science. Its Corporate Net-Zero Standard V2.0 was published on 11 June 2026. Validations under it open on 1 February 2027, and it becomes mandatory for new target submissions from 1 February 2028. Targets already validated under the earlier version stay valid for their cycle. Target ambition is always set on the company’s physical inventory.
- A reduction in the company’s own supply chain
- Reductions that show up in the company’s inventory support emissions reduction claims. A project implemented by or on behalf of the company in its own value chain, with measured outcomes reported in proportion to its contribution, can support target implementation and an “alignment” claim.
- One in its industry, outside its chain
- Action in a shared system the company draws on, such as a supply shed or logistics network, or at sector level, counts only where direct action in its own chain is constrained. It supports a separate “system contribution” claim, reported apart from the inventory.
- What an inset credit does
- Projects must be measured, additional and verifiable. Their outcomes must be uniquely attributed, with serialized tracking to prevent double counting. Credits a company sells on cannot also count for that company. The SBTi plans interim guidance on reporting projects and market instruments for consultation in the fourth quarter of 2026, so how a received inset credit is assessed is not yet fully settled.
Counting each tonne once
- What the standard is
- Double counting happens when two companies claim the same tonne, when one tonne is sold twice, or when a reduction is credited by two programs. Standards such as the SBTi’s now require serialized tracking to prevent it.
- A reduction in the company’s own supply chain
- Several companies in one chain can fund the same project. Each receives its own serialized credits, so no tonne has two holders.
- One in its industry, outside its chain
- The same rule applies wherever the tonne sits: one serial number, one holder, and no credit for a reduction already credited by another program.
- What an inset credit does
- Each credit has a serial number and exactly one holder on the Carbon3 registry. A transfer moves it rather than copying it, and retirement closes it permanently. A reduction already credited elsewhere is excluded at validation.
EU rules on green claims
- What the standard is
- From 27 September 2026, EU consumer law (Directive 2024/825) bans claims that a product has a neutral, reduced or positive climate impact when the claim rests on compensating emissions with credits. Claims about measured reductions in the product’s own life cycle remain possible if they are substantiated.
- A reduction in the company’s own supply chain
- A product claim can rest on measured, substantiated reductions in that product’s own life cycle, which includes reductions at its suppliers.
- One in its industry, outside its chain
- A reduction outside the product’s life cycle cannot support a claim that the product has a neutral, reduced or positive climate impact.
- What an inset credit does
- Inset credits support Scope 3 reporting and progress towards targets, not product neutrality claims. A product claim has to rest on measured reductions in that product’s life cycle. Credits never replace a company’s own emissions reductions.
General information as of October 2026, not legal, accounting or reporting advice. Standards and regulations change; check the current text.
Questions from suppliers
No. An independent validation and verification body does both, using a recognized methodology. Before implementation it reviews the project design and issues a validation report confirming the scope, baseline, methodology, additionality and monitoring plan. After each monitoring period it checks the measured data and issues a verification report stating the verified emissions reduction in tonnes of CO₂e. The supplier then issues realized credits for those verified tonnes, recorded on the Carbon3 registry. Future credits, issued earlier against the validated project, are labeled Future.
Turn a funded emissions reduction into an asset
Share the project details, and Carbon3 prepares an account to review first.