Carbon Credits in Advertising: How Businesses Can Reduce Greenwashing Risks 

Why carbon credit claims matter for organisations

Carbon credits have emerged in recent months as a popular tool for organisations to evidence their commitment to protecting the environment and their climate goals, by offsetting emissions.

However, concerns are growing about the integrity of purchasing carbon credits from the voluntary carbon market and whether the carbon credits acquired reflect a genuine reduction in emissions or merely a partial cut that is offset by increased emissions elsewhere.

The question to ask is whether carbon credits reflect true green credentials, which organisations can advertise as part of their green credentials, or could carbon credits be a form of greenwashing?

What are carbon credits and how do organisations use them?

Regulated carbon markets

Carbon credits are tradeable permits which typically represent one metric ton of carbon dioxide or equivalent greenhouse gas that has either been prevented from entering the atmosphere or has been removed from it. In regulated markets, such as the UK Emissions Trading Scheme, certain sectors must surrender allowances to match their emissions (such as energy intensive industries, power generation and aviation industry). Allowances can be bought through government auctions or secondary markets. The cap on total emissions is reduced over time. Therefore, creating an incentive to decarbonise.

Voluntary Carbon Market

The voluntary carbon market (VCM) sits outside the scope of statutory frameworks. These carbon credits are typically certified by independent standards bodies, such as Gold Standard or the Verified Carbon Standard. Organisations may be involved with trading carbon credits on either or both markets.

What are businesses using carbon credits for?

Carbon credits are used by organisations for a range of strategic purposes including:

• Strategic advantage – organisations may purchase carbon credits to offset emissions as part of a broader decarbonisation strategy. As government policy evolves, early adoption of credible offsetting practices may offer a strategic advantage.
• Reputation management – in response to growing scrutiny from consumers and investors, carbon credits are often used to demonstrate climate responsibility. When used transparently alongside genuine emissions reductions, they can enhance an organisation’s reputation, support brand differentiation, and appeal to environmentally conscious consumers and investors.
• Financial benefits – organisations that surpass their emission reduction targets, may sell their excess credits in VCMs.

Key risks and controversies around carbon credits

Concerns about reliability

Critics argue that carbon offsetting allows organisations to redirect their responsibility rather than reducing their own emissions. Offsetting can create a false sense of progress, potentially delaying the adoption of low-carbon technologies or operational changes. When offsets are used as a primary strategy, they may impede decarbonisation efforts and reduce accountability.

The risk of misleading environmental claims

VCMs lack a unified regulatory framework or a central global registry, leading to inconsistent standards and risk of double counting or fraud. Without robust verification, carbon credits may undermine trust and expose organisations to reputational harm.

The UK government’s recent consultation on VCM integrity (closed July 2025) aims to address these issues by promoting responsible use and aligning global standards.

UK rules on advertising carbon credits and environmental claims

Legal framework governing environmental claims

Organisations should be aware that environmental claims, including those involving carbon credits, are subject to strict regulatory oversight.

When making environmental claims, advertisers are expected to ensure information is clear, accurate and supported by evidence. The key legislation which governs these claims are:

• The Digital Markets, Competition and Consumer Act 2024 (DMCCA), which came into force in April 2025; and
• The Business Protection from Misleading Market Regulations 2008 (SI 2008/1276).

The Advertising Standards Authority (ASA) also enforces compliance through publishing findings of non-compliance, requiring non-compliant ads to be taken down. It can also refer organisations to the Competition and Markets Authority which, as of April 2025, has the power to impose fines of up to 10% of global turnover under the DMCCA.

How the Advertising Standards Authority assesses claims

ASA research has revealed widespread confusion around terms such as ‘carbon neutral’ and ‘net zero’, with many consumers assuming these imply absolute emissions reductions.

In response, the Committee of Advertising Practice and Broadcast Committee of Advertising Practice issued guidance to help advertisers avoid misleading claims. Key recommendations include:

• Avoiding unqualified use of terms like ‘carbon neutral’ and ‘net zero’.
• Clearly stating whether claims are based on actual emissions reductions or offsetting and providing details of the scheme used.
• Ensuring that future orientated claims (e.g. net zero by 2030) are backed by verifiable strategy.
• Making qualified information prominent and accessible.

Importantly, where an organisation is responsible for significant environmental harm, referencing isolated greens initiatives without context may mislead consumers.

Practical steps to reduce greenwashing risks in marketing

Organisations can take several practical steps to reduce risk and improve the accuracy of environmental messaging:

• audit all existing environmental claims across websites, packaging and advertising
• check whether claims are based on actual reductions or offsetting, and make this distinction clear
• review carbon offset schemes to confirm they meet recognised standards
• ensure marketing teams understand the requirements of the DMCCA
• maintain complete evidence files for any claims made
• review long term net zero strategies and ensure interim targets are realistic and verifiable

European Union developments and impact on UK businesses

Empowering Consumers for the Green Transition Directive

The EU’s Empowering Consumers for the Green Transition Directive, effective from September 2026, bans generic environmental claims such as ‘carbon friendly’ and unfair claims based on GHG emission offsetting such as ‘climate-neutral’, ‘climate-neutral’, ‘CO2 neutral certified’ and ‘reduced climate impact’.

This is important for UK businesses which sell and/or market products in the EU because where a business directs its activities to an EU consumer, the EU courts will generally apply any consumer protections that cannot be contracted out of under their domestic law.

As a result, UK based businesses could also fall within the scope of this directive once it takes effect in September 2026.

Green Claims Directive update

The Green Claims Directive is a proposed EU Directive which would require organisations to separate carbon credit use from emissions data, specify whether credits relate to reduction or removals, disclose details about the offsetting scheme and substantiate claims with evidence.

In June 2025, the European Commission announced that the proposal had been paused, and a withdrawal was under consideration, largely due to concerns about the burden it would be placed on micro-enterprises. Since then, it has been confirmed that the proposal would not be withdrawn provided that micro-enterprises are excluded from the scope.

These developments form part of a broader regulatory trend, mirrored in the UK, towards tightening controls on environmental claims to prevent misleading advertising. However, organisations should not be deterred from highlighting genuine sustainability achievements: the focus is on ensuring such claims are substantiated and are communicated clearly and accurately.

What this means for organisations

Carbon credits can support sustainability goals and enhance business credibility but only when used transparently and in conjunction with genuine emissions reductions. UK and EU organisations must ensure that environmental claims are accurate, evidence based and contextually honest. Inaccurate advertisement not only has legal consequences but can erode consumer trust.

If your organisation is making environmental claims or using carbon credits in marketing, it may be helpful to review your current approach in light of the developing regulatory landscape. Seeking early guidance can reduce the risk of misleading claims and help organisations prepare for upcoming UK and EU changes.

This article provides general information only and is not legal advice. Organisations should seek tailored advice before taking or refraining from any action based on this content.