Introduction to Impact Credits
Impact Credits refer to the certificates that are traded in support of a sustainability claim. The credits are issued when a set of criteria have been confirmed to have been met. The physical goods and the credits are traded separately from each other. The credit certificates represent a specified quantity of verified material that has been produced but has not been physically traded as verified goods.
The way they work is quite simple; farms that meet the standard or benchmark will be able to sell credits for their volume of output, and brands can purchase these credits to balance out their use of these output materials. The farms selling the credits may or may not be in the supply chain of the brands, as the credit trading system does not address any traceability. While this means that brands cannot make any content claims on their products, they can by-pass the cost and complexity of long or opaque supply chains in order to deliver impact quickly and efficiently. And they can still make claims about their support for best practices.
Impact Credits are essentially a mechanism for brands to deliver their expectations back to the start of the supply chain and provide financial rewards to incentivize them.