In the nascent era of corporate climate action, carbon mitigation was more tangible and distinctly analogue. Businesses aiming to neutralise emissions would fund projects that planted trees. However, intensifying global climate pressures now demand greater corporate accountability. Consequently, the traditional forestation model is no longer enough.
Forestation projects take decades to mature and remain difficult to audit in real time. They are also increasingly vulnerable to wildfires and poor oversight. As the world explores innovative alternatives to analogue carbon offsetting, a new phase in carbon avoidance is emerging. This takes the form of digitally traceable, tokenised carbon credits.
This technological advancement uses real-time data through Application Programming Interfaces (APIs) and blockchain technology. It transforms how businesses mitigate their environmental impact. For companies navigating the shift from forestation to tokenised carbon credits, this development introduces new possibilities for measuring, verifying and trading carbon avoidance.
From tree to digital ledger
As automation continues to transform every sphere of business, tokenising verified carbon-avoidance data into legitimate carbon credits via an established methodology is beginning to gain traction.
Early opportunities are already emerging in South Africa, with comparable activity seen in markets such as Uruguay, Brazil and Australia. At its core, the transition to tokenised carbon credits involves moving from historical offsets to real-time, auditable mitigation.
Rather than only waiting for trees to grow, businesses can now verify and trade the carbon actively avoided by operational renewable energy projects.
This approach differs from traditional practices. Previously, businesses implementing decarbonisation strategies would calculate their total emissions. They would then convert that figure into a set number of trees. Today, the levers available to affect climate change have evolved as we move from physical forestation to the tokenisation of carbon credits as blockchain-based digital assets.
– Bongiwe Mbunge, Lead Sustainability Partner at Forvis Mazars Africa Region
Tokenised carbon credits offer traceable avoidance. Businesses can leverage downstream projects that other providers have developed or implemented. This approach can strengthen integrity within their own value chains.
By shifting the focus to carbon avoidance, companies are unlocking immediate, quantifiable environmental outcomes. For businesses navigating the shift from forestation to tokenised carbon credits, the distinction is important. Instead of relying exclusively on future carbon absorption, they can account for emissions actively avoided through operational projects.
From sunlight to smart contracts
Capturing this data, however, requires a sophisticated digital pipeline. Consider the journey from solar generation to a tradable digital token. That token must also serve a practical purpose in carbon offsetting. Achieving this requires several interconnected technologies.
By bridging physical hardware, cloud software, and cryptographic security into a single automated pipeline, we can convert the clean electricity generated from photovoltaic (PV) solar panels that replaces fossil-fuel grid power into verified avoidance metrics.
When sunlight reaches solar panels, modern inverters equipped with APIs generate electricity. They also measure the exact kilowatt-hours produced in real time. The system then translates this data into carbon-avoidance metrics. An established methodology subsequently converts these metrics into legitimate carbon credits.
These verified carbon avoidance metrics are then converted into carbon credits and minted as digital tokens on a blockchain, creating an immutable, tradeable representation of a real-world carbon credit.
This level of automation eliminates much of the administrative delay that has historically affected carbon markets.
Once the methodology and infrastructure are established, the process can be automated. The system could be configured to mint and distribute carbon credits periodically, potentially even daily, depending on the methodology and controls in place. These can then be sold to high-emitters to offset their carbon footprint in secondary markets.
For businesses navigating the shift from forestation to tokenised carbon credits, this automated process could change how they monitor and manage environmental performance. It also creates opportunities to connect physical renewable energy production with digital carbon markets.
Solving the trust and valuation gaps
For business decision-makers, tokenisation is more than a technology trend. It offers a practical solution to two major challenges in the voluntary carbon market: double-spending and valuation uncertainty.
Public blockchains provide transparency and immutability. Once someone “retires” or uses a carbon token to offset an emission, the system permanently deactivates it. Their immutable nature means that the full value chain can be traced on-chain, from the underlying carbon-avoidance activity and credit creation through every transfer of ownership to final retirement, providing a transparent and auditable record throughout the asset’s lifecycle.
This can materially reduce the risk of ‘phantom credits’ or the same offset being sold to multiple buyers (double spending), provided the underlying methodology, controls and assurance processes are sound. Furthermore, tokenisation introduces liquidity into a historically opaque market.
The ability to carry carbon credits at value on a company’s balance sheet has historically been a challenge for CFOs due to asset valuations. However, tokenising carbon credits could support more observable, market-based valuations. If an active market exists, this could potentially move the asset closer to an International Financial Reporting Standards (IFRS) 13 Level 1-type valuation.
This makes it easier to measure fair value based on open-market trading. It turns carbon from an ambiguous accounting entry into a highly liquid, easily valued asset.
For finance executives, this development raises important considerations. They must understand how tokenised credits affect asset recognition, valuation and financial reporting. They must also distinguish between the transparency of a blockchain transaction and the credibility of the underlying carbon credit.
Navigating the South African regulatory frontier
Although the technological framework is ready, the regulatory landscape is still catching up. There are several evolving compliance requirements that local companies must navigate when exploring this space.
While the Greenhouse Gas Protocol has finalised standards for Scopes 1, 2, and 3, Scope 4, which covers carbon avoidance, is still an emerging global framework. However, as the Greenhouse Gas Protocol establishes a baseline in terms of CO2 measurements, the protocol remains the same, whether it is applied in Africa, Europe or the US.
South Africa’s International Sustainability Standards Board (ISSB) implementation roadmap also requires attention. Proposed changes could introduce mandatory environmental, social and governance (ESG)-related reporting through a phased approach. This would affect listed entities and larger private companies if the proposals gain approval.
Compliance with the ISSB standards may make ESG reporting mandatory for listed and larger private entities in a phased rollout. As such, the Department of Trade, Industry and Competition (DTIC) is actively facilitating workstreams between the public and private sectors, while the Companies and Intellectual Property Commission (CIPC) will work to amend the Companies Act to reflect these requirements, once consensus is reached.
The prospect of mandatory reporting has already prompted some business leaders to reconsider their sustainability reporting approaches. Some are beginning to move away from certain frameworks. Instead, they are seeking closer alignment with ISSB standards in terms of IFRS.
Furthermore, the EU’s Carbon Border Adjustment Mechanism (CBAM) introduces another consideration for South African businesses. As the mechanism takes effect, exporters will increasingly need verified carbon data and credible sustainability evidence. These will help them demonstrate their low-carbon credentials to European markets.
Beyond reporting standards, businesses must also navigate the complexities of digital asset regulation. Currently, the Financial Sector Conduct Authority (FSCA) regulates the digital asset service providers responsible for tokenisation under the Crypto Asset Service Provider (CASP) licensing framework.
Tokenised carbon credits will likely fall under this regime when they are issued by a CASP. Exchange control regulations introduce further complexities, particularly for cross-border transactions.
A major question is: does exporting a tokenised carbon credit, generated in South Africa, to an international buyer constitute the externalisation of an asset under SARB rules, and will this be considered by the new draft Capital Flow Management Regulations? This is a critical legal frontier we are exploring. Businesses must therefore consider more than the technology when entering this market. They need to understand the regulatory implications of issuing, transferring and trading digital carbon assets. They must also assess how domestic and international requirements interact.
The credibility bridge – assurance in a digital age
As digital assets bridge sustainability and complex financial technology, they require a new generation of independent validators.
Innovators must demonstrate that legitimate carbon-avoidance activities back their tokens. Buyers, meanwhile, need confidence that the carbon credits they purchase are genuine and uncompromised.
This is where the traditional role of an auditor intersects with digital finance. To make this ecosystem work, we need to bridge the gap between traditional ESG credibility and digital asset and blockchain technology.
An audit partner’s role will be to act as that independent validator, conducting pre-assurance and full assurance on the entire supply chain, from the sun hitting the solar PV panel to the token landing on the ledger. It is about providing credibility to the innovator and protection to the user.
We caution, however, that carbon avoidance represents only one part of the broader climate response. While tokenised avoidance can support mitigation, companies still need to address climate adaptation and business resilience, particularly in the Global South. This distinction matters because reducing emissions does not automatically protect businesses and communities against the consequences of climate change. Organisations must continue investing in adaptation and resilience alongside mitigation initiatives.
As the corporate world faces unprecedented pressure to move from promises to proof, the shift from forestation to tokenisation offers a more transparent, auditable and practical approach to carbon mitigation.
In conclusion
For businesses navigating the shift from forestation to tokenised carbon credits, the opportunity extends beyond adopting new technology. It requires credible methodologies, reliable data, appropriate regulatory compliance and independent assurance.
Companies ready to take a first-mover approach to these evolving climate response measures and regulatory requirements must recognise that technology alone cannot guarantee environmental integrity.
The message is clear: the future of sustainability is increasingly shifting from forestation to tokenisation. However, businesses must ensure that this transition delivers measurable environmental outcomes, credible carbon accounting and lasting climate benefits.
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| Dr Wiehann Olivier | Partner | Global Co-Head | Digital Assets | Forvis Mazars | mail me | | Bongiwe Mbunge | Partner | Lead Sustainability | Africa Region | mail me | |
| | Forvis Mazars | | |
