UK-backed code aims to improve the integrity of corporate claims about the use of carbon credits.
The Voluntary Carbon Markets Integrity Initiative (VCMI) has launched a code of practice aimed at giving consumers and investors confidence in the claims companies make about carbon credits.
With Google, Unilever and Hitachi among those already signed up to road-test the provisional code, VCMI is hoping more businesses will take up what it calls a globally standardised benchmark when using carbon credits as part of their net zero strategies.
“Market-based solutions are critical to reducing emissions. Today’s guidelines will help companies continue to decarbonise in a cost-effective way,” UK Business and Energy Secretary Kwasi Kwarteng said.
Regulators around the world are considering increasing their scrutiny of companies’ emissions-reduction claims in a bid to dispel greenwashing concerns.
At the same time, carbon offsetting has come in for criticism for being a substitute for real climate action, distracting from the challenge of cutting emissions from business and industrial processes in line with the targets set out in the Paris Agreement to limit global warming.
The Science Based Targets initiative, which verifies the net zero strategies of corporates and financial institutions, has recommended that offsets should only account for a small fraction of emissions-reduction plans.
The new code aims to provide the information needed to scrutinise carbon credit claims and ensure they are underpinned by science-led action.
Claims will be deemed gold, silver or bronze according to the extent to which companies are on track to meet emissions targets, and the degree to which remaining emissions are covered using carbon credits.
“I do think it’s groundbreaking,” says Guy Turner, Chief Executive of Trove Research. “I think it starts to answer the guidance question, which a lot of companies have been struggling with.”
The targets used are those of the Greenhouse Gas Protocol, the international emissions accounting tool which separates emissions into Scopes 1, 2 and 3, ranging from direct emissions from owned sources through to indirect emissions throughout a company’s value chain.
A claim could be designated as VCMI Gold, for instance, if the company is on track to achieve its next target for Scopes 1, 2 and 3 through emissions reductions and has also covered all remaining emissions by buying and retiring high-quality carbon credits.
“As we all as a community work to address the climate crisis it’s important that we have standard ways of being genuine in the way we’re reporting on our progress,” said Kate Brandt, Chief Sustainability Officer at Google. “We’re looking forward to road testing this work.”
Companies will have to maintain good corporate practice on climate change, including a public commitment to reaching net zero by 2050. The code can also recognise the progress of an individual brand or product and highlight those firms exceeding their targets.
Following public consultation and testing by businesses over the rest of the year, the next version of the code is expected to be released by early 2023.
The volume of carbon credits required to meet climate targets could grow by 40-fold between now and 2035, according to a recent report from EY, with credits set to become increasingly scarce and expensive in the years ahead as a result.
VCMI was launched in July last year with co-funding from the UK government and the Children’s Investment Fund Foundation, and with the support of the COP26 Presidency and the United Nations Development Programme.
“With clarity for business and by business on what is being claimed, we may harness the potential of the markets to help us meet our shared net zero ambitions,” said VCMI Co-Chair Rachel Kyte.