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Beyond ‘Carbon Neutral:’ Refining Corporate Carbon-Credit Claims

With the explosive growth of the voluntary carbon market came concerns around carbon-reduction claims lacking clarity or being misleading. Several refined claims frameworks have emerged to bridge these gaps.

Sponsored Content | / This article is sponsored by South Pole | By George Favaloro | Published 1 year ago | About a 4 minute read

Image: 17% of the world’s black carbon comes from biomass-based cooking; providing clean cookstoves is a common carbon-offset choice for companies. | Project Drawdown

Historically, companies relied on carbon credits to bolster claims of Carbon and Climate Neutrality; using these credits to "offset" their carbon footprints — whether for products, buildings or entire operations. While this strategy had a significant global impact, motivating numerous businesses towards climate action over the past two decades, concerns arose about its shortcomings. Specifically, the worry was that companies might be prioritizing the purchase of offsets over authentic emission reductions. To address this, the Science Based Targets Initiative (SBTi) advocated for businesses to first reduce their emissions in alignment with a 1.5°C-aligned reduction pathway and then using carbon credits to achieve what the Science Based Targets initiative (SBTi) calls Beyond Value Chain Mitigation (i.e., mitigating emissions beyond their own footprint).

But even with this guidance, ambiguities persisted — centered around the transparency of credits within a “net-zero” context and the risk of such claims lacking clarity or being misleading. To bridge these gaps, several refined claims frameworks have emerged.

VCMI — Claims Code of Practice

The Voluntary Carbon Markets Integrity Initiative (VCMI) framework — with its tiers of Silver, Gold and Platinum claims — offers a robust approach to carbon claims. It is built on a requirement of a commitment to a SBTi-approved net-zero reduction pathway. The framework then addresses concerns about the verifiable carbon impact of credits by creating a hierarchy that requires companies to invest in higher-quality compensation projects. This framework emphasizes transparency, verification and the need for genuine emissions-reduction efforts alongside investing in climate projects.

To achieve even the most basic level (Silver), a company must be on track to meet its reduction goals for scope 1, 2 & 3 emissions and compensate for at least 20 percent of the remaining emissions. That’s a difficult-enough achievement that, according to Trove Research, less than 4 percent of firms using credits would currently qualify for the Silver tier of the Claims Code. For Gold, a company needs to compensate 60 percent of the remainder and for Platinum, 100 percent or better.

In short, the VCMI approach — with its prescribed levels of compensation achievement — adds an essential layer of credibility to climate claims and is designed to inspire companies to set more ambitious goals.

Gold Standard — fairly contributing to global net zero

The Gold Standard's approach to carbon claims goes a step further by incorporating a commitment to global net-zero emissions. This standard challenges companies to consider their carbon impact in the broader context of achieving global climate goals. By tying carbon claims to “fair contributions toward a net-zero world,” this approach aspires to align with the urgency of addressing climate change at a systemic level. As with the VCMI framework, it builds on SBTi’s net-zero requirements and also encourages such things as addressing historical emissions, setting an internal price on carbon, and policy advocacy; as well as encourages companies to invest in cutting-edge technologies, and collaborate across industries to drive meaningful change. This framework aims to shift the narrative to a broader, global net-zero context.

South Pole — funding climate action

At South Pole, our approach emphasizes the transformative potential of "Funding Climate Action." This new claim is intended for use by companies who fund climate action beyond their value chain using “high-quality, verified mitigation contributions” — essentially, carbon credits that are contributions, not offsets. This avoids any potential double counting — including between corporations and developing countries where the carbon credits are generated — and, in that sense, is “Paris aligned.” This approach is designed to provide companies with a clear pathway to scaling up climate investment without facing undue criticism.

The South Pole approach also highlights a company’s emissions-reduction efforts by giving a simple way to communicate their accomplishments with the new Funding Climate Action label. The label not only signifies quality and responsibility; but also — through QR codes that link to informational websites — it offers a consumer or other stakeholder the opportunity for a deeper dive into a company’s specific climate goals and achievements, ensuring transparency.

While these approaches represent the latest approaches to authenticating corporate climate claims, more refinements are yet to come: SBTi will update its carbon-credit claims guidance later this year, which should provide another solid framework for companies to consider.

Emerging from the drive towards climate neutrality, the consistent theme through all of this work is to increase the ambition of corporate action, to provide a much-needed source of funding to protect and restore ecosystems, and to give companies a way to meet the urgent need for transparent and genuine contributions to the global climate challenge.