The Voluntary Carbon Market Integrity Initiative (VCMI) has launched a consultation on its new Scope 3 Claim. Abatable’s Co-founder Maria Eugenia Filmanovic and Policy Associate Holly Nicholson explain how the Claim relates to VCMI’s existing Carbon Integrity Claims, and how companies looking to take action on their Scope 3 emissions can use it.
The Voluntary Carbon Market Integrity Initiative (VCMI) was established in 2021 in response to concerns that companies making carbon neutrality claims based on their use of carbon credits to offset their emissions were greenwashing. VCMI’s remit included developing a set of credible claims that companies can make when using carbon credits to more accurately reflect the real-world impacts of their actions.
In November 2023 VCMI launched – alongside its Claims Code of Practice – a beta version of a ‘Scope 3 Claim’. Following engagement with stakeholders, an updated version of the Scope 3 Claim was released on 2 September, which is now open for a consultation that runs to 7 October. In this article, we unpack the progress the VCMI has made so far, explore its Scope 3 Claim, and outline the next steps the VCMI will be making over the upcoming year.
The background
Let’s begin with a quick history of VCMI:
- July 2021: The VCMI is launched as a multi-stakeholder platform, funded by the UK government and Children’s Investment Fund Foundation, to drive integrity on the demand side of the voluntary carbon market (VCM). The group’s aim is to help companies make credible VCM claims, while its partner organisation, the Integrity Council for the Voluntary Carbon Market (IC-VCM), was set up to focus on determining which credits were of high quality on the supply side.
- June 2022: VCMI released its provisional Claims Code of Practice and began a public consultation on the draft. It also conducted a road-testing process involving around 70 companies.
- June 2023: VCMI released its full Claims Code of Practice, outlining the steps companies can take to make a Silver, Gold, or Platinum VCMI Claim. One key difference between the provisional Claims Code and the June 2023 release was that the group dropped its ‘Bronze’ or ‘On-Ramp’ claim, which was designed for companies unable to reach the foundational criteria for Silver, Gold, or Platinum.
- November 2023: The Claims Code of Practice was updated at COP28, alongside other key developments. These included the release of VCMI’s Monitoring, Reporting and Assurance (MRA) Framework, the VCMI Claims Reporting Platform, Carbon Integrity Brand Guidelines, and finally, a Beta version of the Scope 3 Claim.
- February 2024: Bain & Company makes a Carbon Integrity Platinum Claim, becoming the first company to make a VCMI Claim – and at the highest level.
- September 2024: The updated Beta Scope 3 Claim is released alongside a consultation platform developed with the British Standards Institute (BSI).
What steps does a company need to take to make a Silver, Gold, or Platinum VCMI Claim?
Regardless of the tier achieved, any company making a Carbon Integrity Claim must satisfy the VCMI’s Foundational Criteria. This includes establishing and maintaining a Scope 1, 2, and 3 greenhouse gas emissions inventory, setting a near-term emission reduction and a long-term net-zero target, demonstrating progress on near-term targets through internal finance allocation and governance, and ensuring that public policy advocacy aligns with climate action and the goals of the Paris Agreement.
Once this criteria is met, the company can select whether to claim Carbon Integrity Silver, Gold, or Platinum. This is based on how many carbon credits are retired annually:
- Silver: 10-50% of Scope 1, 2, and 3 emissions
- Gold: 50-100% of Scope 1, 2, and 3 emissions
- Platinum: 100% or more of Scope 1, 2, and 3 emissions
These credits cannot be any old carbon credits in the VCM. They must be high-quality to align with the group’s focus on building a high-integrity market and enabling credibility. VCMI will require the use of IC-VCM-approved credits that are aligned with the Core Carbon Principles (CCPs) from 2026.
Until then, a company can either use credits that are eligible under the aviation industry’s CORSIA scheme or demonstrate how its due diligence process aligns with the CCPs. The last option may be preferable for most claim-makers, given the current shortage of supply of both IC-VCM and CORSIA-approved credits.
Finally, the claiming company should seek third-party assurance that is aligned with the VCMI’s MRA Framework, and submit evidence through the VCMI’s Claims Platform.
Limitations to the Claims Code
Making a VCMI Carbon Integrity Claim should make it easier for companies to contribute to high-quality climate action without getting bogged down in the complexities of whether they can or should make claims such as being ‘carbon neutral’.
However, there are still a number of barriers that companies face when making a claim:
- Companies must meet all four VCMI Foundational Criteria, including establishing detailed Scope 3 reporting.
This journey can be quite challenging, particularly for those companies just stepping into the arena of detailed climate reporting and ambitious target-setting, or those struggling with data availability across their complex value chains.
- Companies must have science-aligned (Science Based Target initiative or equivalent) targets.
These targets must be validated within 24 months, which requires significant effort and resources.
- Companies may struggle to find IC-VCM or CORSIA-approved credits.
On top of this, the VCMI mandates that companies aiming for Silver or Gold status step up their game by retiring more and more credits each year. This move could stretch the finances of some businesses, posing an additional challenge.
- Scope 3 emissions – a term that keeps many sustainability managers up at night – still pose a significant challenge.
Reporting, reducing and then compensating for Scope 3 emissions with carbon credits in line with the VCMI guidelines may be unachievable for some companies, particularly smaller firms, those in the Global South and those with complex supply chains.
While a VCMI Carbon Integrity Claim demonstrates that a company excels in climate ambition and action, VCMI has now created an option that would allow those who are facing these Scope 3 challenges to also demonstrate their commitment and progress.
Enter the Scope 3 Claim.
Scope 3 flexibility
The VCMI’s Beta Scope 3 guidance aims to encourage companies to get back on track with their emission reduction targets while also supporting climate action projects.
In its current form, companies must still comply with the VCMI Foundational Criteria, use high-quality credits, and obtain third-party assurance aligned with VCMI’s MRA Framework. They must also be achieving their Scope 1 and 2 emission reduction targets. The difference between the Scope 3 Claim and Silver, Gold, or Platinum Claims is that the former has flexibility provisions for those not yet able to achieve their annual Scope 3 emission reductions.
Under the Scope 3 Claim, companies must take a series of steps.
First, the company should calculate its emissions gap. This is the difference between its most recently reported Scope 3 emissions and the expected emissions that year according to its science-aligned short-term and net-zero targets.
If the emissions gap is more than 24% of total expected emissions that year, the company would be ineligible to make a Scope 3 Claim. If it is less than 24%, it is eligible and must retire high-quality credits to compensate for this gap (see Figure 1).
Figure 1. Emissions gap limit to make a Scope 3 Claim. Source: VCMI
Companies making a Scope 3 Claim also need to use progressively fewer credits to keep their claim. The use of carbon credits against Scope 3 emissions must then be phased out entirely by 2038.
Once a company has achieved its annual Scope 3 target, it is eligible to make a Silver, Gold, or Platinum Carbon Integrity Claim with the VCMI.
A compromise, that’s still challenging
The VCMI’s Scope 3 Claim proposal has the potential to address the Scope 3 barriers that companies face when making a VCMI Carbon Integrity Claim. As our recent blog on the SBTi’s Scope 3 discussion paper outlines, companies are struggling to achieve Scope 3 emissions reductions. The VCMI proposal could offer a level of flexibility for these companies by allowing them to supplement climate action within their value chain with climate action outside their value chain as a temporary measure.
However, it is possible that companies may still face the challenges we outlined in points 1 to 3 above, even when using the Scope 3 Claim in its current form.
Stakeholders can contribute to VCMI’s Scope 3 Claim consultation until 7 October. The group, which also ran a recent webinar unpacking the Claim, expects to publish responses and begin road testing in November 2024. The final Scope 3 Claim is expected to be released in Q1 2025.
Organisations looking for practical means to take action on Scope 3 – one of the most difficult parts of the climate puzzle – would do worse than to make their voices heard.
For more information on how to find the right carbon credits for your climate strategy or to address your Scope 3 emissions, visit our website or speak to a member of our team.
This article was first published in ESG Investor.
