This week the Voluntary Carbon Markets Integrity Initiative (VCMI) released their hotly anticipated Provisional Claims Code of Practice (CoP). We summarize the key takeaways for organizations wanting to make climate commitments.
What is the VCMI?
The VCMI was established to ensure that voluntary carbon markets (VCMs) make a meaningful positive impact on mitigating climate change and the UN Sustainable Development Goals. The initiative is particularly focussed on demand-side integrity. It aims to ensure that credit purchasers are using the credits, and talking about those actions, in a way that is honest, transparent, and aligns with international climate targets.
VCMI vs IC-VCM
Confusingly, there is another integrity initiative for VCMs: the Integrity Council for the Voluntary Carbon Market (IC-VCM). The IC-VCM is focussed on supply side integrity i.e. ensuring carbon credits are high quality. Threshold standards will be outlined in their Core Carbon Principles (CCPs) and Assessment Framework (AF), which are currently being developed.
What is the VCMI’s Claims Code of Practice for?
The VCMI’s new Claims CoP outlines the criteria for high integrity use of carbon credits, aligned with global pathways to 1.5°C. For organizations wanting to make meaningful climate commitments, it provides concrete guidance on how to use carbon credits within these strategies. It also provides criteria to rate organizations’ climate claims as either gold, silver, or bronze, promoting transparency and external accountability.
The CoP isn’t intended to replace other guidance, such as the SBTi’s Net Zero Standard. Instead, this is a complementary piece of guidance focussed on verifying organizations’ use of carbon credits within their wider climate strategies.
Code of practice overview
The Code of Practice outlines four criteria for making credible claims:
- Meet the Prerequisites
Before organizations even start on a VCMI claim, they need to meet a set of requirements broadly covering two areas:
- Ambitious net zero emissions reductions targets across scope 1, 2 and 3 emissions, with a net zero date no later than 2050 and science-aligned interim targets at least every 5 years.
- Public reporting of GHG inventories, emissions reduction strategies, and climate advocacy.
- Identify Claim(s) to Make
Claims can either be organization-wide, or just for a specific product, service, or brand. Depending on the level of ambition, these claims will qualify for either a VCMI gold, silver or bronze rating.
- Purchase High-Quality Credits
In the near term, credits are required for ‘beyond value chain mitigation’ (BVCM), or compensating for annual emissions. In the long term, once a net zero target is achieved, organizations are required to purchase and retire removals credits to neutralize residual emissions. The CoP outlines a number of guidelines to identify ‘high quality credits’, but defers to other guidance such as ICVCM’s CCPs for specifics.
- Report Transparently on the Use of Carbon Credits
Finally, organizations must report annually on the details of their carbon credit uses, including quantity of credits, project identifiers, methodology, host country, vintage, and whether a corresponding adjustment is applied.
- Claims must relate to a science-based target aligned with the mitigation hierarchy
The VCMI recognizes the importance of carbon credits, but also that credits alone will not mitigate climate change. Their use must come alongside significant emissions reductions in the short term. The importance of different types of credits will also shift over time: now there is a critical role for avoidance/ reduction credits, but by 2050 the focus will be on removals.
- Interim targets are fundamental
In order to stand a chance of limiting global temperature increases to 1.5°C, it is not enough to reach net zero in 2050. Cumulative emissions up to that point matter, and so emissions reductions need to start now and continue each year, including halving emissions in this decade. Organizations need to set and meet targets to reduce their emissions in line with this pathway before they even qualify to use credits in a way approved by the VCMI.
- Reporting requirements will reduce the risk of greenwashing
Currently, some organizations capitalize on the lack of transparency and uniformity to make great sounding climate claims when really only taking small actions. For example, some organizations have only offset emissions from a very small portion of their activities, or for one particular product. VCMI will require organizations to disclose exactly what aspect of their business their claim relates to, and to measure and compensate for all associated emissions across scopes 1, 2, and 3.
- Claims are tiered based on climate impact each year
When organizations use carbon credits as part of their climate strategies, they can qualify for a VCMI claim certification. Companies achieving all their emissions reduction targets, and offsetting all their emissions can qualify for VCMI gold. Stepping stones to this are provided in the form of silver and bronze certification, in recognition that these mitigation measures can take time to implement.
The main criteria for each certification are outlined here:
- The onus is on credit buyers to identify high quality credits
Even if credits are used as part of a credible climate strategy, they will not have a positive impact unless they are high quality. Credit buyers, therefore, need to ensure they conduct appropriate due diligence to ensure the credits they buy really deliver a positive impact to the climate and development. There’s a lot to consider, but you can find a useful introduction to how we assess carbon credit quality here.
- This guidance is not yet finalized
This is a provisional CoP, open to comments. This consultation is open for any feedback until 12th August, then a final version is expected later this year.
Should my organization follow this guidance?
This CoP is an invaluable resource for any organization using carbon credits! It can be overwhelming when faced with the multitude of guidance on setting high quality climate targets, and knowing which rules to meet. Luckily, many of the most high profile organizations have delivered complementary guidance, which address a different aspect of what needs to be considered. Any organization concerned with making credible climate claims and avoiding greenwashing should consider this CoP carefully.