With the release of its long-awaited enhanced Claims Code, including an innovative “Scope 3 Flexibility” claim designed to encourage even more credible use of carbon credits, the Voluntary Carbon Markets Integrity Initiative (VCMI) has made major strides in scaling the carbon markets – yet, as always, there continues to be work to do.
Here, I share a brief history of corporate carbon credit claims, the present context of the VCMI Claims Code and where our future needs to take us.
Our climate emergency requires an “all hands on deck” approach. However, the vast potential of the carbon markets to mobilize private capital of up to $250B per year has not yet been realized.
One missing — but critical — piece of the financial puzzle is clear guidance to corporations as to what high quality carbon credits are and how they can be used credibly as part of an overall environmental strategy without attracting accusations of greenwashing or worse.
VCMI has partnered with the Integrity Council for the Voluntary Carbon Market (ICVCM) to create “end to end” guidelines designed to foster a high-integrity carbon market. The ICVCM is focused on evaluating carbon crediting programs and specific methodologies, while VCMI works with countless stakeholders to thread the thinnest of needles: incenting massive voluntary corporate investment into carbon projects without enabling such investments to deter or delay corporate decarbonization.
First released in July 2023, the VCMI Claims Code of Practice (Claims Code) established a comprehensive four-step framework that now integrates various standards, including Greenhouse Gas Protocol, Science Based Targets initiative (SBTi), CDP, and ICVCM. Its primary objective: Guide companies in the credible use of carbon credits.
Core challenges in the carbon market have been very public challenges to the integrity around the actual impact of carbon credits as well as corporate greenwashing accusations. Companies have faced reputational risks and have even had lawsuits filed against them by environmental nonprofits alleging that the claims made related to carbon credit use were non-credible. The VCMI and the ICVCM address these concerns head-on by providing clarity, transparency, and consistency in commitments and claims, thus instilling confidence in all market participants.
On November 28, VCMI released many important updates to its Claims Code — updates that serve to enhance, clarify and operationalize it. But even more intriguing, the update added a new claim type with game-changing potential.
In the world of corporate climate commitments, Scope 3 emissions have always presented a unique challenge. These indirect emissions, arising from a company’s value chain, are often the largest portion of their carbon footprint and the hardest to control.
The Scope 3 Flexibility Claim, a beta version launched by VCMI, represents a significant leap in corporate climate action. This claim allows companies to address their indirect scope 3 emissions through the use of high-quality carbon credits, while simultaneously progressing towards a net-zero target. It's a practical step that acknowledges the complexities of complete control over indirect emissions.
The claim is built on several guardrails designed to ensure integrity, including compliance with VCMI’s foundational criteria, meaningful progress in reducing direct (scope 1 and 2) emissions, and a cap on the volume of carbon credits used (not exceeding 50 percent of Scope 3 emissions and declining year on year). It also includes a requirement to phase out credit use by 2035, aligning with a path to net-zero through internal decarbonization.
The introduction of the Scope 3 Flexibility Claim is grounded in recent research from both MSCI and Ecosystems Marketplace:
Designing a Scope 3 Flexibility Claim has not been without its challenges. Balancing practicability with broad stakeholder acceptance and addressing methodological gaps within the voluntary carbon markets has been complex. A major challenge is the lack of a commonly accepted methodology to assess whether companies are making sufficient progress towards their interim science-aligned targets.
To finalize this claim, VCMI has outlined a roadmap that includes developing tools to measure a company’s progress, refining the claim's criteria, and establishing a distinct brand separate from its “Carbon Integrity” claims. An advanced version of the claim is expected in Q2 of 2024, incorporating methodological improvements, with the final release scheduled for September 2024.
If we are serious about mobilizing the massive amounts of capital needed to meet the challenge of climate change, we need to both increase the incentive and decrease the risk for corporations to purchase carbon credits. This week’s launch of the enhanced and fully operational VCMI Claims Code, including the beginnings of a Scope 3 Flexibility Claim, are a critical step forward for the carbon market.
It’s time for all market stakeholders to rally behind this common sense approach, while also advocating for more corporations to participate, including the millions upon millions of companies that found themselves left out of VCMI guidance previously.
We also wholeheartedly endorse the ICVCM and VCMI’s call to action urging businesses to rapidly decarbonize operations and demonstrate climate leadership:
In the face of climate change, nothing is more dangerous than inaction. Companies and other non-state actors play a critical role in cutting global emissions in half by 2030. That means action now. The planet cannot afford delays or excuses.
For further insights on how investors and corporations can maximize their engagement with the voluntary carbon market, please reach out to us here.
To review the full VCMI Claims Code and associated documents, click here.
Flowcarbon is a pioneering carbon finance and technology company working to scale the voluntary carbon market through innovative investment and carbon finance structures and sales.
Adam Shedletzky is the Director of Policy at Flowcarbon, where he contributes to the development and growth of a high-integrity voluntary carbon market.