VCMI’s Operational Claims Code of Practice

Step 1, referred to as “The Foundational Criteria”,

 involves disclosing an annual GHG emissions inventory, establishing and disclosing science-based emissions targets for the near term, publicly committing to achieving net-zero emissions by 2050, demonstrating progress towards these targets, and ensuring that the company's public policy advocacy aligns with the goals of the Paris Agreement and does not impede ambitious climate regulation.

According to the guidance, companies must demonstrate that they are 'on-track' to meet near-term emission targets. However, participants have questioned the precise meaning of 'on-track' as the text lacks clarity. According to VCMI, being 'on-track' means publicly presenting climate transition plans that cover governance, strategy, and expenditure, but they recognize that the term needs clarification.

For inventory reporting, companies must align with the GHG Protocol Corporate Accounting and Reporting Standard, the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, and forthcoming guidance for the land sector and removals. This includes accounting for Scope 1 and 2 emissions separately and disclosing Scope 2 emissions calculated using location- and market-based approaches, as outlined in the GHG Protocol's Scope 2 Guidance. Additionally, companies must include Scope 3 emissions for all relevant sources, using the minimal boundary provided by the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard for each of the fifteen Scope 3 categories.

Companies can report their inventory using various methods, such as CDP Climate Disclosure, their annual sustainability report or statement of GHG emissions, Global Reporting Index (GRI) disclosure (including GRI 305-1, 305-2, and 305-3), or Sustainable Accounting Standards Board (SASB) index.

To establish goal boundaries and emissions coverage, companies must adhere to SBTi standards. This entails achieving 95 percent coverage for Scopes 1 and 2 emissions and 67 percent coverage for Scope 3 emissions if Scope 3 emissions account for over 40 percent of the total inventory. Sector-specific conditions outlined by SBTi, such as those applicable to the power sector, must also be met.

Moreover, companies are encouraged to follow the recommendations of the UN High-Level Expert Group on Net Zero Emissions Commitments of Non-State Entities and participate in the UN-led Race to Zero program, which calls for reducing emissions by 50% by 2030.

The mandatory public disclosure should include the total financial contributions made throughout the year towards GHG mitigation across the company's value chain, expressed as a percentage of annual revenue or capital/operational expenditure.

Once the VCMI Foundational Criteria are met, companies should consider which 

 they can fulfill. VCMI Claims are categorized into Silver, Gold, and Platinum tiers. Silver requires purchasing and retiring carbon credits for 20-60 percent of the company's remaining emissions, while Gold requires coverage from 60 percent to less than 100 percent of remaining emissions. The platinum tier necessitates covering at least 100 percent of the remaining emissions. For Silver and Gold tiers, the percentage of carbon credits to be purchased and retired must increase continuously. The Bronze tier, previously used to show the transition to Silver, is still under discussion.

Transparency in communications is intrinsically linked to the use of carbon credits for claims. Companies must clearly disclose the amount of emissions abatement achieved by reducing internal emissions and through the purchase of carbon credits.

Scope 3 coverage for each tier was clearer in the previous publication. The new document, however, states clearly that all claims require the purchase of high-quality carbon credits representing mitigation achieved outside the value chain (according to SBTI’s definition of the Beyond Value Chain Mitigation (BVCM)).

Step 3 – “Meet the required carbon credit use and quality thresholds,"

 companies must choose carbon credits that meet strict quality criteria aligned with the Core Carbon Principles (CCPs) set by the Integrity Council for the Voluntary Carbon Market (ICVCM). While CCP-label credits are not yet available, CORSIA credits for the pilot and first period will be accepted. Companies are not required to have credits with corresponding adjustments (CAs), but they must be transparent by disclosing whether a credit has CAs or not.

Companies must report the number of credits purchased and retired, along with details such as certification standard name, project name, project ID, retirement serial number, retirement date, host country, credit vintage, methodology, project type, and additional third-party certification regarding social or environmental integrity.

Step 4 - “Obtain third-party assurance following the VCMI Monitoring, Reporting & Assurance

, which lists the metrics that firms must submit in the first year after filing a VCMI Claim. Each metric must be subjected to independent, third-party limited assurance.

The VCMI MRA will launch in November. Consequently, November 2023 is the earliest time for making a VCMI claim, enabling companies to become early adopters of the VCMI. There is a time gap between the launch of MRA in November and the availability of ICVCM CCP-labelled credits. ICVCM is expected to start labeling credits in Q3 of this year, while companies are eager to adopt the VCMI claims code. This time gap means there might not be enough supply of ICVCM-labelled credits in the market by that point. As a result, companies may turn to CORSIA-labelled credits instead, which could potentially impact the current low prices.

The upcoming steps also involve developing modules for Brand, Product, or Service-Level claims in consultation with the VCMI Stakeholder Forum. Additional VCMI Claims tiers and updated claim names will be published, although experts have already expressed reluctance to adopt the "Carbon neutral" claim name.

The November launch will also provide further guidance and provisions specific to sectors, geographies, and smaller entities. The current VCMI tiers steer away from carbon neutral and offsetting claims, at least for the current tiers, and instead lean towards the "Mitigation Contribution" approach as defined in COP27.

South Pole launched a new climate claim, 

, on Tuesday (27 June), one day before the VCMI Claims Code launch, after holding a stakeholder engagement for the so-called "Paris-Aligned" claim a few months prior. 

 pulled the same move in April this year, establishing a new label called "ClimatePartner certified," replacing its "climate-neutral" label.

The Funding Climate Action label provides a framework for companies to transparently showcase their climate action efforts to customers and stakeholders, ensuring transparency and future-proofing their claims. It enables companies to demonstrate their investments in climate action projects in addition to their decarbonization initiatives. To qualify for the label, companies must quantify their emissions, although it's not clear which scopes need to be quantified and whether this information must be made public. Secondly, companies must commit to a climate journey and transparently show progress towards best practices and emission reduction over time. Thirdly, companies must make a verified climate contribution by investing in high-quality climate action projects that reduce emissions beyond their value chain. Lastly, companies must communicate their sustainability vision and achievements and undergo an annual review to renew the label.

South Pole suggested that a second label, FCA+, may be created in the future to enable corporations to go even further by supplementing their ton-for-ton efforts with monetary contributions on a money-for-tone basis.

The "Climate Partner certified" seal requires similar steps, including calculating carbon footprint (Scopes 1, 2, and 3 for corporations and a life-cycle assessment for products), setting reduction targets (aligned with SBTi), implementing reductions, financing climate projects, and communicating transparently.

 for users and buyers of Verra-issued carbon credits (VCUs). The draft guidance, set to be released for public consultation by the end of July 2023, will endorse the mitigation hierarchy and offer recommendations for the credible use of VCUs and associated claims. It will cover both contribution claims, related to a company's climate goals and global mitigation efforts through VCUs, and compensation claims, focused on achieving emissions reduction targets within a value chain. Verra fully supports the Voluntary Carbon Markets Integrity Initiative (VCMI) Claims Code of Practice and aims to provide additional guidance that acts as a bridge to this important market-wide initiative.

However, these initiatives listed above are less ambitious than the Claims Code of Practice and are relatively easier to achieve, especially for small companies. The question remains to what extent creating more individual labels aligns with the players' efforts to standardize the market. It is unclear why a company should focus its efforts on obtaining an "FCA" label, a "ClimatePartner-certified" label, or a new emerging label. The credibility of one seal over another is still unclear; it may simply come down to market preference. VCMI badges are likely to be widely accepted and represent a high level of ambition. However, claims can serve as a stepping stone for corporations that are not yet able to meet the VCMI criteria.

Although the initiatives by South Pole, Climate Partner, and VCMI are separate, they can be considered complementary as they share a common direction. The new approach promotes the adoption of the 'contribution claims' framework by businesses to finance climate initiatives by purchasing carbon credits while simultaneously working towards reducing their own operational carbon emissions. It emphasizes complete transparency, where companies must disclose their comprehensive emissions profile, establish both short-term and long-term objectives, publish information about their carbon credit procurement and retirement, and disclose their expenditure on emissions reduction.

While the initiatives are conducted individually, significant efforts were made to align them. 

VCMI has expressed its willingness to collaborate with ICVCM

, and the Claims Code acknowledges other initiatives like the GHG Protocol and the Science-Based Targets Initiative (SBTi).

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A platform with real-time GO data and insights, reporting prices and market fundamentals for Wind, Hydro, Solar, Biomass, Biomethane and RGGOs. 

Our community offers access to webinars, discussions and updates from industry leading experts and analysts. 

On June 28, the Voluntary Carbon Markets Integrity Initiative (VCMI), a multi-stakeholder platform that promotes net-zero aligned participation in voluntary carbon markets, published the long-awaited 

 the Provisional Code of Claims published by VCMI. Some changes have been made since the previous publication, including:

The 1st step, formerly known as “Prerequisites”, is now called “Foundational Criteria”;

Step 2 “Identify Claim(s) to Make” remains, but the previous Bronze, Silver, and Gold tier has been replaced with Silver, Gold, and Platinum, with Platinum representing the most ambitious claim;

Step 3 still focuses on the purchase of high-quality carbon credits;

Step 4, previously titled “report transparently on the use of carbon credits” is now “obtain third-party assurance following the VCMI Monitoring, Reporting & Assurance (MRA) Framework, scheduled to launch in November.

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Redefining Environmental Impact - From Carbon Neutrality to Contribution Claims

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