Case Studies of Company Climate Commitments

WORKING PAPER Use Cases and Case Studies of Company Climate Commitments July 2021 vcmintegrity.org ABOUT VCMI Contents I. Introduction The Voluntary Carbon Markets Integrity Initiative (VCMI) is a Pg 5 multistakeholder platform to drive credible, net zero aligned participation in voluntary carbon markets (VCMs). VCMI’s goal is to ensure VCMs make a significant and meaningful II. Types of Corporate Climate Claims contribution to climate action and limit global temperature from rising to 1.5˚C above pre-industrial levels, while also supporting Pg 9 the achievement of the UN Sustainable Development Goals (SDGs). III. Case Studies: Company Commitments Through consultation with stakeholders from civil society, the private sector, Indigenous Peoples, local communities, and Claims and governments, VCMI intends to develop and communicate Pg 17 guidance on how carbon credits can be voluntarily used and claimed by businesses and others as part of credible, net zero decarbonization strategies. It also engages countries to IV. Summary support development of strategies to access VCMs to drive ambitious climate mitigation. Pg 27 The UK Government is supporting VCMI, as announced by COP26 President-Designate Alok Sharma at the Climate and Development Ministerial on 31 March 2021. To date, VCMI has been led by Meridian Institute, a US-based not-for-profit organization, and supported by consultants (hereafter referred to as the VCMI Consortium). The VCMI Consortium’s role is to refine the scope, governance and processes that will underpin VCMI in its future phases. The Initiative is co-funded by the Children’s Investment Fund Foundation (CIFF) and the UK Department for Business, Energy and Industrial Strategy (BEIS). ABOUT THIS PAPER This VCMI Working Paper is a product of the Key Terms of Reference: The subject matter VCMI Consortium working in collaboration with addressed in this paper relies upon a complex, staff from the VCMI funders. This particular evolving, and interrelated set of key terms. paper was led by Trove Research. This paper In an effort to be clear about the definitions has not been reviewed nor approved by the we have used for these key terms, the VCMI VCMI Steering Committee, which was being Consortium has developed a Glossary of Key formed as the paper was being developed. Terms that can be found in Annex A of this The intent of the paper is to spur dialogue paper as well as all of the Working Papers and an exchange of ideas amongst all key that are being released by the VCMI at the stakeholders to inform the development of time of its official launch. VCMI guidance on matters addressed in this paper during the next phase of the VCMI process, which will be governed by the VCMI If you would like to give feedback, please Steering Committee. You can learn more about contact [email protected] the Steering Committeehere ). 2 VCMI — Voluntary Carbon Markets Integrity Initiative Image: © RLU Case Studies Working Paper 3 I. Introduction 4 Forests Partnerships for Flores, Sunan plantation, Image: Kemiri 5 Introduction This paper has been prepared by Trove The SBTi is now developing the criteria for Researchi to support VCMI with an analysis a net zero standard, enabling companies to of the state of play of corporate climate commit to achieving net zero emissions by claims. Specifically, it sheds light on the 2050 or sooner. This is likely to be released nature of current claims, how they differ, in November 2021. It is anticipated that and how prevalently they feature in different existing SBTs will become an interim to the industry sectors. The numerical analysis longer-term net zero targets that companies is drawn from a sample of 60 large firms will commit to. Companies are also making covering six broad economic sectors, using commitments to achieve net zero emissions data from Q1 2021. Claims that have been by different target dates, or to reduce or updated more recently are not included in offset all emissions associated with their the analysis. operations to claim a “carbon neutral” status for a product, service, or the company as In the last year, there has been significant a whole. growth in the number of companies making climate commitments or making These developments are taking place claims related to the climate impact of as companies seek to make climate their products and services. The focus of commitments or ambitions public or many company climate targets is emissions demonstrate that they have already reductions within the company’s own achieved an emissions reduction or offset- operations and supply chain. However, there based claim, without broad agreement on are various types of targets, claims, and the definitions of these climate claims or commitments that incorporate the use of commitments. This may create difficulties in emissions offsetting through the purchase understanding, comparing, and assessing of carbon credits. different climate targets, claims, and commitments made by companies, as well The use of “science-based targets”, as increase the complexity for companies developed by the Science Based Targets in trying to understand how to set their own initiative (SBTi), is one of the main methods commitments or claims. by which companies seek to demonstrate that their emissions reductions targets are Section 2 of this paper describes the aligned with global emissions reductions structure of corporate climate claims used targets agreed under the Paris Agreement. in the analysis and shows the distribution of Under current guidance from the SBTi, claims by type and sector. Section 3 presents emissions reductions should be achieved examples of firms using these claims, and throughout the company’s value chain that Section 4 lays out some brief observations. represent an emissions reduction pathway that is aligned with the Paris Agreement. Currently, only Science Based Targets (SBTs) that extend up to 15 years into the future can be verified by the SBTi. i) 6 VCMI — Voluntary Carbon Markets Integrity Initiative Trove Research analysis, 2021 Unsplash Image: Veeterzy, Case Studies Working Paper 7 II. Types of Corporate Climate Claims 8 Image: Filippo Cesarini, Unsplash 9 Types of Corporate Climate Claims Figure 1 shows the key differences between — Emissions coverage: the type of emissions these types of claims, based on five key covered (both in terms of the gases attributes: emitted and the source of those emissions Companies use a wide variety of terms to “achievement” claims. “Net zero” claims within the company’s value chain). refer to their voluntary climate commitments. reflect a commitment to achieving emissions — Company coverage: whether the — Use of carbon credits: whether the These fall into four broad categories: reductions in the future. We refer to these commitment covers the entirety of the commitment uses both compensation as “commitment” claims. Claims referring — Carbon Neutral – company level company’s value chain, or one particular and neutralization carbon credits, or to “beyond carbon/climate neutral” imply — Carbon Neutral – products or services product or service. neutralization credits only. reducing emissions in excess of current — Beyond Carbon Neutral (can also be — Target achievement date: whether the emissions, for example covering historic Beyond Climate Neutral) company has made a commitment to This table is a summary of current practice years. These can be either, achievement — Net Zero achieve a certain target in the future, or if and is not a recommendation for the structure or commitment claims, depending on the the company is claiming to have reached of claims going forward. There are also a “Carbon neutral” (company level and state of company’s carbon credit purchasing the agreement today. number of attributes that are not presented products) claims are typically made in programme. This is summarised in Table 1. — Emissions target: whether the emissions in this table. For example, the strength of relation to current activities. We term these target is aligned with an emissions evidence required to justify progress against a pathway of 1.5°C of warming by 2100. target might become a requirement. Table 1: Types of commitment and achievement claims Figure 1: Differences in company climate claims COMMITMENT CLAIMS ACHIEVEMENT CLAIMS 1. Carbon 2. Carbon 3. Carbon 4. Net Zero Neutral Neutral Neutral Product Company Product Carbon Neutral – company level Whole company value chain Company coverage Carbon Neutral – product level Specific product/service Target Today ( ) Beyond Carbon Neutral achievement date Future (2030 — 2050) ( ) Net Zero 1.5˚C pathway alignment Emissions ( ) ( ) ( ) target Internal emissions reduction required CO2 only All GHGs Emissions coverage Scope 1 and 2 required, Scope 3 encouraged Scope 1, 2, and 3 required Compensation and Emissions neutralization projects target Only neutralization projects 10 VCMI — Voluntary Carbon Markets Integrity Initiative Case Studies Working Paper 11 Figure 2 shows the distribution of company Companies were counted twice if they claims from the sample of 60 companies have both current and future claims. used in the analysis, differentiated by claim Where companies have multiple future type and the year in which the target needs claims, the most ambitious target or the to be achieved. Targets set by companies target with the longest timeframe was can be achieved immediately, or before 2030, mapped, and other pledges were considered 2040, or 2050. to be interim on the pathway to their principal climate commitment. The size of the circles represents the number of companies in a particular time/commitment cluster. Figure 2: Distribution of corporate climate commitments (sample 60 companies)ii Target Year Now By 2030 By 2040 By 2050 Carbon Neutral (Product) 6 Image: © Stuart Clouth / P4F Nearly a third of claims (18) in the sample targets such as 2050 are likely to be in Carbon Neutral (Company) 15 2 1 5 are “carbon neutral” at the company level, more carbon-intensive industries, such as reflecting immediate actions to offset a energy and metals.

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