VCMI to launch consultation on use of carbon credits for Scope 3

The Voluntary Carbon Markets Integrity Initiative (VCMI) is set to run a public consultation seeking feedback on its ‘Scope 3 claim’, which allows companies to use carbon credits to offset some of their value chain emissions.

The consultation will run from September 2 to October 7, and aims to  help VCMI finalise its rules for using the claim, ensuring that it “maintains high standards of integrity, while also being practical to potential corporate adopters”, the organisation said.

In particular, the consultation is seeking feedback on the core methodology for the claim, and guardrails to ensure it drives further mitigation and prevents greenwashing. 

VCMI Scope 3 claim rules

Launched in November 2023 as part of a set of guidelines on how companies can make VCMI-backed ‘carbon integrity’ claims for their use of quality carbon credits, the Scope 3 claim (initially called ‘Scope 3 flexibility claim’) in its current form allows firms to offset up to 50% of their Scope 3 emissions.

VCMI claims can only be made by companies having set and publicly disclosed SBTi-validated near-term emissions reduction targets and a commitment to reach net zero emissions by 2050 – which, per current SBTi rules, only allows carbon offsetting for up to 10% of emissions. 

The VCMI Scope 3 claim is therefore a departure from these guidelines, which has led to criticism: think tanks NewClimate Institute and Carbon Market Watch have warned that it would “effectively nullify” the targets of many companies, giving the examples of Volkswagen, Toyota, Danone, Adidas, Stellantis and Mars.

Standard-setters open the door to Scope 3 carbon offsetting flexibility

But VCMI sees this flexibility as a practical solution to incentivise companies to begin to act on the Scope 3 emissions they are unable to reduce at this time, while also supporting the development of a high-integrity voluntary carbon market. One of the guardrails set up by the organisation to avoid abuses is that carbon credit use must decline over time “leading to complete phaseout no later than  2035”.

Mark Kenber, Executive Director at VCMI, explained: “The Scope 3 Claim is designed to incentivise companies to decarbonise across the whole of their value chain, while also investing in high quality projects that reduce and remove emissions. Responses to this consultation will be key to building a robust, credible framework for Scope 3 impact to help meet our global climate goals.” 

The consultation’s responses are scheduled to be published in late 2024, with the Scope 3 claim due to be finalised in Q1 2025.

It is worth noting that the Science-Based Targets Initiative itself is considering increasing the carbon offsetting threshold for Scope 3 – to the dismay of many sustainability leaders, including H&M’s Head of Sustainability Leyla Ertur). A draft of proposed changes is expected by the end of July, though VCMI warn that the two consultations are unrelated.

Companies growing wary of using carbon offsets

These standard-setters’ exploration of flexibility mechanisms for Scope 3 emissions has rekindled the debate around the corporate use of carbon offsets for climate action – and led several companies to step away from carbon credits altogether.

In recent months, flooring manufacturer Interface, Australian telco operator Telstra and Scottish beer company BrewDog have all decided to stop using carbon offsets – relinquishing their ‘carbon neutrality’ or ‘carbon negativity’ claims in the process – to redirect funds towards carbon reduction initiatives. 

This dampened enthusiasm has greatly affected the voluntary carbon market, which went down 61% in value in 2023. At the same time, Big Tech is betting heavily on carbon offsets to make up for the AI-driven increase in its carbon footprint. For example, Google, Meta, Microsoft and Salesforce have launched a coalition to develop 20 million tonnes of carbon credits from nature-based projects by 2030.

BloombergNEF now sees 2024 as a ‘make-or-break’ year for the voluntary carbon market, with success hinging almost entirely on whether initiatives such as the Integrity Council for Voluntary Carbon Markets (ICVCM) and VCMI manage to restore trust in carbon offsetting schemes.