Is This the VCMI Claims Code We’ve All Been Waiting For?

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.

A Brief History: Why the VCMI Is So Important

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.

What is the VCMI Claims Code of Practice?

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.

Enhanced VCMI Claims Code Update Now Offers More Carbon Credit Guidance 

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.

Three Important Claims Code Updates

1. Clarification on the type of high-integrity credits required for use. Notably, the Claims Code now makes clear that starting on January 1, 2026, companies will be required to retire “CCP-Approved” credits. Until then, companies will have two interim options under the new code: (a) the use of CORSIA-eligible credits so long as the relevant activity type has not yet been assessed by the ICVCM, and (b) disclosing how due diligence processes align with all 10 Core Carbon Principles. This approach demonstrates VCMI’s commitment to maintaining market flexibility while upholding integrity.
2. Introduction of enhanced “Carbon Integrity” claims. Apparently designed to essentially replace the traditional “carbon neutral” label, VCMI’s revised “Carbon Integrity” claim with a tiered system of Silver, Gold, and Platinum emphasizes a company’s progress in emission reductions as well as its purchase of high-integrity carbon credits. The ability to “stack” a SBTi commitment with a compelling label is an important development that will help encourage increased action from SBTi market participants, which together make up over one-third of global market capitalization.

3. A new Measurement, Reporting and Assurance (MRA) Framework that underpins the “Carbon Integrity” claim. By including metrics for reporting and guidance on the VCMI Claims Reporting Platform, the MRA framework offers a structured process for companies to validate their climate commitments. Important, too, it leverages existing reporting and disclosures to major platforms, reduces administrative burden on companies, and comes with a brand new digital platform to enable easier reporting. 

Game Changer: A Beta “Scope 3 Flexibility” Claim

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.

Why Introduce a Scope 3 Flexibility Claim?

The introduction of the Scope 3 Flexibility Claim is grounded in recent research from both MSCI and Ecosystems Marketplace:

1. Addressing the Emissions Gap A significant gap exists between current scope 3 emissions and target levels. If this gap is bridged temporarily through carbon credits, it could catalyze $19 billion to $65 billion worth of investment in 2030.
2. Encouraging Ambitious Targets Flexibility in using carbon credits is seen as a catalyst for companies to set and maintain science-based targets, with 70 percent of survey respondents saying this would increase the likelihood that their company would maintain a science-based target. 
3. Promoting Ambitious Climate Action: Ecosystems Marketplace Research indicates that companies using carbon credits tend to be more ambitious in their climate initiatives. These companies are more likely to have science-based targets, assure carbon emissions data, and engage more robustly in internal decarbonization efforts.

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.

What Is Missing in the VCMI CCP Release?

1. An “on-ramp” for millions of companies not yet in a position to achieve the VCMI’s Foundational Criteria. Still, it is encouraging that the VCMI re-iterated its acknowledgment that special provisions or entirely different Claims are required for companies such as Small and Medium-Sized Enterprises as well as those in hard-to-abate sectors or specific geographies (particularly, developing countries) as well as startups, companies with low profit margins and financial services firms. VCMI envisages development of a full set of claims that includes not only these situations, but also those companies that are simply at the beginning of their decarbonization journey and cannot yet meet its Foundational Criteria. 
2. Product-, service-, or brand-level claims guidance. In the initial version of the Claims Code, the VCMI outlined guidance and requirements for companies to make claims related to products, services, or brands. However, concerns emerged during public consultations that such claims could lead to greenwashing without a stringent framework to assess impacts at the product, service, or brand level. 

VCMI Continues to Shape Corporate Climate Action

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.

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About Flowcarbon

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.