The Voluntary Carbon Markets Integrity Initiative (VCMI) has launched a new "Scope 3 Action Code of Practice." This code aims to guide companies in addressing Scope 3 greenhouse gas (GHG) emissions, which are those indirect emissions that occur throughout a company's value chain including suppliers and product use. Scope 3 emissions often represent the largest portion of a company's overall carbon footprint; however, they are among the most challenging to measure and mitigate. In order to recognize this complex situation, where around 47% of companies with Scope 3 targets are falling behind on those targets, the VCMI’s new framework provides a practical pathway for businesses to incorporate the use of high-integrity carbon credits as a supplementary tool while following genuine emission reductions.
VCMI’s Code of Practice is willing to create a pathway to close the Scope 3 action gap and keep the Paris Agreement goals within reach. The code offers a structured approach for companies to assess their Scope 3 emissions gap, report the challenges they encounter and face along the process, outline the strategies they have adopted to address these obstacles, and take meaningful action on unresolved Scope 3 emissions by utilizing high-quality carbon credits. It offers a dual approach to work on direct emissions reductions and to use high-quality carbon credits. To explain this, in the beta version of the Scope 3 claim, VCMI defines high-quality credits as those that meet the Core Carbon Principles (CCP) regarding Governance, Emissions Impact and Sustainable Development, set by the Integrity Council of the Voluntary Carbon Market (ICVCM). It needs to be said that carbon credits are used as a complement to, not a substitute for, direct decarbonisation of emissions.
According to the VCMI, the Scope 3 emissions gap is growing faster among time. The volume of Scope 3 emissions and reduction targets is comparable to Japan's total annual emissions in 2022. However, projections indicate that by 2030, these emissions could increase fivefold, reaching approximately twice the total emissions of the European Union. This new Code sets 2040 as the deadline by which companies should have been able to overcome these obstacles and in this way, companies can keep advancing their climate goals while accelerating progress toward global net-zero emissions.
The Scope 3 Action Code of Practice offers:
- A structured, step-by-step approach designed to guide companies in narrowing their Scope 3 emissions gap and realigning with their long-term decarbonization goals.
- Strict safeguards to ensure that the use of high-quality carbon credits is a temporary, transparent and accountable measure, not a substitute for decarbonization.
- Companies are required to transparently disclose their emissions gap, barriers they face, and actions taken to get back on track with net-zero commitments
- The Code sets deadlines to help companies fully close their Scope 3 emissions gap by 2040, keeping them aligned with climate goals. After that, carbon credits can be used to go beyond just meeting targets and contribute additional climate benefits.
Additionally, the VCMI introduced an initiative that allows companies to declare their climate action in the Voluntary Carbon Market (VCM), being classified into Silver, Gold and Platinum levels according to the use of high integrity carbon credits. Only Bain and Company and Natura Cosmetics have achieved Platinum status. Likewise, this strategy is complemented by a new "Scope 3 Action Challenge", which recognizes companies committed to reducing indirect emissions and provides them with practical tools to move forward. It is important to understand that the Scope 3 Action Code is meant to complement, not replace, science-based climate goals. Companies must first establish a near-term emissions target - such as one approved by SBTi - and report annual progress. Only after this can they use the Code to address their remaining Scope 3 emissions by retiring equivalent carbon credits.
Despite the efforts demonstrated by VCMI, prices on the VCM are remaining unchanged. The fundamental purpose of the VCMI and ICVCM is to raise standards and restore confidence in voluntary carbon credits. However, the market is not yet experiencing a significant impact on prices or volumes and is currently in limbo due to the limited availability of credits that meet the Core Carbon Principles (CCPs) standards and certified units remain limited. There are also other concerns about VCM. These include pricing issues and doubts about the integrity of credits, for example under the Korean Emissions Trading Scheme (K-ETS) due to problems with projects claiming to generate more credits than they actually do.
In conclusion, the Scope 3 Action Code of Practice represents a significant step forward in helping companies address the most complex and extensive sources of their carbon footprint. By setting clear rules, timelines and transparency requirements, it aims to restore confidence in the voluntary carbon market, while ensuring that carbon credits are used responsibly and as a complement to science-based climate goals. Despite the current market stagnation, the Code lays an important framework for long-term climate action and corporate accountability.
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