Progress on corporate climate claims and new guidance from the Science-Based Targets Initiative (SBTi) could help ensure that carbon credits are used more for green action than greenwashing inaction.

The pieces are slowly falling into place when it comes to clarifying the role of carbon credits in climate action. Carbon offsetting has come under fire in recent years for being used by many companies as a smokescreen to hide their climate inaction. Rightly so.

Now a consensus is building around the idea that ambitious corporate climate action requires companies to invest beyond their own value chains as a complement to reducing their own emissions, not as a substitute for it. More importantly, a concrete articulation of what that means and how it can be implemented in the real world is shaping up.

Growing solutions as alternatives to offsetting

The Science-Based Targets Initiative (SBTi) released today new guidance on “beyond value chain mitigation”, which encourages companies to invest beyond their own internal decarbonisation, for example to protect ecosystems or promote new technologies, and provides a clear framework and recommendations for doing so. To complement this guidance, Carbon Market Watch has released a detailed FAQ discussing the concept of “beyond value chain mitigation” (BVCM), as well as a useful checklist and template which companies can use as a complement to existing reporting initiatives that they are engaged in, to disclose BVCM-specific information.

This checklist, which is the result of extensive data-driven research and has benefited from input from a range of civil society and private-sector stakeholders, can also be used as a resource by transparency-focused organisations to include new, BVCM-focused, questions in their existing sustainability disclosure forms. It is available in short form, which includes only questions focused on BVCM and avoids any duplication with other reporting templates, as well as in full form, including all questions needed to get a sense of a company’s BVCM strategy.

SBTI’s new guidance

SBTI’s new BVCM guidance is a very positive step in clarifying the role of carbon credits as part of companies’ climate strategies. By encouraging companies to apply a science-based carbon price to their internal emissions, and to spend the resulting money on both short-term, quantifiable and long-term, transformational climate action, the SBTi is making clear that 1) corporate finance for broader climate action is direly needed, and 2) that such contributions cannot be considered equivalent to or sufficient for meeting science-based (internal) decarbonisation targets. In the absence of a more idealistic global carbon tax regime, such schemes to incentivise private investments are welcome.

Some open questions remain, such as how a “science-based” carbon price is to be set, and how companies could take meaningful steps towards BVCM if they cannot immediately price their full emissions at their true cost to the environment, which would equate to several hundred dollars per tonne (which would be financially impossible for many). In addition, ensuring that private contributions truly benefit the common good is another  challenge to overcome in this type of voluntary approach.

But the guidance does what it needs to do: it provides recommendations for what high-integrity action beyond a company’s value-chain should look like. The adoption of this guidance and implementation of sustainable BVCM approaches is now up to companies, and we, as a watchdog, and other stakeholders will be monitoring closely how and when they adapt their use of carbon credits.