Many organisations have set carbon neutrality targets, as part of their voluntary climate action, for example for the year 2030 or 2035, and some are carbon neutral already. Organisation-level carbon neutrality means that the organisation has reduced its own emissions to some extent, preferably aligned with the 1.5˚C target of the Paris Agreement, and offsets the remaining emissions with high-quality carbon credits. These carbon credits can be based either on emission reductions or carbon removal, and they should be certified through a certification programme, as well as avoid double counting and double claiming with national climate targets.
If the company uses high-quality carbon credits that fill the minimum criteria for offsetting (see more information in the Finnish government guide), achieving carbon neutrality or setting a future carbon neutrality goal can still be a valid way to take voluntary climate action. However, things are changing very rapidly in this space, and organisations making climate claims should pay attention to the claims they make and their credibility.
Carbon neutrality is starting to be yesterday’s news.
In order to reach the Paris Agreement targets, the world needs to move towards net zero in the longer term. What does net zero mean and how does it differ from carbon neutrality? In the big picture, by 2050 at the latest greenhouse gas emissions need to be on the same level or lower than greenhouse gas removals, to avoid the most catastrophic climate change scenarios. On the organisation level this means that the organisation’s emissions need to be reduced significantly, by approximately 90 %, and the remaining ~10% need to be neutralised through long-term carbon removal, either in the organisation’s own value chain or by purchasing suitable carbon removal credits.
Net zero is a more ambitious target than carbon neutrality, and a couple hundred pioneering organisations in the world have now set their net zero targets under the Science-Based Targets initiative (SBTi), with target years usually ranging from 2035 to 2050.
In our view, setting a net zero target already now shows leadership and sets an example for other organisations in the sector worldwide.
Setting a net zero target also provides a strong signal to the organisation’s value chain that it needs to decarbonise quickly, as the net zero targets also cover the Scope 3 emissions of the setting organisation. Therefore companies that set a net zero target now can have a wider impact on the economy’s decarbonisation than just their own climate action.
From carbon neutrality to beyond value chain mitigation and net zero
Instead of carbon neutrality, there are some new options for different types of climate action goals and claims organisations can make. The international Voluntary Carbon Markets Integrity Initiative (VCMI) has published in June 2023 its ambitious Claims Code of Practice. The foundation for using the Code of Practice is that organisations set near-term and net zero Science-Based Targets and demonstrate that they are on track to meeting these targets. These organisations can then purchase carbon credits representing either emission reductions or carbon removals achieved outside their value chain, also defined as beyond value chain mitigation, in the short term as they transition towards net zero. These carbon credits should be in line with the Integrity Council of Voluntary Carbon Market (ICVCM) core principles and qualify under its new Assessment Framework, published in July 2023. Depending on what percentage of remaining emissions are covered by purchasing high-quality carbon credits, organisations can make a silver/gold/platinum VCMI claim, which needs to be validated by a third party. These claims do not mention carbon neutrality, as the carbon credits can also contribute to national climate targets. In our view, this is big change to the claims companies have made so far, as marks a shift towards contribution claims and away from traditional offsetting and company-specific carbon neutrality. The Science-Based Targets initiative (SBTi) has also in June launched its draft guidance for beyond value chain mitigation, with plans to have it finalized by the end of 2023. This draft SBTi guidance also talks about contributing towards societal net zero instead of carbon neutrality.
Organisations need to be aware of the changing claims and new guidance when making decisions on their climate targets and actions.
The field is still constantly changing, and the guidance is becoming more detailed, so it is vital to keep track on the latest developments. Some of the issues to look for are the ICVCM category assessment criteria coming in fall 2023 and the UN-level negotiations on Article 6 of the Paris Agreement on e.g. which activities can generate Article 6.4 credits, which can also be used for voluntary purposes.
When weighing options for setting targets, organisations also need to be aware of the increasing regulation on environmental claims they can make regarding their climate actions, such as the EU’s Green Claims proposal. This means that for example a carbon neutrality or net zero goal and the used carbon credits need to be well substantiated, documented and reported, and based on actual data. There is also other new substantial regulation on climate reporting in the EU such as the Corporate Sustainability Reporting Directive (CSRD) and its climate change standard. The new standard requires that organisations need to for example report their emission reduction plan and explain how their plans are compatible with the 1.5 degree target. In Gaia’s view, organisations need to significantly ramp up their reporting on their climate actions and targets, including offsetting, according to this new regulation. This will mean a lot of work for many organisations, and it is best to start early to prepare for this reporting effort. It is also good to note that the new regulation is not only about reporting, as the increased transparency also encourages companies towards more ambitious climate action.
How can Gaia help?
If your organisation is interested in beyond value chain mitigation, setting a carbon neutrality goal, or making a VCMI-aligned claim, we can help you build an emission reduction roadmap, formulate your climate targets correctly according to the latest regulation and guidance, and help you choose the best carbon credits to make a credible climate claim. If you are interested in setting a pioneering net zero target, we can help you build credible emission reduction scenarios and select a suitable target year, and help you through the SBTi target setting process. Regarding climate-related reporting, we can help your organisation be prepared for the CSRD reporting in time, and help you with the related studies and data gathering. Get in touch with Gaia and let’s discuss how to move forward with credible and ambitious climate action!
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Carbon Neutrality, Climate Policy, Sustainable Finance, Carbon Markets, Renewable Energy, Sustainable Business, Development Cooperation
anna.laine@gaia.fi
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