Maggie Lund, policy manager on the Carbon Markets and Corporate Carbon Strategies team explores recent trends and initiatives in the Voluntary Carbon Markets that aim to ensure quality carbon credit supply and credible corporate environmental claims.
Review our findings below:
Despite the growing interest in carbon removal projects, the removals market is still nascent and many unanswered questions exist around project-level criteria, new methodologies, and scalability. In the absence of definitive and common standards, how can corporations help build a robust carbon removals market that can support net zero ambitions by 2050 or sooner?
In this paper, we will start to answer that question by:
Explore this paper to learn how your organization can develop its own strategy for building a robust carbon removals market that can support net zero ambitions by 2050 or sooner.
Corporations will play an essential role in transitioning to net zero emissions no later than 2050. With the size of their environmental footprints – and their capacity to reduce them – companies will be critical in scaling the action needed to ensure a sustainable future. The United Nations High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities recently published “Integrity Matters,” a report that aims to dispel greenwashing and support science-aligned, robust pathways to net zero emissions.
Expanding on current credibility and standard-setting frameworks for net zero pledges, the UN’s report emphasizes setting targets with reputable third party organizations and reducing operational and value chain emissions before engaging in beyond value chain mitigation efforts. The group gathered findings from over 40 discussions with over 500 organizations worldwide to generate its recommendations. In this blog, we boil down the 44 page report into three key themes for companies looking to set and implement credible net zero targets.
The UN Expert Group offers an ambitious roadmap for corporations seeking to align themselves with a net zero future. It simultaneously acknowledges existing initiatives that have gained significant traction in the market, such as the Science-Based Targets Initiative (SBTi), Partnership for Carbon Accounting Financials (PCAF), and Voluntary Carbon Markets Integrity Initiative (VCMI), while suggesting a higher bar needs to be set when it comes to creating, disclosing, and tracking progress against robust net zero implementation plans. The report condemns targets that don’t live up to SBTi standards and implementation plans that do not clearly show how companies will achieve them.
According to the UN Expert Group, an organization should be considered net zero-aligned only if its targets are validated under a robust third-party standard, such as the SBTi. Furthermore, the UN Expert Group’s report and SBTi’s Net-Zero Standard align closely, with both requiring coverage of scope 1, 2, and 3 emissions under a net zero target; alignment with an IPCC or IEA 1.5C pathway; setting of interim targets; and neutralization of residual emissions with removals-based carbon credits.
Both the UN Expert Group and SBTi recommend that companies prioritize emissions reductions over offsetting and state that carbon credits cannot be used to achieve interim targets; however, both strongly encourage purchasing high-quality carbon credits to mitigate beyond value chain emissions, and the UN Expert Group specifically points to the Integrity Council for the Voluntary Carbon Market (IC-VCM) to establish a global quality standard for credits used in a net zero strategy. With such strong parallels between the UN Expert Group’s guidance and the SBTi standard, 3Degrees is encouraged that the market is continuing to coalesce around a unified definition of net zero and expects corporations to continue to increasingly opt for SBTi-validated rather than self-defined targets.
Misleading targets that aren’t aligned with science slow down the crucial work required to achieve zero emissions globally. Even if a target is rooted in science, companies should publish progress reports on work towards pledges in which independent third parties can periodically verify and compare against industry peers based on publicly available data.
When setting net zero targets, organizations need to be ready to hit the ground running — robust net zero transition plans should be developed during the target setting process so that companies understand the activities, resources, and budget necessary to achieve their goals before setting them publicly. However, authors of the UN Expert Group’s report suggest that companies are falling far short on their net zero transition planning. According to the report, about one third of the world’s largest publicly-traded companies have made net zero commitments, but only half of those have outlined how their targets are embedded in their corporate strategy. Many net zero transition plans do not reference trusted sector pathways or include enough detail to be credible.
The UN Expert Group’s recommendations for developing credible net zero transition plans go far beyond current standards in the market. According to the report, clear transition plans should be all encompassing, including details of how planned emissions reduction activities will enable achievement of targets across all three scopes, and the role beyond value chain mitigation efforts, such as carbon credits, will play in the strategy. Considerations for climate justice and the rights of local communities and indigenous peoples, the company’s lobbying efforts, and plans for phasing out fossil fuels should also be taken into account. Furthermore, one recommendation reiterated throughout the report was that these plans should include interim targets for 2025, 2030, and 2035 and be updated at the same cadence. Given the wide-ranging nature of elements to be included in net zero transition plans, as recommended by the UN Expert Group, these roadmaps should be developed through engagement with a variety of stakeholders, both internal and external.
Another key theme throughout the report is the need for public disclosure of net zero transition plans and companies’ progress towards their targets. Since climate change is a global issue impacting numerous facets of society, the UN Expert Group stresses the need for transparency into the actions taken to address it. That includes not only disclosing comprehensive net zero transition plans, but also obtaining third-party verification of greenhouse gas emissions data and publishing it annually through the UNFCCC’s Global Climate Action Portal where it can be compared side-by-side against other companies’ data. Additionally, carbon credit transactions should be transparently reported, and related claims should be easily understandable and verified (e.g., based on the forthcoming VCMI standard).
According to the IEA, we’re at an inflection point that can shift the globe away from fossil fuels. Now is the time to accelerate the energy transition to a renewable energy future. To do this, authors of the UN Expert Group’s report emphasize that investors must move away from funding fossil fuel infrastructure and instead invest at scale in clean energy.
It’s imperative that global emissions peak before 2025 and are cut in half before 2030, and corporations can play a leading role in bringing this to fruition. The UN Expert Group recommends that companies cannot claim to be net zero while continuing to build or invest in new fossil fuel supply, as these resources account for more than 75% of GHG emissions worldwide. Decommissioning or canceling construction of existing carbon intensive assets is highly encouraged, and immediate attention should be paid to establishing fossil fuel close out dates, in line with guidance from the IPCC and IEA. Lastly, companies should include specific targets for ending the use of (and support for) fossil fuels, and for reaching 100% renewable energy usage.
The UN Expert Group also offers a series of recommendations on aligning companies’ lobbying activities with their net zero claims. The authors recommend that companies disclose all of their lobbying trade association affiliations, encourage these groups to advocate for pro-climate policies, develop an escalation strategy for addressing groups that fail to do so (up to and including leaving groups that do not advocate for pro-climate policies), and state the specific policies and regulations that would enable them to meet their net zero goals. They should also actively push for ambitious and forward-thinking net zero policies in all the countries and industry groups in which they operate.
While the standards laid out by the UN Expert Group for development and disclosure of corporate net zero transition plans and progress towards net zero targets are likely to be highly challenging for most companies to meet, 3Degrees encourages organizations to strive towards these best practices. Regardless of the current status of a net zero transition plan, companies can always begin laying plans for building out new components of their net zero strategy over time such as climate justice, standardized disclosure, and reporting progress against targets.
Companies should review their net zero commitments against these recommendations, but keep in mind there isn’t just one pathway to achieve a net zero emissions goal. No matter your organization’s journey, 3Degrees offers a full suite of global solutions to help you set and meet goals. For guidance on designing a credible net zero implementation plan or to learn more about how our team can support your organization in decarbonization, get in touch today.
Every year, the Conference of the Parties (COP), hosted by the United Nations Framework Convention on Climate Change (UNFCCC), brings together world leaders to align on policies to limit global temperature rise and mitigate the worst impacts of climate change. This year’s 27th summit took place in November in the city of Sharm El-Sheikh, Egypt, filled with representatives from a broad spectrum of sectors worldwide sharing their intentions, ideas, and innovative progress.
COP27’s immense size and scope have left the global environmental community wondering whether the conference’s original objective -to holistically address and mitigate climate change- is still realistic. Are COP’s formal, high-level negotiations aligned with the realities currently faced by climate-vulnerable communities around the world, especially considering the pace of innovation and mobilization required to address these adversities? This was one of the questions we pondered during COP27. In this blog, we will share some of the key moments and meaningful takeaways from the conference.
In November, our Director of Business Partnerships for EMEA, Stein Haugan, attended the 27th summit in the city of Sharm El-Sheikh, in Egypt.
As the war rages on in Ukraine, we are simultaneously experiencing spiking inflation, a sinking economy, and volatile energy prices—all of which are influenced and exacerbated by each other. Meanwhile, climate change is driving record-high temperatures, extreme weather events, and sea level rise around the world. How can global leaders and policymakers address any or all of these problems in the short period of time available? Below, we review some of the key developments coming out of COP27 that are helping to make inroads during this extremely tumultuous time.
UN Establishes Fund for “Loss and Damages”
The expectation coming into COP27 was that negotiations would focus on climate financing, adaptation, and, most crucially, establishing a fund to pay for climate “loss and damages” to developing countries. Small island states and other vulnerable nations, which have and will continue to experience substantial climate-related damages despite contributing relatively little to global climate change, have long advocated for such a fund. This call lent increased urgency following the devastating flooding experienced by Pakistan and Nigeria earlier this year.
Although parties have struggled to find consensus on loss and damages in the past, COP27 saw a breakthrough after the EU proposed (and the U.S. eventually agreed to) the creation of a joint fund to compensate for climate damages. We await more substantive details of this fund next year and at future COPs.
Support for Adaptation Efforts in Developing Countries
Financing for adaptation in the Global South was another major focus of conversation at COP27. Adaptation finance provides countries with proactive support to help build climate resilience before disasters strike. Nations formally committed to finalizing the UN’s Global Goal for Adaptation next year at COP28 but, in the meantime, have pledged an additional $230 million to the Adaptation Fund.
Furthermore, the UN announced the launch of its Early Warnings for All initiative, which aims to provide all individuals in the Global South with early warning signals for extreme weather events and impending climate disasters. The UN’s Race to Resilience campaign also released a new Data Explorer intended to transparently track national progress toward adaptation implementation.
Expert Group Pushes to Standardize Net Zero Target-Setting
The UN High-Level Expert Group on Net Zero Commitments (HLEG) released a Net Zero Commitments report that attempts to establish a “universal definition of net zero” through 10 key recommendations on target-setting, use of carbon credits, reporting, and climate advocacy.
U.S. Strengthens Commitment to Climate Action
The U.S. reaffirmed its commitment to climate change mitigation at COP27, introducing new regulations and initiatives intended to cut greenhouse gas emissions both domestically and abroad:
Methane reductions: President Joe Biden announced plans to strengthen methane regulations in the oil and gas sector to cut emissions by 87% below 2005 levels by 2030.
Energy Transition Accelerator: A new carbon market mechanism that will allow companies to fund jurisdictional-scale transitions away from coal and oil in developing economies in return for “offsets” from resulting greenhouse gas reductions.
Climate Targets for Federal Suppliers: The U.S. became the first nation to require federal government suppliers to set Paris Agreement–aligned emission reduction goals through its Federal Supplier Climate Risk and Resilience Rule.
While COP27 generated a number of positive outcomes, the conference failed to address a few crucial issues to avoid the most catastrophic effects of climate change. Some of the barriers that emerged during COP27 are detailed below.
Coalition for Rainforest Nations stand at COP27 in Egypt
Failure to Formally Commit to Fossil Fuel Phase-Out
Despite progress in providing financial support for developing countries, there were few efforts in formal negotiations to strengthen emission mitigation efforts and targets. Notably absent from the overarching COP27 decision (dubbed the “Sharm el-Sheikh Implementation Plan”) was language around phasing out fossil fuels, despite calls to include such language from many nations, including the U.S. and India. This failure to increase ambition left observers questioning if the Paris Agreement’s goal of limiting warming to 1.5 degrees Celsius is still within reach.
EU Unsuccessfully Pushes for Increased Mitigation Ambition
Yet again, and not surprisingly, the EU led the global community on climate change mitigation, driving breakthrough negotiations on loss and damages under the condition that all other nations commit to strengthening their emissions targets. While their push to increase global mitigation action ultimately failed, the EU was one of the only negotiating parties to announce a plan to update its own climate goal by pledging 55% emissions reductions by 2030, supported by the REPowerEU initiative.
While there were hundreds of other announcements at COP27, the time to act is shrinking, and positive reinforcement will be crucial in the long run. Encouragingly, many organizations and companies gathered to bring constructive and promising solutions to pressing climate problems. Ultimately, governments, companies, and individuals must work together to protect the same and only planet Earth we all share.
Reach out to discuss how your company can mitigate its impact on climate change.
Maggie Lund, Policy Manager, Carbon Markets & Corporate Carbon Strategies
Maggie leads 3Degrees’ carbon-related policy engagement, working directly with standard-setters and regulatory authorities to develop best practice recommendations for international carbon markets.
Stein Haugan, Director of Business Partnerships, Renewable Energy & Climate, EMEA
Stein supports global corporate customers to deliver renewable energy and carbon solutions tailored to their specific sustainability goals.
At nearly every conference that we have attended this year, our teams have heard about the complexities surrounding quantifying and addressing supply chain emissions. As we know supply chain emissions account for the lion’s share of a company’s total emissions (upwards of 90% in some cases), it was satisfying to attend an entire conference devoted to this topic. At the Reuters Transform Supply Chains USA conference, we dug into this very complicated challenge, shared learnings, and identified opportunities to better quantify and reduce emissions throughout the supply chain.
The first-ever Reuters Transform Supply Chains USA was held in Chicago and brought together over 250 supply chain and sustainability experts to explore cutting-edge methods for decarbonizing entire value chains across all sectors. Alongside two of my fellow colleagues, I journeyed to the Windy City to join in on the discussion. In two days time, we emerged with new potential partnerships, industry connections, and strategies to influence our teams’ efforts. Read along for a deep dive on the major themes we picked up on at the event.
ECP Director, Elizabeth Geller, participated in a panel on day two of Reuters Transform Supply Chains USA.
At the conference, I had the pleasure of participating in a panel titled “Decarbonizing the Supply Chain: Combatting the Challenge of Scope 3 Emissions” next to Chief Sustainability Officer of Conagra Brands, Katya Hantel. Our discussion centered around two main challenges of scope 3 emissions: how they are quantified and how they are reduced.
I stressed that scope 3 emissions quantification and hot spot analysis is an iterative process – companies can start measuring emissions in a variety of ways, including the use of economic input-output tools, industry-wide emission factors, and supplier engagement. The key is to get started. We also discussed some of the drivers of action around addressing scope 3 emissions. Regulatory and investor pressure are motivators necessitating the collection of quantifiable, comprehensive data from all scopes of the supply chain. It’s becoming increasingly critical to leverage tools and frameworks to help organizations feel more confident in their emissions data.
There were nods to existing data collection platforms such as Ecovadis and the Sustainable Apparel Coalition’s Higg Index, which are widely used across the industry for access to supplier sustainability data, and discussion about new emission quantification platforms as well. There is excitement around the ability of climate management platforms to enhance data collection and improve the reliability, accuracy, and availability of scope 3 measurements. That being said, human-powered analysis from energy and climate professionals is essential to ensure these new and existing tools are being used accurately, help fill the data gaps, interpret highly technical emission factors, and apply the findings to organizations’ unique supply chains.
Our partnership with multiple climate tech software platforms makes GHG emission reduction services more accessible, across all three scopes of emissions. These platforms’ joint services provide granular emissions data, a precise understanding of each scope, and streamlined GHG emissions reporting. In addition to our partnerships, we also assist organizations in the selection of a climate tech software solution that works best for them. In studying the ecosystem of leading software solutions, we look for a number of foundational requirements, including integrations, market positioning, audit-ability, and emissions reduction planning.
With over 100 climate-related software solutions to optimize the accounting and reporting process, it is challenging to know which to select and where to begin. We can assist in exploring available tools, making a best-fit selection, and then onboarding the right piece of technology for your business.
Looking beyond emission quantification, another important topic that I discussed during the panel was scope 3 emission reduction strategy. Organizations looking at getting started on scope 3 emissions reductions can consider the following four strategies:
The 3Degrees team at Reuters Transform Supply Chains USA Conference in Chicago.
Supplier engagement strategies were a recurring theme at the conference. Corporates are mostly engaging with tier 1 (those that supply the company directly) and tier 2 (direct suppliers to their tier 1) suppliers, and that traceability down to the lower tier suppliers will likely become a requirement in coming years. Effective supplier engagement programs are typically geared toward suppliers with a high emissions impact or those that make up a sizable portion of the company’s spend. Many organizations discussed feedback received from their suppliers, which uncovered a need for uniformity in requesting supply chain data and support in providing emission reduction strategies.
Across industries, supplier energy usage is a major scope 3 hotspot and a tangible area for supplier engagement. It’s important to understand how much electricity suppliers use to manufacture purchased products and the grid emission factor for that region. In addressing this area of emissions, companies can provide suppliers with educational materials for quantifying emissions, setting science-based targets, and procuring renewable energy that is available locally.
Another supplier engagement starting point discussed at the conference was related to companies that purchase animal products. Suppliers of beef or dairy can reduce emissions by changing manure management practices to reduce methane or changing grazing practices to increase soil carbon sequestration. Approaches such as these can significantly reduce supplier operational emissions and ultimately result in a revised supplier-specific emission factor for the sourcing brand. Our Carbon Markets team works with farms and ranchers on the ground to set up projects, monitor progress, and help brands with claims guidance surrounding the projects’ emissions reductions.
There is a reason scope 3 gets a lot of attention—it is the least understood source of emissions and the most challenging to address. Despite this, organizations shouldn’t be afraid to dig into this portion of their business’ operational activity. 3Degrees can help your organization calculate a greenhouse gas emissions inventory, select a greenhouse gas emissions quantification software, manage scope 3 data, design a supplier engagement strategy that’s right for your organization, and engage with suppliers to reduce emissions in your supply chain.
If you’re interested in better understanding your organization’s scope 3 footprint, or for guidance in the complex process of greenhouse gas reduction, please get in touch today.
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