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A Paris-aligned corporate claim for Funding Climate Action

Executive Summary

Climate action is urgently needed. Current global actions are far from sufficient for achieving 1.5°C. The voluntary carbon market offers a credible, proven way to drastically scale up needed climate action – but only if corporations are empowered to make claims that earn them credit for their actions.

Given the recent heated debate around 'climate neutral' and 'carbon neutral' claims, South Pole proposes industry alignment around the term ' Funding Climate Action'. Doing this will provide companies with a clear pathway to scaling up climate investment and helping to solve the climate crisis.

Our stakeholder consultation is now closed. Thank you for your valuable feedback.

Read more about the South Pole proposal below or check out the results here.

Introduction

Climate change is one of the biggest challenges of our century.

Climate change is one of the biggest challenges of our century.

In order to stay on a 1.5°C pathway, the world needs to reach net zero emissions by 2050, achieve a reduction of 43% in comparison with 2019 levels by 20301, and make sure global emissions peak in 2025.

The current global actions are far from sufficient for achieving 1.5°C.

Even if governments deliver on their commitments under the Paris Agreement, the IPCC and the global scientific community expect that the emission cuts will miss the 1.5ºC target by a large margin2. Current levels of climate investment need to increase by at least sevenfold by the end of this decade: governments cannot achieve this alone.

The private sector needs to step up and play a leading role.

The private sector needs to step up and play a leading role.

This is recognized by the Paris Agreement, particularly in Article 6.4, and by the Science Based Targets initiative (SBTi), which recommends that companies 'take immediate action above and beyond their science-based targets to contribute to reaching global net-zero through beyond value chain mitigation (BVCM)'.

The voluntary carbon market offers a credible, proven way for companies to drastically scale up their climate action now.

However, recent history has shown that companies are unwilling or unlikely to invest in this way unless they are able to claim credit for their actions by making clear, credible claims that the market supports and which do not bring them under attack for greenwashing.

The Need for a Paris-Aligned Climate Funding Claim

Over 20 years ago, the founders of South Pole were among the pioneers to launch the term "climate neutral". This term has been a global success story, inspiring thousands of companies to engage in climate action. However, sadly, over the past few years it has been abused by some companies for greenwashing. This is unacceptable. Not surprisingly, over the past years, we have seen heated public debate around voluntary corporate climate action and a call for viable alternatives to 'climate neutral' or 'carbon neutral' claims, which are prone to being misinterpreted.

A welcome development took place at the climate conference in Sharm El Sheikh in November 2022: COP27 shed light on a way forward by clarifying the distinction between 'authorized A6.4ERs' and 'mitigation contribution A6.4ERs'. Simply speaking, countries agreed on two use cases for credits issued under Article 6.4, just like any other type of carbon credit or allowance:

  1. Those that are authorized by host countries and can be used towards the achievement of investor countries' Nationally Determined Contributions (NDCs) and/or other international compliance purposes (such as the CORSIA scheme for aviation), and
  2. Those that are not specified as authorized and can be used for the purpose of contributing to the reduction of emission levels in the host country.

As companies strive to demonstrate their commitment to the climate and strive to differentiate themselves through climate-conscious narratives, the UN decision brings legitimacy to their actions by recognizing their impact in supporting mitigation in host countries, within and beyond countries' NDCs.

This has inspired us to develop a new vision for Paris-aligned corporate claims on funding climate action which is compatible with and supportive of the overall goals of the Paris Agreement, as well as the SBTi's Corporate Net Zero Standard guidance on 'beyond value chain mitigation'.

Consultation results

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Spotlight on the results

Companies are under unprecedented pressure to authentically communicate their climate goals and efforts to make good on commitments – but need to be able to claim green efforts with confidence and transparency.

Tested with companies, leading NGOs and policy experts 'Funding Climate Action' enables companies to invest in verified mitigation contributions to cover residual carbon emissions, while declaring genuine green credentials.

  • 94% of respondents support the need for compatibility of corporate claims with the Paris Agreement
  • 69% is supportive of the claim 'Funding Climate Action'
  • 73% agree with the 3 fundamental criteria
  • The majority of respondents (60%) would see the claim applicable for their business, products or services

Renat Heuberger, South Pole's CEO: “The private sector must take responsibility for their emissions and keep investing in climate action - that is non-negotiable. For this to be well-received by company stakeholders, they need a claim that transparently shows exactly what their contribution is. The FCA claim, backed by a label with a verifiable process, does exactly that. It encourages radical transparency and accountability at a time when all eyes are watching whether corporates are engaged in greenwashing or greenhushing."

The FCA is a new and smart way for companies to declare climate investments which go above and beyond their own value chains, alongside their existing efforts to decarbonise - an imperative recognised by Article 6.4 in the Paris Agreement. The voluntary carbon market offers a credible, proven way for companies to drastically scale up their climate action now, and the FCA provides a pathway for companies to take credit for their effort with confidence.

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Stakeholder commentary

Buy-in from industry thought leaders has already been won with Oxford Net Zero and other leading voices praising South Pole for its inclusivity in initial discussions about forging a new landscape for corporate climate claims.

Kaya Axelsson, Net Zero Policy Engagement Fellow at the Smith School of Enterprise and the Environment, said: “This collaboration will result in a consolidated and simplified toolbox that empowers companies to effectively demonstrate how their efforts contribute to fulfilling national commitments and driving climate action forward."

Suzanne DiBianca, EVP and Chief Impact Officer at Salesforce."By fostering transparency and providing incentives, we can empower businesses to accelerate climate action. South Pole's 'Funding Climate Action' claim sets a new standard, encouraging companies to go beyond their own four walls. It's time for companies to unite on shared goals and propel the global net zero transition forward."

Dr. Cornelius Walter, Impact investor, advisor at Lightrock (global private equity platform): “By encouraging the adoption of a new contribution claim, South Pole is helping to create a paradigm shift in how businesses view and engage with climate action. This initiative paves the way for a future where companies not only prioritise profitability but also embrace their responsibility to address the pressing environmental challenges we face."

Mahua Acharya, Chief of Staff at C-Quest Capital: "There is no way we can deliver the goals of the Paris Agreement without the private sector. But for companies to make claims around their efforts in a credible way, we need improved and verifiable ways to demonstrate how their investments are aligned with our shared goals."

Amelie Tan, UK and WW Regional Manager, Transition Accelerator, Carbon Disclosure Project: "Companies must urgently accelerate their science-led value chain emission reductions, and go even further by investing in mitigation outside their value chains. Credible and transparent contribution claims help companies to amplify their beyond value chain mitigation activities and as a result, increase our chances to resolve the climate crisis."

Britta Wyss Bisang, Global Sustainability Director, Schoeller Allibert: "The FCA label reflects our investment in addressing climate change in a meaningful and verified way while constantly reducing our climate impact. With the help of the new label, we are able to display this climate action in the most transparent and credible way."

Matthias Hausmann, Director Chemistry and Environment, CEWE Stiftung & Co. KGaA: "As a company we have felt the obligation for quite some time, that it is a necessity to invest in climate action, and use verifiable claims backed by science to show for it. South Pole's proposal of 'Funding Climate Action' through verified climate contributions is a viable alternative for companies funding climate action beyond their value chains and wanting to demonstrate how these efforts align with the Paris Agreement."

Patrick Lefevere, CEO of Decolef, Soudal Quick-Step (Tour de France racing team): "Combining our passion for cycling and the environment, we aim to amplify our collective voice and raise awareness about the urgent need to address climate change and strive to inspire others to join the movement for 'Funding Climate Action'. It all starts with us."

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Glossary

  • Headline claims: Shorter, marketing-focused claims to progress or status used to convey climate-related achievements, e.g. Carbon or Climate Neutral, current examples include (organisational) Net Zero.
  • Narrative claims: Typically, longer descriptive claims made to convey more detailed progress or status-based achievements. For example, describing actions undertaken or planned and sharing data about achievements made.
  • Compatibility with the Paris Agreement: Refers to the way corporates talk about what they are funding in a way that is coherent with the way countries report on their progress in achieving their NDC in the context of the PA.
  • Funding: Setting a benchmark price on carbon through investing in high quality climate contributions. There is always a direct link between the investment and certain scopes of residual carbon emissions.
  • Verified Climate Contributions: Previously called as Climate action certificates (CACs), climate contributions are verified by ICROA or ICVCM backed standards or government pricing programmes.
  • Global: This activity contributes to global emission reductions beyond a company's value chain.
  • Unabated/residual emissions: Companies' unabated emissions calculated according to best practice emission calculation standards, e.g. GHG Protocol or similar standards.
  • Ton-for-ton: The term refers to the amount of independently verified climate contributions funded to match or exceed the scale of unabated emissions that a company or a product is responsible for. The calculation of unabated emissions should be based on international standards, e.g. GHG protocol.
  • Beyond value chain mitigation: As recognised by the SBTi's Beyond value chain mitigation guidance, Companies must scale up investment to get the global economy on track to halve emissions by 2030 and achieve net-zero by 2050. The SBTi strongly recommends that companies go beyond their science-based targets by channeling additional climate finance towards mitigation activities outside of their value chains.

South Pole's Proposal

South Pole proposes alignment around the claim:

Funding Climate Action

Where space allows, this can be expanded to read:

Funding Climate Action with Verified Climate Contributions

This claim will be coupled with the following supporting copy:

(Longer) This company has funded climate action through high-quality certified mitigation contributions - in line with its residual carbon emissions

(Shorter) This company has fully funded climate action in line with its residual carbon emissions

​To earn this claim, South Pole proposes a company must meet three fundamental criteria:

  1. 'Both and', not 'instead of':

    Funding climate action beyond companies' value chains through the purchase of Verified Climate Contributions must happen on top of, and never instead of, emission reductions at the source and within their value chain.

  2. Contributions must be independently verified and of high quality:

    Verified Climate Contributions have to be backed by a Verified Emission Reduction or Removal unit issued by one of the independent ICROA-endorsed standards, ICVCM-approved programs or a government carbon pricing program.

  3. Contribution should at least be 'ton-for-ton':

    The amount of independently Verified Climate Contributions funded should match or exceed the scale of unabated emissions for which a company or a product is responsible, in line with best practice.

Additionally, companies need to make sure they champion transparent disclosure of contributions:

Companies using the claim are invited to specify the kind of contributions used, supported projects with the verification scheme and registry, as well as the scope of residual emissions accounted for.

Need more information?

Get in touch with our experts to learn more.
Need more information about corporate claims for Funding Climate Action?
Get in touch with our experts to learn more.
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South Pole calls for businesses to align around new future-proof green claim: Funding Climate Action

South Pole launches a new climate claim, Funding Climate Action (FCA) and a related label, to provide companies with a transparent pathway to scaling up climate investment today.

1 The evidence is clear: The time for action is now. We can halve emissions by 2030, IPCC
2 Climate Change 2022: Mitigation of Climate Change, IPCC
3 Some of the elements of the Assessment Framework for carbon standards by the Integrity Council for the Voluntary Carbon Market (ICVCM) are still under development. The first endorsements at program and unit level are expected in Q3 2023 (see more details here).

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