How businesses can better navigate the complex world of climate claims

The fear of reprisals is stopping companies speaking out about their efforts to reduce emissions

Many business leaders are taking climate action, but an uptick in enforcement against corporate greenwashing is stopping them from speaking out. This lack of public affirmation about their steps to reduce emissions is slowing the energy transition and also restricts the sharing and understanding of best, and worst, practices that is so vital if all sectors are to decarbonise in line with climate science.

Nearly one-third of chief executives expect climate change to impact the way they do business over the next three years and those who are responding with climate action today are seeing the benefits. Some of the world’s largest companies that reduced reported emissions over the past year earned $1bn more in profit than the average of their peers.

However, in 2023, the private sector saw an uptick in enforcement against corporate greenwashing in various countries, from lawsuits to regulatory action. In the UK, the Competition and Markets Authority announced investigations into several fashion brands to determine if environmental statements mislead consumers.

In the US, the Securities and Exchange Commission announced a landmark rule aimed at improving transparency around actions taken to address climate risks. The growing regulatory pressures promote transparency, but they are also creating a fearful environment for companies committed to or considering climate action.

This fear of reprisal for making a climate claim has silenced many companies and hampered the willingness to set ambitious goals. The voluntary carbon market has been a particular target, making companies question whether going beyond internal reductions, setting targets that stretch outside their operational boundaries, and delivering much-needed investments in communities suffering some of the worst effects of climate change, are worth it. The short answer is, unequivocally, yes.

This is not an either/or situation; it is yes/and. Companies engaging in the VCM are nearly twice as likely to be decarbonising year over year, and are investing three times more in emissions reduction efforts within their value chain than their peers that are not. We need to find ways to reward this work, rather than punish frontrunners.

Credible claims

More investment in projects in developing economies that conserve and restore forests, that help transition communities to renewable sources of energy, and that build sustainable infrastructure is desperately needed. These projects are critical to meeting our global climate targets.

The VCM is constantly evolving to build greater integrity and credibility for claims related to the use of carbon credits, which provide the finance these projects rely on. Companies must be confident in the investments they make and how they tell their stakeholders about their work, making credible claims and continuing to support climate goals. Frameworks such as the ISO’s carbon neutrality standard, the Voluntary Carbon Markets Integrity initiative, and the Science Based Targets initiative are aimed at addressing this issue.

Unfortunately, this space remains complex, even as regulations work to encourage transparency and consistency around reporting. Companies need help in finding routes through the growing number of guidelines and frameworks. The new Climate Action Protocol is a tool that compares and contrasts requirements for some commonly used frameworks — such as Climate Impact Partners’ carbon neutral certification, the ISO’s net zero guidelines, the SBTi’s net zero standard, and the VCMI’s carbon integrity claim – can provide clarity for the market.

As the market seeks to build a global consensus among the various standards to incentivise continued action, companies must understand that not every standard fits for every company. The Climate Action Protocol helps to arm chief sustainability officers and their teams with the information they need to make the right claims based on their corporate targets, in addition to understanding how this may evolve with future goals.

Increased scrutiny has brought increased reporting to ensure corporates are transparent about their programmes and progress. That is essential to encourage the right action. In addition, we must also empower CSOs to look for ways to do more and move faster, which includes rewarding proactive ambitious action through the VCM and recognises the credible, verified claims that are being established.

With more help to navigate the complexities around claims, we can build the confidence for all companies to get started, and enable for those who want to be leaders to be more ambitious and to deliver the much-needed impact, while empowering them to be recognised for their efforts.

Sheri Hickok is chief executive of Climate Impact Partners