FUNDING BEYOND

VALUE CHAIN
MITIGATION
Step by step guidance for organisations taking
responsibility for their emissions

VERSION 1.0 - MARCH 2024

Owen Hewlett and Daniel Magrath - Gold Standard

Robert Höglund - Milkywire

Will Hutton - Murmur

Ian Stanton - Beggars Group

 COLLABORATING
PARTNERS
Gold Standard is an NGO focused on high quality and integrity action towards the
global goals. Its pioneering standards seek to enable high quality action and funding
through robust and credible claims. It has been a pioneer on the topic of BVCM
since 2015, being part of the group of thought leaders that initially developed new
approaches to internal fee setting and a ‘contribution’ model of funding action.

This work forms a part of Gold Standard’s suite of guidance and tools for organisations,
based upon its Strategy Framework for Corporate Climate Action.

www.goldstandard.org

Milkywire is a leading impact platform dedicated to growing financing for high-quality

environmental projects while enhancing efficiency and transparency. Milkywire has
created the charitable Climate Transformation Fund that supports projects within
carbon removal, emission reductions, and nature restoration & protection to help
reach global net zero, providing an alternative to offsetting. Launched as a BVCM
initiative in 2021, the fund—backed by companies like Spotify, Klarna, and ING Bank—
has so far selected 30 projects across the world.

https://www.milkywire.com

Murmur, a registered charity founded by leaders in climate strategy and the creative
industries, enables the worlds of visual art and music to play their part in combatting
the climate crisis by encouraging Beyond Value Chain Mitigation thinking.

https://www.murmur.earth

FUNDING BEYOND VALUE CHAIN MITIGATION COLLABORATING PARTNERS 2

 OVERVIEW
To be a credible organisation in the context of the climate emergency requires both a
commitment to and robust action towards reducing the organisation’s greenhouse gas
emissions footprint. Simultaneously, it is crucial to take responsibility for the emissions
still occurring while on that journey. This is because reducing emissions represents
reducing harm towards a state of global balancing, and taking responsibility
represents an accountability for the harm still being done during this process.

This Guidance provides a step-by-step framework for organisations to take

responsibility for their unabated greenhouse gas emissions, supplementing but
not displacing their efforts towards decarbonising their own value chains. This
responsibility is demonstrated by setting an internal carbon fee and channeling it into
funding credible, ambitious and effective climate action beyond their value chain.

This approach, termed 'beyond value chain mitigation' (BVCM) represents a shift from
‘traditional’ carbon offsetting narratives towards a more impactful and effective model
where companies contribute meaningfully to global climate targets through funding
external action.

The rationale behind BVCM as a strategy for taking responsibility for emissions, is
that while rapid decarbonisation of corporate value chains is essential, there is also
an immediate need for additional financing to curb emissions globally and achieve
net zero. Organisations have not only a responsibility but also great potential to aid in
reaching these goals.

This Guidance is designed to help organisations in implementing a robust BVCM strategy,

through four key steps (see Figure 1, below):

Figure 1 - Four steps towards implementing a robust and credible BVCM strategy

STEP 1 STEP 2 PRINCIPLE

STEP 3 3 STEP 4

Set and maintain

Account and Report Fund high quality Make credible
internal carbon fee
unabated emissions climate action claims
per tCO2eq

Calculate and disclose Use an appropriate Use the carbon fee to

historical emissions pricing method to set fund high quality climate
meaningful fees mitigation action

Seek to optimize the

Calculate and disclose Consider a ratchet over time portfolio of action
(annually) ongoing supported and adhere
unabated emissions to key quality attributes

FUNDING BEYOND VALUE CHAIN MITIGATION OVERVIEW 3

 These steps collectively empower organisations to contribute significantly to global
net zero efforts, affirming their commitment to responsible and sustainable business
practices. This in turn enables them to present their efforts to stakeholders, such as
consumers and investors as credible and distinctive from their competitors.

The four steps are in line with what the Science Based Targets initiative (SBTi) proposes
in their recent BVCM paper as well as the steps laid out in the pioneering work of WWF &
BCG Corporate Blueprint for Climate and Nature, and New Climate Institute’s Guide to Climate
Contributions. This alignment indicates a strong consensus emerging amongst civil society
entities on how organisations should address their unabated emissions.

It is important to note that any strategy for climate and emissions should form a part of a
wider organisational strategy to contribute to the Global Goals and should be integrated
with other areas of target-setting, such as for nature and biodiversity. Future updates
will incorporate this integration more fully but for the present the Science Based Targets
Network offers information on strategies for nature.

This Guidance is created to inspire and enable action, not to overwhelm organisations.
While it strives to provide sound best-practice grounded in climate science and policy
expertise, it also recognises the importance of offering options, rather than mandates.
Organisations should feel empowered to start small, be transparent about uncertainties,
make choices that fit their circumstances, to acknowledge and learn from mistakes – both
their own and those of others.

The guidance provided in this document is intended for a wide range of stakeholders,
especially organisations and institutions seeking to set targets and enact responsibilities
for unabated emissions. It also applies to those involved in and contributing to those
processes, such as developers of mitigation activities, financiers, auditors and members of
civil society.

Simply embarking on the journey to take responsibility for unabated emissions and
funding external climate action is both commendable and consequential.

FUNDING BEYOND VALUE CHAIN MITIGATION OVERVIEW 4

 Table of contents

Key Definitions 6

Context 9

Overview of Approach 11

STEP 1 -Account and report unabated emissions 15

STEP 2 - Set and maintain an internal Carbon Fee 19

STEP 3 - Fund High Qulaity Action beyond the Value Chain 23

STEP 4 - Make credible claims 38

Next Steps 41

FUNDING BEYOND VALUE CHAIN MITIGATION Table of contents 5

 KEY DEFINITIONS

Abatement Measures that (organisations can take to) prevent, reduce, or

eliminate sources of GHG emissions. Value chain abatement considers
the abatement of sources of emissions, such as processes, activities
or purchases that are within an organisation’s value chain.

Beyond value chain A concept where organisations take responsibility for the
mitigation (BVCM) greenhouse gases they are still emitting and have emitted
historically (i.e. unabated emissions), by funding climate actions.
This is supplementary to their efforts to abate their own value chain
emissions.

Carbon credits A unit, often tradable, that represents a quantified way of supporting
emission reduction and carbon removal projects by assigning of
outcomes to a specific reporting entity. These may include:

Emission reduction A credit that represents a decrease in the release of greenhouse

credits gases into the atmosphere from a source, activity or process, often
achieved through energy efficiency, the use of renewable energy
sources, or avoided deforestation.

Permanent carbon A credit that represents the capturing and removal of Carbon Dioxide
removal credits from the atmosphere, storing it in a durable way. Can be used to
neutralise fossil CO2 emissions following the like-for-like principle.

FUNDING BEYOND VALUE CHAIN MITIGATION KEY DEFINITIONS 6

 “Temporary” carbon A credit that represents the capturing and removal of carbon dioxide
removal credits from the atmosphere in a non-durable way, for example in a Carbon
Dioxide storage with a high risk of reversal. Can be used to neutralize
short-lived GHG emissions following the like-for-like principle.

Contribution claim A contribution claim is a communication from the organisation to

its stakeholders that it has funded action that contributes to global
net zero efforts. It is distinct from an offsetting claim, including
neutralization, because it does not further imply that this contribution
somehow ‘resolves’ any source of emissions elsewhere by the
organisation.

Like-for-like The UNFCCCs Race to Zero campaign defines like-for-like as “When

principle a source of emissions and an emissions sink correspond in terms of
their warming impact, and in terms of the timescale and durability of
carbon storage.” This means that CO2 from permanent sources like
fossil fuels must be stored permanently, while CO2 from transient
sources like forests can be offset by equivalent storage methods. This
principle ensures that long-cycle emissions, such as those from fossil
fuel production, cannot be offset merely by short-cycle solutions like
tree planting, maintaining integrity in emission neutralization efforts.

Mitigation (In this context) - A human intervention to reduce emissions or

enhance the sinks of GHGs at the source.

Net zero A state where anthropogenic (human-caused) CO2 emissions are

counterbalanced with anthropogenic carbon removal, meaning on
net, more carbon dioxide is not being added to the atmosphere by
humans than what is taken out. It is noted that there is a difference
between global net zero and organisational net zero, the latter being
defined by the counterbalancing of corporate value chain emissions,
once aligned with a 1.5-degree warming scenario, and permanent
carbon removals (see SBTi Net Zero Standard for further details).

FUNDING BEYOND VALUE CHAIN MITIGATION KEY DEFINITIONS 7

 Neutralisation claim The act of counterbalancing emissions with removals, reaching
net zero. In the SBTi standard it refers to the use of permanent
carbon removal credits to offset up to the last ten percent of an
organisation’s emissions to reach net zero. For the purposes of this
manual, responsibility for unabated emissions prior to 1.5-degree
warming scenario alignment (through funding BVCM) is differentiated
in intent and approach from responsibility after (neutralization
through permanent removal). Neutralisation is technically a form of
offsetting, whereas offsetting is not implied in BVCM approaches.

Offsetting The act of making a claim to compensate for (and thus ‘resolve’ the
impact of) greenhouse gas emissions after purchasing carbon credits.
This has often been part of a strategy to claim to be “carbon neutral”.

Unabated emissions Emissions sources that remain unabated in a specific year of a

mitigation scenario and those left unabated resultant from historical
activities of an organisation

Voluntary carbon An umbrella term for the voluntary issuance and/or use of carbon
market (VCM) credits. Available to organisations to fund climate action (i.e. BVCM) by
buying and retiring carbon credits. These credits are used to support
emission reduction and carbon removal projects. Historically used for
offsetting but can be re-imagined for use as a contribution.

Value chain An organisation’s scope 1, 2, and 3 emissions as defined by the GHG

emissions Protocol Corporate Accounting and Reporting Standard.

FUNDING BEYOND VALUE CHAIN MITIGATION KEY DEFINITIONS 8

CONTEXT

This Guidance complements the Gold Standard (GS) Initial Framework for Organisational Climate
Strategies, which included five key principles that organisations should apply as they seek to
become positive contributors to global net zero efforts (illustrated in Figure 2, below).

As a supplement to that framework, this document specifically provides a step-wise guide for
organisations to apply Principle 3 of that document: taking responsibility for unabated emissions,
namely ongoing residual emissions on the journey towards achieving value chain targets and for
historical emissions.

Figure 2 - Extract from Gold Standard Initial Framework for Organisational Climate Strategies – the five principles

PRINCIPLE 1 PRINCIPLE 2 PRINCIPLE 3 PRINCIPLE 4 PRINCIPLE 5

Organisational Value chain Responsability for Climate related Credible Claims

Governance emissions abatement unabated emissions practices

Establish climate Set science-based, global Account, report and Disclose all climate related Make credible, measured,
within organisational net zero aligned disclosure and baited lobbying and cease any transparent claims
governance abatement targets historical and ongoing that are at odds with the concerning climate related
emissions Paris Agreement achievements

Take responsibility for End all fossil fuel related

Establish transparent Use credible accounting unabated emissions by investments, achieve zero
disclosure processes and reporting practices setting an internal carbon deforestation within value
and platforms to monitor and report price and using it fund chains and end the use of
progress climate action single use packaging

Independently assure Implement plans and Implement sustainable

all aspects of strategy transparently manage procurement approaches
change

Principle 3, namely taking full responsibility for unabated emissions is enacted through the setting
of internal carbon fees and using them to both inform business decisions and to fund BVCM. It
builds upon and can be read as a progressive update to previous generation offsetting approaches,
moving toward a more rational, optimal contribution to global net zero efforts.

Guidance is presented as a series of steps as illustrated previously in Figure 1, with each step
containing a summary ‘to-do list’ for organisations, some key choices that need to be made, and
the outputs organisations should achieve upon completing them.

FUNDING BEYOND VALUE CHAIN MITIGATION CONTEXT 9

 Historically a ‘climate mitigation hierarchy’ has been referenced as fundamental to crafting a
strategy for organisational climate action. This hierarchy prioritised value chain abatement
(i.e. the abatement of emissions attributable to the organisation’s activities) with responsibility
for unabated emissions as a secondary consideration, usually by offsetting them through the
purchase and retirement of carbon credits.

However, a hierarchy is no longer sufficient in light of the increasing urgency of the climate crisis,
as both elements are crucial to limit global warming to 1.5 degrees.

While abating value chain emissions towards net zero alignment is necessary and foundational,
it is insufficient. Value chain-only approaches merely reduce harm to the atmosphere over
time until the level of harm remaining is consistent with a 1.5-degree warming scenario, often
considered the ultimate end point or ‘target’ of a science-based target.

Those targets are also generally many years in the future. Between now and then, organisations
continue to use the very limited and non-renewable remaining scope of atmospheric emissions
or global ‘carbon budget’. Taking responsibility for these emissions ensures that companies can
meaningfully contribute to global targets while they undertake longer term transitions to more
sustainable operating models. If done correctly, it also significantly reduces the risk of criticism
and creates a greater opportunity to be considered credible in the immediate term.

This Guidance highlights the role of financing Beyond Value Chain Mitigation, allowing
organisations to align with global net zero climate targets, make a genuine contribution to
decarbonisation beyond their value chains, and distinguish themselves through financing
environmental actions that address ongoing and potentially also historical emissions.

FUNDING BEYOND VALUE CHAIN MITIGATION CONTEXT 10

 OVERVIEW OF APPROACH

The approaches in this manual are consistent with and supplemental to key target-setting
frameworks, such as the Science Based Targets initiative (SBTi) Beyond Value Chain Mitigation
report Above and Beyond, and its Net Zero Standard (NZS), Gold Standard’s Initial Framework for
Organisational Climate Strategies and are informed by the WWF Corporate Blueprint for Climate
and Nature (see Figure 2, below, particularly Steps 3 and 4). In doing so,
and in the review of wider input from stakeholders, the intent is to create a credible guidance
that builds upon civil society and academic positions first, while also considering the perspective
of companies.

Figure 3 - extracts from the WWF Blueprint

1 2 3 4

Account & disclose. Reduce Value Chain Quantify financial Invest the financial
emissions in line with commitment by commitment for TARGET
Further emissions YEAR
Unlocking climate Quality carbon
reductions solutions credits/mitigation
Science-based target pricing reamining climate and nature 5 to 10 years outcomes
pathway. emissions. impact.

Landscape finance GHG reduction

GROSS EMISSIONS

Influence climate policy in own sector Collaborate with value chain, peers, Build resilience in changing climate Climate innovation GHG removal
and beyond employees and other key stakeholders

1.5°C-aligned
emissions pathway
Figure 4 - extract from SBTi Net Zero Standard
0 CO2E
EMISSIONS NEUTRALI
EMISSIONS COMPENSATION

Net-emissions
TARGET YEAR
5 to 10 years

Abatement

Removals
GROSS EMISSIONS

1
Reductions or removals
beyond the value chain
BASE YEAR TARGET YEAR
Net-zero emissions
By 2050 at the least
2 1.5°C-aligned
emissions pathway
0 CO2E Fig. – Science Based Targets initiative’s “Climate Positive” approach to meet Net Zero targets
EMISSIONS NEUTRALIZATION
EMISSIONS COMPENSATION

4 Net-emissions

3
To set near-term science-based targets
1
5-10 year emission reduction target in line with 1.5°C pathways

To set long-term science-based targets

2
Target to reduce emissions to a residual level in line with 1.5°C scenarios by no later
than 2050

Beyond value chain mitigation

3
BASE YEAR TARGET YEAR TIn the transition to net-zero, companies should take action to mitigate emissions
By 2050 at the least beyond their value chains. For exemple, purchasing high quality credits or investing
in direct capture (DAC) and geologic storage

Fig. – Science Based Targets initiative’s “Climate Positive” approach to meet Net Zero targets
Neutralisation of residual emissions
4
GHGs released into the atmosphere when the company has achieved their long-term
SBT must counterbalanced through the permanent removal and storage of carbon
from the atmosphere

To set near-term science-based targets

1
5-10
FUNDING year emission
BEYOND VALUEreduction
CHAIN target in line with 1.5°C pathways OVERVIEW OF APPROACH
MITIGATION 11
To set long-term science-based targets
2
Target to reduce emissions to a residual level in line with 1.5°C scenarios by no later than 2050
Whereas the NZS outlines how to set corporate targets and provides details on what areas of
abatement are eligible to be reported against it (and how to report them), this Guidance provides
greater detail with regards to the implementation of BVCM, as part of a credible, holistic, corporate
mitigation strategy.

Having established that taking responsibility for unabated emissions by funding BVCM is an
essential component of a credible climate strategy, the process followed and the tools used must
also be effective.

Matters such as setting a carbon fee, reporting progress, selecting high-impact activities to
support, ensuring their additionality, robust impact quantification, and dealing with impermanence
are all critical. Similarly, care must be taken to avoid all forms of harmful double counting or
undermining the ambition of others.

As with any Gold Standard recommendation, safeguarding, co-benefits and stakeholder inclusivity
are all primary considerations, not after thoughts. They lead to the optimal design of actions taken
and maximise the impacts generated.

Table 1, below, builds upon the four steps conveyed in Figure 1 and summarises ‘at a glance’ the
criteria contained in the Gold Standard Initial Framework for Corporate Climate Strategies into
three concise steps.

Table 1 - Steps to take responsibility for unabated emissions, building upon Principle 3 of the Gold Standard Initial Frame-
work for corporate climate strategy

ACTION COMMENTARY

1 – account and report This step stablishes the scope and volume of
unabated emissions (ongoing and responsibility, building on the corporate emissions
historical) inventory. Ongoing and historical emissions are
separately estimated, reflecting the likely differing
scopes, the availability of information and strategies
for implementation.

FUNDING BEYOND VALUE CHAIN MITIGATION OVERVIEW OF APPROACH 12

 ACTION COMMENTARY

2 – set and maintain an internal This step determines how much funding should be
carbon fee per tco2eq made available based on unabated emissions. It has
the further benefit of informing business decisions,
much in the way a shadow price would do, but with real
world implications.

Setting a robust internal carbon fee internalises what

has traditionally been seen as a negative external cost
(climate impact to society) within the balance sheet
of the organisation responsible for that impact and
creates a pool of funds to finance high-integrity climate
action.

3 – fund high quality climate While the internal carbon fee should be used as part
action beyond the value chain of business decision making, it also funds beyond
value chain mitigation actions. It is important that
the mitigation outcomes should be realised outside
the value chain reporting of the organisation to avoid
real or perceived issues of double claiming and of
potentially reducing the efficacy of price signals.

The finance raised from a carbon fee should support a

mix of activities based on scientific priority and actions
that may not be easily financed through other means.
However, this does not mean every organisation
must strive for an optimal mix, indeed leveraging the
natural capacity, creativity and passion of individual
organisations to target specific areas of action may be
more effective overall.

All actions funded should meet key quality criteria to

ensure impact is achieved and negative externalities
have safeguarding and mitigation in place. These
actions should also be reported accurately, both
individually and collectively.

FUNDING BEYOND VALUE CHAIN MITIGATION OVERVIEW OF APPROACH 13

 ACTION COMMENTARY

4 – credibly represent A poor claim could undermine all credibility, even if all
achievements in claims and other elements are in place. To maintain the integrity
communications of the claims and safeguard against accusations of
greenwashing, Gold Standard’s Claim Guidelines is
recommended.

BOX 1: ON WHAT CRITERIA ARE ORGANISATIONS JUDGED?

In traditional offsetting modalities, organisations were judged on whether enough fungible

carbon credits were purchased and retired to represent a one-to-one compensation for their
footprint. This was simple to understand and, to some extent, straightforward to enact. It
is, of course, noteworthy that organisations were also held to account for the efficacy of the
credits purchased, with some falling short in areas of additionality and estimation (effectively
meaning one-to-one compensation was not achieved).

Taken together, this means that organisations were judged on whether their claims to have
compensated were matched by the credits purchased. This made life difficult for some
organisations as the responsibility for the efficacy of credits typically lies with a third-party
issuer. Likewise, credits represent an estimation of emission reduction or removal, whereas
compensation claims do not suggest any grey areas.

This Guidance is built on the premise that the responsibility of organisations is to calculate
their unabated emissions, set a credible internal carbon fee, and use it to fund action. In one
sense, this could imply that the efficacy and effectiveness of the action are unimportant, but
this would be a mistake, especially given that the organisation will still be associated with
‘bad’ actions.

Some organisations may wish to still match their footprints with a volume of reduction or
removal funded elsewhere. This is perfectly reasonable, though not essential. Others still
may wish to unlock highly ambitious and uncertain action and not be concerned about the
volume of impact.

In a shift away from compensatory claims, organisations have more protection from the
mismatch between estimation and binary achievement-based claims, as seen in Step 4.

FUNDING BEYOND VALUE CHAIN MITIGATION OVERVIEW OF APPROACH 14

 STEP 1 - ACCOUNT AND REPORT
UNABATED EMISSIONS

TO DO LIST KEY DECISION EXPECTED OUTCOMES

1 – Prepare accounting Which accounting and Statement of unabated

and reporting of unabated reporting approach to use emissions (ongoing) reported

emissions, using for e.g. the (recommended – Greenhouse year on year, with any

Greenhouse Gas Protocol Gas Protocol) adjustments/deductions and

their rationale
2 – (recommended) Prepare

an estimate of historical What base-year to set

emissions to a reasonable when considering historical Estimate of historical

base-year emissions (one suggestion emissions to a reasonable

being to use the year of the base year

3 – Make any adjustments for
Kyoto Protocol – 1997/8)
others taking responsibility

for those emissions, or for

e.g. where they are already

regulated

Unabated emissions include ongoing emissions, i.e. those emissions occurring from the date of
BVCM target-setting (typically reported annually), and historical emissions, i.e., those occurring
during the entire life of the organisation to that date.

Gold Standard considers taking responsibility for both ongoing and historical emissions to be
best practice. However taking responsibility for ongoing emissions is the minimum expectation,
while those who wish to go further can expand to include historical when feasible, which is
acknowledged to be more difficult for some organisations to approve.

Accounting and Reporting Unabated Emissions

The two components of unabated emissions, ongoing and historical, imply different accounting
and reporting approaches to calculate the scope of responsibility:

– Ongoing emissions: These should be calculated annually (for example from 1 January or
for a fiscal year, aligned with the organisation’s inventory reporting cycle). Applying the

FUNDING BEYOND VALUE CHAIN MITIGATION STEP1-accountandreportunabatedemissions 15

 Greenhouse Gas Protocol standards, including Scope 1, 2, and 3 emissions (disaggregated)
or other equivalent inventory approaches confirms the scope of BVCM as a by-product of
reporting. The final emissions reported with the inventory in a given year represent the base
scope of emissions for which responsibility should be taken.

It is noted that since this is reported in arrears it implies that organisations would need to
take action in the following year. However, estimating emissions based on the previous year’s
inventory allows organisations to take action earlier. A reconciliation can be subsequently
made as needed and is a valid approach to balancing the need for accuracy with immediate
action.

Although value chain targets and BVCM are intrinsically linked, responsibility for unabated
emissions should be taken whether or not value chain near-term targets are met. Funding
climate action beyond the value chain does not make up for a lack of progress or failure to
meet those targets, though companies not achieving targets as hoped may wish to consider
enhancing their BVCM contributions for those periods, provided the reporting is strictly
not conflated. Organisations that transparently disclose and take honest and authentic
ownership of missing their targets are likely to be seen as significantly more credible than
those attempting to work around a lack of progress in order to make positive claims.

– Historical emissions: To take full responsibility for corporate emissions, organisations

may also opt to include historical emissions in their BVCM targets. Prominent examples of
companies doing so include Microsoft and Velux.

The accuracy of historical emissions calculations can be limited by the expanse of time,
the accuracy and availability of data, and record keeping (including issues caused by
data privacy, security, etc). As such, an estimate of historical emissions should represent
a reasonable attempt to quantify for the purposes of responsibility and should be
transparently communicated. Appointing a credible third party to either produce the
estimate and to assure the process would be beneficial. It may be that a current year’s
inventory can be used to extrapolate backwards and/or an assessment of economic scale
with emissions could be used.

As many organisations have existed for decades or even hundreds of years it could create
a degree of unfairness when compared to a new organisation that has, for free, benefitted
from the creation of profitable market mechanisms and business strategies. To balance this
a reasonable definition of historical could be argued to be the date from which the damaging
effect of greenhouse gas emissions was commonly known, for example the date of the Kyoto
Protocol ratification (11 December 1997, or for the sake of practical accounting and reporting,
January 1998). The Greenhouse Gas Protocol can again be applied, so far as feasible, as the
accounting and reporting standard for historical emissions.

FUNDING BEYOND VALUE CHAIN MITIGATION STEP1-accountandreportunabatedemissions 16

 Similarly, newer companies should establish carbon fees at the heart of their governance
and in full knowledge of what it means to establish a business in a climate emergency and
benefit from markets that are already built upon embedded greenhouse gas emissions.
Accordingly, in some sectors, it is reasonable to expect greater initial ambition from newer
companies, while older companies may need to establish new practices and norms as quickly
as they can.

Responsibility for historical emissions is recommended, but even if not fully undertaken then
an assessment of this parameter should be a consideration for all organisations. This will
give a sense of the scale of the resources that the organisation has had available to them to
date and a sense of perspective for ongoing responsibility. As a way of taking responsibility
to the fullest logical extent, an organisation should consider the climate as a key stakeholder
upon which they will continually return benefits beyond their yearly emissions. If a company
is not in the position to immediately take responsibility for historic emissions through the
funding of climate action, they should still track and be prepared to disclose those emissions
as part of their BVCM progress, while publicly disclosing a strategy to include them in their
climate action within 2 years of setting a BVCM target.

Establishing a Level of Responsibility

Having established an overall ‘gross’ scope and volume of responsibility, some deductions can be
credibly made. For example, when responsibility for emissions is covered by another organisation,
with the explicit intent that this leads to organisations encouraging their peers and suppliers to
increase the scope and coverage of their responsibility.

It should be noted that deductions represent reputational risk. While there are potential areas
where it makes sense logically and may make the scope of responsibility more tenable, there is
nuance to interpretation that may lead to criticism. The following potential deduction areas are
therefore potentially applicable to both historical and ongoing emissions but should still be treated
with care and include:

– Emissions that are within the scope of another organisation’s approved (i.e. by the Science
Based Targets initiative) Science-Based Target. The key related risk is whether the approved
target is credible and that the organisation has a credible plan to enact it.

– Emissions that another organisation has taken responsibility for, for example by following the
elements set out in this manual.

– Emissions and/or mitigation activities that are formally required by regulation and enforced
by/under national legislation. The key risk related is that these emissions are still unabated
and many regulations are not themselves credible.

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 1 - account and report unabated emissions 17
Organisations making such deductions should take care to check the rationale and to transparently
communicate about this, noting the inevitable risk that comes with being seen to reduce
responsibility. It may be helpful to enlist external expertise to ‘sense check’ these decisions and
mitigate the risk of self-serving approaches.

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 STEP 2 - SET AND MAINTAIN
AN INTERNAL CARBON FEE

TO DO LIST KEY DECISION EXPECTED OUTCOMES

1 – Establish a carbon fee for At what level to set the Statement on carbon fee(s),

ongoing unabated emissions internal carbon fee(s) rationale and how it will be

and (recommended) maintained

historical.

2 – Establish a mechanism to

ratchet this fee over time and

to ensure it aligns with latest

practice.

Utilising an internal carbon fee provides an effective way for organisations to take responsibility
for their ongoing emissions as they reduce. It also poffers a financial mechanism for organisations
to allocate resources towards climate mitigation projects beyond their value chains. This carbon
fee should not be conflated with an internal carbon price—often termed a "shadow price"—which
serves to evaluate the potential impact of future carbon taxation on a business's profitability and
associated risks. Naturally, however, the setting of a fee should influence business decision making
over time and could act in a dual role in that sense.

Pioneers in the adoption of internal carbon fees include Microsoft, Swiss Re, Klarna, New Climate
Institute and Ben & Jerry's.

Determining a Credible Carbon Fee – Option 1, The Cost of Carbon

Organisations with the financial capacity should aim to establish a fee that reflects the
environmental and societal cost of their emissions. Establishing this cost can take multiple
approaches:

1. Align with the cost of permanently sequestering CO2 from the atmosphere—a figure that
currently stands at several hundred U.S. dollars per tonne for most technologies but is
anticipated to decrease to approximately 100-200 USD/tonne in the coming decades.
NewClimate Institute recommends that companies adopt a carbon fee of at least USD 100-

FUNDING BEYOND VALUE CHAIN MITIGATION STEP2-SETANDMAINTAINANINTERNALCARBONFEE 19

 250 per tCO2eq, with a clear plan to raise this level over time and in response to emerging
new evidence.

2. Benchmark against the social cost of carbon, a metric used to quantify and monetise the
long-term economic damages associated with a tonne of CO2 emitted. Current estimates of
the social cost of carbon range from 185 USD according to a recent Nature publication, to 237
(in 2022) rising to 286 Euros by 2050, as recommended by the German Federal Environment
Agency. The UK government and US EPA have proposed similar levels. Given these factors, a
credible internal carbon fee would lie in the 100 to 200 USD/tonne range.

Whatever the fee that is set, organisations should ensure it is high enough to meaningfully
influences internal decision-making and make a significant contribution to funding BVCM. The fee
should be set to increase over time, accounting for inflation at a minimum, but also tracking the
rising costs of climate impact.

Determining a Credible Carbon Fee - Option 2, Differentiated

Recommendations for Organisations with Varying Emissions and Profits

One potential challenge with implementing a credible carbon fee is that high emitting/lower
profit sectors could find themselves paying very large shares of, or more, than total profits. As
an example, the Carbon Gap Report titled "Bridging the Ambition Gap” showed that (in a dataset
with the world’s largest companies) the large emitters responsible for 85% of emissions all had
profits of less than 100 USD per tonne in Scope 1-3, meaning that paying a social cost of carbon
would exceed total profits for these companies. The heavy emitters also typically have the largest
monetary needs internally to finance emission reduction. This can make it very difficult to approve
large external funding in line with the social cost of carbon. To balance this a differentiated
approach to emissions intensity could be followed.

Conversely, organisations with lower emissions profiles and higher profit per tonne emitted are
particularly well-positioned to implement a credible carbon fee to fund external climate projects.
The same Carbon Gap report showed firms responsible for 15% of emissions accounted for 85% of
total corporate earnings, many with profits per tonne exceeding tens or hundreds of thousands of
dollars, thus capable of setting a credible internal carbon fee for external projects.

Organisations with very high profits per tonne and capabilities to use a credible fee are typically
in industries like finance, insurance, software, consulting and similar. These organisations do not
typically have large internal financial investment needs for their value chain emission reductions,
enabling them to spend more on external projects. Conversely, sectors like power generation,
mining, the built environment/infrastructure and fuel organisations typically have lower profit
margins and significant internal investment requirements to reduce their emissions, thereby
limiting their ability to fund external projects.

FUNDING BEYOND VALUE CHAIN MITIGATION STEP2-SETANDMAINTAINANINTERNALCARBONFEE 20

Consequently, recommendations for the level of internal carbon fees reflect these variances. The
fee structure can be tailored based on an organisation's direct control over emissions (e.g., Scope
1, Scope 2, and business travel emissions) as opposed to emissions where accountability is shared
(remaining Scope 3 emissions). Diverse fee levels may also be implemented for upstream versus
downstream Scope 3 emissions.

Suggestions for a Differentiated Approach:

– Very low emission intensity organisations (e.g. finance, insurance) with high profit-per-tonne
emitted could be expected to afford to implement a credible fee of $100-200 per tonne CO2e
across all scopes.

– Low emission intensity organisations (e.g., media, tech, pharma) with moderate-to-high
profit-per-tonne can reasonably afford $100-200 per tonne for Scopes 1-2 and business
travel, and $5-99 per tonne for other Scope 3 emissions.

– Medium emission intensity organisations (e.g., transport, consumer goods, retail, food &
beverage) with lower profits-per-tonne could aim for a fee level that amounts to >1% of
profits. (This equates to ~$5 per tonne CO2e on average in the Carbon Gap dataset of the
world's top organisations.)

– High emission intensity organisations (e.g., cement, oil & gas) with very low profit-per-tonne
could also aim for >1% of profits, (averaging ~$0.34 per tonne CO2e in a dataset of the
world's top organisations.)

With this concept organisations are asked to take responsibility for their emissions by paying a
credible fee. Although only a few organisations can do so, they are not paying for “more than they
should” and others should strive to increase their carbon fees to the credible level. Increases will
be easier to make as emissions are reduced, for example where responsibility is being taken by
peers in the organisation’s value chain (see Step 1).

It is worth considering that a differentiated approach can be somewhat confusing to stakeholders,

given it is an attempt to find a fair and optimal balance between responsibility for absolute
emissions and for emissions intensity and profit. Public scepticism is high and it is strongly
recommended that organisations take the time to transparently share their rationale and seek
feedback on their approaches.

While the concept of an internal carbon fee could, in theory, be applied to both internal and
external sustainability initiatives, this guide emphasizes the importance of directing these funds
toward external climate projects. Some industries have internal financing needs to reduce their
carbon emissions that are much higher than the levels proposed here. For some their annual
investment needs are larger than their annual profits.

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It is noted, however that heavy emitting organisations would likely be criticised for setting lower
internal fees, especially given these potentially differ so broadly from recommended social cost
estimates. It can be questioned whether low fees really represent responsibility. Likewise without
credible plans to align their emissions profiles with science, something that is challenging if
not impossible for some industries, this approach can be open to criticism. Balancing this with
absolute fee volumes vs a credible figure per tonne of emissions requires careful thought and
communication, but it should also be recognised that heavy emitters seeking to take responsibility
need to make realistic decisions to do so, increasing over time as their emissions downscale.

Disclosing the Internal Carbon Fee

Transparency is a cornerstone in the effective implementation of an internal carbon fee.
Organisations are strongly encouraged to publicly disclose key aspects of their fee structure. This
should include the current rate of the internal carbon fee, any variances in the fee across different
scopes of emissions, and strategic plans for future adjustments. Publicly sharing this information
serves to enhance an organisation's reputation for corporate responsibility and sets an example
that can drive industry-wide adoption of similar practices. This is also a requirement of the EU
Corporate Sustainability Reporting Directive.

Maintaining the Internal Carbon Fee

The internal carbon fee should be expected to be updated over time, ratcheting with ambition as
well as the rising social cost of carbon. The publications already referenced in this document are
very likely to be maintained and updated and as such it is recommended that the internal carbon
fee be reviewed on a rolling basis by the organisation applying this Guidance.

A concern organisations’ may have with this updating process is that their liabilities will grow over
time. Of course, if the organisation’s footprint is being reduced towards their value chain targets
then this should not be the case. Likewise if they are successful in lobbying their peers to take
active steps in the same direction and/or the expected expansion of regulation takes place then
this would also reduce the need for responsibility.

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 STEP 3 - FUND HIGH QUALITY ACTION
BEYOND THE VALUE CHAIN

TO DO LIST KEY DECISION EXPECTED OUTCOMES

1 – make choices about the Based on organisation’s 1 – a portfolio plan for the
types of action you wish to profile, decide which types of actions the organisation
support action to support: wishes to support

2 – decide which – Long term or short-term 2 – a decision on which

mechanism(s) you wish to use mitigation, or a mix funding mechanisms to use
to fund the action – Reductions, removals or
3 – Organisational impact
a mix
3 – make sure to check the reporting
– Activity types
quality attributes needed to
make credible claims are in Decide which mechanisms to
place use to fund action:

4 – report estimated impacts – Market mechanisms such

transparently at both the as carbon markets
action level and in the – Direct funding
aggregate at the organisation – Equity investments
level
Decide (based on the above)
how to measure and report
impact

Organisations should aim to use the internal carbon fee to fund ambitious, effective climate
action. This could support a diverse range of actions through valrious mechanisms, such as carbon
markets and/or internal and third-party funds. Itis important to assemble a portfolio of actions
and funding approaches that reflect the qualities and practices required to achieve a robust BVCM
approach and the needs and ‘personality’ of the organisation regardless of approach.

This section explores the qualities of and the types of action that could be funded and how to
assemble a portfolio of funded action. It further explores the mechanisms through which that
funding could be disbursed, the quality attributes of actions that should be considered and finally
how impacts should be estimated and reported.

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Constructing a Portfolio of Action
In one definition of an ‘ideal’ world, all organisations would fund an optimal mix of activities, with
a balance that aligns with science-led priorities and updates over time. In reality this hypothetical
‘algorithm’ does not currently exist and would be fraught with subjective inputs and qualitative
judgements about priorities. It would also assume that ‘optimal’ is defined by the aggregate efforts
across organisations, with each individual creating an optimal mix. This perspective overlooks the
fact that some organisations have a particular skillset, access, influence or other opportunities to
focus on a specific subset of activities in a way that is stronger, in terms of quality and impact, than
if other organisations were to do the same.

Accordingly, it is recommended that organisations consider funding a balance between near

term and future impact and between direct and indirect actions. Furthermore, organisations will
need to consider which specific types of activity to support within that framing. These choices are
illustrated in Figure 5, below:

Figure 5 – Illustrative spectrum of activity choices available to organisations

FUTURE IMPACT

Nature-based R&D
Solutions
CDR nascent
tech

Reforestation

Advocay/policy

“High hanging
fruit”
DIRECT IMPACT emissions INDIRECT IMPACT
reduction
projects
CDR
established
tech (e.g. Avoided
Bluechar) deforestation -
Avoided root causes
deforestation -
protection
E-mobility
services
(e.g. changing
infrastructure)
Clean energy
Incentivising
public
Fuel Switching transportation

NEAR TERM IMPACT

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 24
Various types of impact come with distinct characteristics. Each of these actions will differ in terms
of how easily their effects can be measured, the likelihood of their successful implementation, their
additionality, and the overall potential impact they might have on achieving sustainability goals.
Below, each quadrant in the matrix is described with comments on how projects in the quadrant
could rank on these characteristics.

Near-term Direct Impact: This category includes mostly established solutions, such as the
direct displacement of fossil fuels with clean electricity or other fuels (e.g., biogas), and the direct
protection of forests.

Funders of these types of projects can have a high certainty that they will occur, or may fund
projects “ex-post”, where the intervention already has taken place. The impact is also directly
measurable, at least in theory but effects like leakage may complicate it. The additionality can be
harder to prove. As investigations have shown, some historical carbon credit projects have been
shown to have low or no additionality, thus not having an additional impact. In general, the further
away from profitability a project is the higher the additionality, though other factors may be
influential too. The potential direct impact of the projects is bounded.

Near-term Indirect Impact: This includes efforts where the project influences others to make
choices that reduce emissions, thus having an indirect impact. This includes projects that change
behaviours, for example to address the root causes of deforestation, or incentivise public
transportation, as well as enabling actions like funding charging infrastructure for electric vehicles.

The measurability of these types of projects can be challenging as they will depend on estimates
and sometimes abstract (i.e. not directly able to witness) counterfactual assessments. There is a
risk of non-additionality as potential impacts may have occurred event without the projects. The
potential impact of these types of actions is often bounded if they, for example, engage with a
limited audience as opposed to for example changing attitudes in society at large. There is often an
inverse correlation between potential impact and measurability.

Indirect impact generally requires that the action funded is necessary for the result to occur,
though not necessarily sufficient without other inputs. Organisations can opt to optimise for
maximum expected impact in their contributions, or only choose to support low-risk projects
even if their relative expected impact is lower. Similarly some weigh co-benefits very highly and
will prioritize projects that have clear and tangible co-benefits even if there are other projects with
higher expected climate impact.

Future Direct Impact: This category includes actions like reforestation which take decades for a
significant climate effect to materialise or making offtake agreements for future carbon removal
tonnes through a more established technology without the same potential for technological
breakthroughs and cost reductions as nascent Carbon Dioxide Removal (CDR) methods.

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These types of projects often have high measurability and a low risk of not being additional. They
are also bounded in their potential impact.

Future Indirect Impact: This category encompasses catalysing future solutions, which are higher
risk, but generally have higher potential. Examples include capacity building and skills transfer,
or advocacy and policy projects to sharpen climate targets, stop the financing of fossil fuels or
increase government support for renewable energy. It can also include early support for new
technologies where the future impact is uncertain such as supporting nascent carbon removal
technologies. Although the latter carries some direct impact, the expected effect of such a strategy
is indirect through aiding technology development and bringing down costs.

The potential impact of these types of projects can often be very high but the measurability is
challenging as they will depend on estimates and counterfactual assessments.

Note that a project may contain elements of both direct and indirect impact. For example, funding the
implementation of a new technology in a demonstration project can save emissions directly through
the use of the equipment, but also lead to the adoption of the technology beyond the project.

Special Case for Nature-Based Solutions and for

Community Services

There is arguably a case for companies to allocate a portion of their funding to support global
issues that are not easily supported through other mechanisms. Examples such as high-quality
nature conservation and restoration should focus on nature-based solutions that deliver,
inclusively, for people, nature and climate. Gold Standard recommends seeking to work with
credible NGOs, such as WWF. Such efforts are likely to make strong contributions to organisational
targets for nature. A good source of inspiration is the IUCN Nature-based Solutions resources.

Contributing to robust and credible sustainable landscape programmes can be a good way of
delivering on holistic and durable mitigation. There are many examples of organisations working
collectively towards landscape goals. Resources and opportunities can be found via WWF, IUCN,
Landscape Finance Lab and IDH.

Similarly, supporting efforts aimed at ensuring community access to energy and water is
important, especially where subsidy and regulation are challenging to implement and are not
typically profitable to invest in. Such activities are often highly additional and are unlikely (though
not always so) to be within the value chains of large companies.

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Special Case for Carbon Removal
There is a case for all organisations to include some level of carbon dioxide removal (CDR) in their
BVCM strategies. Unlike most other sectors, the CDR sector lacks conventional sources of finance,
primarily because the commercial value of CDR lies solely in its climate benefits. This contrasts
with other climate solutions such as renewable energy, electric vehicles, hydrogen, batteries, etc.,
which have inherent commercial value as they provide products and services that people use.
Additionally, CDR will be needed by corporates to fulfill their net zero targets, even if just for the
last 5-10%. Therefore, it is particularly important for voluntary corporate contributions to include
some level of CDR to foster innovation in the field and build the sector so that it can deliver the
necessary tonnes to reach net zero.

Choosing Mechanisms to Support BVCM

It is logically possible to fund BVCM through a range of mechanisms. Some organisations will be
large enough and have sufficient capacity to fund action directly. Others will seek to collaborate
with peers, for example through a shared fund that manages activities on behalf of its participants.
Others still will prefer the transactional nature of market mechanisms, allowing them to fund
a part of an action without needing to manage the activity itself directly. These are all viable
provided quality criteria, stated previously in this section, are met.

Organisations are free to build a mix of approaches, the choice of option(s) will depend on
organisational preference, with the following considerations being pertinent:

– Capacity of Organisation: Is the organisation able or willing to directly fund and manage, to
work with peers to do so, or does it prefer an arm’s length, third party managed approach such as
offered by environmental markets?
– Scale: Is the organisation and its funding large enough to directly fund and ‘own’ an activity, or is
the organisation smaller and thus better suited to proportionally contributing to an action, such as
through a shared fund or market mechanism?
– Reputational Risk: Is the organisation confident in its ability to defend its actions, where directly
taking them? Likewise is it comfortable with externalizing this reputational risk to third parties to
manage?
– Method/Assurance Availability: Does the activity targeted benefit from communities of practice,
methods of estimation and assurance providers, or would these need to be built from scratch?
– Maximising Impact: Can the organisation generate greater impact for its funding through one
mechanism over another?

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 27
 BOX 2: THE ROLE OF CARBON CREDITS

Carbon credits represents a structured funding instrument designed to support climate

action, offering one viable option for addressing climate change. Credits come with a set of
benefits, standards, and methodologies that aim to ensure projects contribute effectively
to carbon reduction, due to requirements for additionality, permanence, conservative
baseline setting, approved methodologies to quantify impact, and independent third-party
verification, which lead to greater certainty and credibility.

Despite their potential, carbon credits are not without drawbacks. One of the primary
concerns is the high cost associated with the verification process, which can be a barrier
for many projects, especially smaller or grassroots initiatives. Additionally, the lead times
required to create credits can be extensive, delaying the impact of climate action efforts.
Another significant issue is that many valuable climate projects, such as policy advocacy or
certain grassroots organisations, are ineligible to generate credits.

Importantly, carbon credits should not be referred to in this context as “offsets,” as offsetting
is an action a company can take representing one use case of carbon credits that suggests a
cancellation of carbon emissions in atmospheric terms.

To ensure the highest impact and integrity when purchasing carbon credits, organisations
should, in addition to the principles noted earlier in this section, purchase adhere to the
following 5 principles:

1. Credits developed by methodologies that are measurable, robust, conservative and

prioritise impact.
2. Certified by processes that continually improve and adapt methodologies to the best
available data at the time of release.
3. 3rd party verified.
4. Applying safeguards and, where relevant, community engagement processes that ensure
any local and affected communities benefit from and are not negatively impacted by the
project's implementation.
5. Purchased at prices that are fair. While this will vary between projects, 10 - 20 USD per
credit may be a reasonable benchmark depending on the context of the projects1.

1
Readers note - Project prices vary depending on parameters such as type, size, location and the positive contributions
to the development goals, there is no definite singular “fair price” for all projects, but the range given will encompass the
majority. For example, larger-scale projects that use an established methodology may be less complicated to implement
and receive greater numbers of emission reductions to recoup costs whereas smaller community-based projects in hard-
to-reach places, are likely to encounter more complication, less emission reductions, but deliver greater contributions
to development. Both are important in our mitigating climate change and enabling the SDGs, but both have different
breakeven scenarios.

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 Additional criteria for organisations attempting to maximise impact

6. Credits that demonstrably contribute to multiple sustainable development goals.

One useful source of information about quality carbon credits is the Integrity Council for
Voluntary Carbon Markets (ICVCM). ICVCM has defined quality principles for the attributes
associated with ‘good’ credits and in future will designate a label for those credits that meet
the principles. This can help organisations judge which credits they can buy, as part of a
credible strategy.

Overall it should be noted that carbon credits represent a useful tool to fund climate action
and to generate mitigation outcomes, but are not the only tool available to organisations.

Figure 4 below provides a summary of the potential categories of outcomes sought and
mechanisms that can be applied and how they relate to claims that organisations can make.

Figure 4 – Outcomes, claims and mechanisms

MECHANISM MECHANISM

Grants and other financing methods Carbon credits

CLAIMS CLAIMS

Contribution claims Neutralisation claims

OUTCOME OUTCOME OUTCOME

Temporary CDR
Indirect reductions Direct emissions
or removals reductions

(e.g through capacity building,

OUTCOME
advocacy, R&D etc.)

Permanent CDR

Beyond value chain mitigation

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 29
This graph represents a simplified overview of BVCM. The scope is broad but different financing
mechanisms enable different types of claims and outcomes. Note that carbon dioxide removal
(CDR) could be financed by grants etc, and indirect reductions by carbon credits, but there are
limits to what we can show visually. As per the like-for-like removal principle “temporary” (short-
lived or with a high risk of reversal) removals could be used to neutralize short-lived greenhouse
gasses, while permanent CDR would be required for neutralizing fossil CO2.

It is highlighted that neutralization claims are distinct from BVCM and only relevant once an
organisation has successfully decarbonised to a state in line with a 1.5 degree Celsius warming
scenario (representing a 90% reduction for most organisations). They are included in the above
diagram for completeness only.

Quality Attributes of Funded Action

Although there are many ways to fund action towards a BVCM strategy, what remains essential
regardless of choice is that the action funded meets the quality criteria needed to make credible
responsibility claims. This section unpacks those quality criteria, enabling organisations to conduct
due diligence, design good projects or choose credits that align (noting that the quality criteria
generally denoted in this section are aligned with both the principles of Gold Standard and of
ICVCM).

Although not necessarily ‘attribute’ level qualities, funded action should be holistic and inclusive
(i.e. deliver for all affected stakeholders and consider benefits and risks beyond climate) and
durable (i.e. should be sustainable long term, not only relying on short term funding).

Different types of funded action require consideration of somewhat different criteria. This section
is therefore broken down into types of action accordingly.

QualityAttributes of Funded Action – Direct Emission Reductions,

Temporary CDR and Permanent CDR

For activities that result in direct mitigation outcomes the following quality criteria are applicable:

– Beneficial Climate Impact – Activities should deliver a mitigation outcome (i.e. the action should
demonstrably be the cause of the beneficial outcomes)
– Additionality - Funding must focus on activities that would not otherwise occur without this
source of finance. Emerging tools around Article 6 of the Paris Agreement are likely to be the most
appropriate, otherwise those used within carbon crediting standards, until that time should be
applied.

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 30
– Credible Baseline Setting - Estimating the impact of BVCM requires a credible counterfactual
baseline, which in turn follows from a credible methodology.
– Robust Monitoring and Reporting - Estimation, monitoring, reporting and independent
verification of outcomes are essential. Third-party, independently peer reviewed and approved
methodologies are recommended. They should be based on the latest good practice and
maintained and updated year on year as required. A good source of methodologies can be found in
the carbon markets.
– Independent Assurance – A competent, third-party assessment of the efficacy of the funded
activity and the impacts derived is essential to building trust and credibility.
– Permanence - As funding BVCM does not imply offsetting or compensating for emissions that live
in the atmosphere for hundreds of years, permanence is important rather than essential. The focus
should be on durability, i.e. funding activities that have the greatest chance of remaining in place in
the long term through good design, management and ongoing user incentive to maintain. However,
for fossil CO2-neutralisation claims, permanence is essential.
– Avoidance of Double Counting - Since funding BVCM does not imply offsetting the need for a
unique claim is not as high a priority. Still, it is important to avoid any double counting with an
organisation’s own value chain emissions now and in the future, best enacted by funding action
that does not relate directly to the sectors in which the organisation operates. For neutralisation
claims the outcome should be uniquely claimed (i.e. no other individual, organisation, state or
nation should claim the outcome towards any other target they may hold). Without a unique claim
to the beneficial outcomes, organisations should focus their communications on mitigation of
emissions at source, rather than reducing total emissions released to the atmosphere.
– Avoidance of Leakage - Avoiding any increase in emissions outside the scope of the funded action
is important to credibility.
– Safeguards and Sustainable Development – All activities should be properly safeguarded, all
relevant rights and intellectual and cultural property (including use, land, access and access to
resource) engage with and positively include stakeholders throughout and contribute to wider
sustainable development.
– Co-benefits - Beyond the primary goal of reducing emissions or improving environmental
conditions, co-benefits encompass additional positive outcomes that arise from BVCM activities.
These can include enhancing biodiversity, improving air and water quality, fostering economic
development for local communities, promoting social equity, and improving public health. Ideally,
projects supported are both high impact from a climate and co-benefit perspective, and different
funders will differ in how they weigh these factors.
– Ongoing Feedback and Response Processes – Ensuring that stakeholders can provide feedback
at any time, including raising grievances that will be acted upon, free from the threat of intimidation
or repercussion.

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– Measured Claims - Organisations should carefully consider how to convey claims made with
respect to their BVCM activities. It is especially important not to convey offsetting has occurred,
unless all the quality attributes needed for offsetting are in place (though this is not necessary for
taking responsibility for unabated emissions).

Quality attributes – Indirect Reductions or Removals

For activities that can indirectly lead to mitigation outcomes, for example by enabling them
through research and development, consider these quality attributes:

– Enable a Beneficial Climate Impact – Activities must demonstrably enable the delivery of
mitigation outcome.
– Additionality – The activities cannot have otherwise occurred without the support of the finance
associated and be beyond any regulatory requirements.
– Necessity – The activities should be necessary to unlock further mitigation outcomes (i.e.
the outcomes could not be achieved without the enabling work to unlock them). Alternative
approaches should be mapped and considered in reaching the conclusion that the approach taken
was the most appropriate. This can include scaling an idea. Note that the idea of necessity is often
conflated with sufficiency (i.e. that the action taken is sufficient for the result). This is not required
in this context and it should be expected that due to the complexity of indirect action that other
actions are likely to also be necessary to realise real emission reductions and removals in future.
– Expert-led – Organisations are encouraged to work with credible experts and institutions to
roundly consider all possible trade-offs, risks and opportunities.
– Safeguards and Sustainable Development – All activities should be properly safeguarded,
engage with and positively include stakeholders throughout and contribute to wider sustainable
development.
– Co-benefits - Beyond the primary goal of reducing emissions or improving environmental
conditions, co-benefits encompass additional positive outcomes that arise from BVCM activities.
These can include enhancing biodiversity, improving air and water quality, fostering economic
development for local communities, promoting social equity, and improving public health. Ideally,
projects supported are both high impact from a climate and co-benefit perspective, and different
funders will differ in how they weigh these factors.
– Monitoring and Reporting – While it may not be possible to directly measure and verify outcomes
arising from this type of action, there are elements that can be assessed and inform the further
improvement of the approach. A robust monitoring plan should still be developed and independent
assurance of progress is recommended. Transparency of uncertainty is also important where
applicable.

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– Independent Assurance – Whenever possible, a competent, third-party assessment of the efficacy
of the funded activity and the impacts derived is essential to building trust and credibility. This is
more challenging for indirect outcomes than for direct ones.

Any support for BVCM action should be expected to generate positive climate impact in the form of
either directly or indirectly avoiding or removing greenhouse gases. Ideally, funds should generate
as much impact as possible per dollar spent, however that is not always possible to measure.

It is important to remember that while rigorous measurement and evaluation serve accountability
and impact maximization goals, organizations at all stages should be lauded for voluntary climate
contributions. Perfection should not be the enemy of good - as long as misleading claims are not
made; action is preferable to inaction. We aim for a supportive environment where organizations
openly share challenges, questions and innovations to move collective knowledge forward.

Estimating Climate Impact

All actions funded should estimate impact ‘ex ante’ (i.e. up front) and ‘ex post’ (i.e. actually
achieved). It is stressed that since it is not typically possible to directly measure greenhouse gas
emissions at their source or as they are emitted to the atmosphere, accounting and reporting are
based on estimation. This should be conveyed in any claims and communications as such.

BOX 3: EXPECTED IMPACT

Assessment of expected impact accounts for the potential impact of a project and the
likelihood of achieving it, helping organisations make more informed decisions based on
the best available information at the time of investment. In some cases, projects with a
substantial potential impact may carry a high risk of not being successful, but their high
expected impact could still justify a funding decision. For example, an advocacy project may
have a small chance of stopping a new coal power plant, but if successful, the effect would be
very large. Such a project can have a very high expected impact even if it is most likely not to
succeed.

There are limits to an expected impact analysis, and it could lead to outcomes that seem
absurd, such as justifying exposing people to a grave risk of harm if the potential impact is
deemed high enough. It's essential to consider not just the expected impact, but also the
ethical implications and potential unintended consequences of funding a project.

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Some mechanisms, such as the carbon markets, have established norms for estimating impact.
Those methods could be transferred to other mechanisms, such as funds, noting the need to take
care to check that the transfer is comprehensive and kept up to date.

Projects that exist outside the carbon market or where credible methods do not exist and where
there is no established methodology need alternative ways for estimating impact. This of course
comes with its own reputational risk, particularly if organisations seek to develop in-house
methods for example.

Assessing Potential Impact, Ex-ante

Before making a funding decision, impact estimations should be conducted - either by the donor
organisation, or by a BVCM fund or regranting organisation. In either case it is recommended to
appoint external, independent experts to scrutinize approaches and to make them transparently
available for public scrutiny.

Impact estimations will differ between project types and may need to be tailor-made. Different
organisations will also have different priorities and different ways to evaluate projects. Examples of
what could be included in an impact estimation are described below.

– Project Intervention Plan: Provide a detailed description of the planned interventions, including
their objectives, activities, timeline, and expected outcomes.
– Baseline Estimation: Develop a well-reasoned estimate of what is likely to happen in the absence
of the project. This should include justification and documentation of the baseline. If applicable,
include a sensitivity analysis showing a range of different scenarios that might occur without
the project.
– Probability of Success: Estimate the likelihood of achieving the project's intended outcomes based
on factors such as the project's track record, management team, and external environment. Clearly
state the assumptions used in this estimation and consider a range of possible success probabilities
if relevant.
– Estimated Direct Effects: Estimate the potential direct effects of the planned interventions
compared to the baseline, such as trees to be planted and expected survival rate, number of
farmers to be educated in agroforestry methods, or tonnes of CO2 to be avoided from direct
fuel switching.
– Estimated Indirect Effects: Estimate the potential indirect effects of the planned interventions
compared to the baseline, such as farmers adopting tree-growing practices due to training,
policymakers implementing policies due to advocacy efforts, or tonnes of CO2 avoided from
increased access to e-mobility. The indirect effects may also be negative, such as the project
displacing climate action elsewhere. When quantifying the indirect effects, clearly state all

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 34
 assumptions used and consider providing a range of possible indirect effects rather than a
single number.

For some types of projects, especially those that seek to create enabling environments or are
focused on research this may be a challenging exercise, but orders of magnitude numbers can
often be produced.

– Project Additionality: Estimate how likely it is that this project would have happened without
your support.
– Attribution Analysis for the Project: Assess the potential influence of other interventions or
external factors on the project's outcomes and, if necessary, estimate the share of the impact that
could be attributed to the project.
– Attribution Analysis for your Funding: Estimate the proportion of the project impact that can
be attributed to your funding, considering factors such as the role of other funders, the project's
financial needs, and the potential leverage effect of your funding.
– Cost-Effectiveness Analysis: Calculate the estimated cost-effectiveness of the project by dividing
the expected impact by the project's total cost. Consider the potential direct and indirect effects,
attribution analysis for the project, as well as the probability of success and the longevity of the
project's impact, when comparing different projects' cost-effectiveness.

Aside from an impact estimation projects to be funded need to be vetted from a social and
ecological risk perspective as well as estimating any co-benefits.

Assessing Achieved Impact

Like estimating expected impact, assessing achieved impact will differ between project types and
needs to be tailored. Achieved impact assessments approaches should be consistent with those
employed for estimated impact (or carefully explain any differences) and could contain:

– Updated Baseline: Revise the initial baseline estimation to account for actual conditions and real-
world data after the project's completion or at specific milestones.
– Description of the Interventions Taken: Summarise the implemented interventions and any
deviations from the original plan.
– Quantifying Direct and Indirect Effects: Estimate the actual direct and indirect effects of the
interventions, as well as their expected longevity, and compare them to the baseline and the initial
estimations. Gold Standard methodologies may be used when available. [ADD LINK]
– Attribution Analysis for the Project and your Funding: Reassess the attribution of impact to the
project and your funding based on the actual outcomes and the involvement of other interventions
or funders.

FUNDING BEYOND VALUE CHAIN MITIGATION 35

STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN
For enabling activities such as policy and advocacy, the final impact after the project is finished can
be estimated, but it is impossible to precisely quantify its impact.

Policy change can take a long time, often many years or even decades, complicating impact
assessments that might need to happen just a few years after funding. There are often many
actors involved in creating policy change, making attribution analysis harder. The baselines might
also be hard to specify if they include complicated counterfactual scenarios. Nevertheless, analysis
by research groups such as Giving Green and Founders Pledge shows that funding advocacy and
policy projects often gives the highest expected impact of a contribution.

An impact assessment is distinct from asking whether the decision to fund the project was justified
or not. The decision to fund a project might have been the right one even if the impact ended up
being zero if the expected value was high or there was good reason to believe the project would
succeed. This of course can be a difficult message to communicate; some organisations will be
more comfortable funding actions that are more experimental and thus run the risk of having
lower than expected impact, while others will prefer to minimise this risk by funding ‘safer’ actions
and working with experienced partners.

Aggregating Reporting
Reporting the impact of funded BVCM at the organisational level is an important aspect of the
overall strategy. For example, evaluating the relative success or challenges associated with funding
decisions is best done on a portfolio level, allowing organisations to learn from experience and
inform future funding decisions. It will also underpin public claims made (see next section).

Organisations should also proactively share information and are actively encouraged to contribute
to a shared evidence base that others can learn from.

Organisations should therefore report and publicly disclose the following information:

– Activities funded as part of the BVCM strategy, including project particulars

– Any activities removed from or added to the portfolio in a given period and the rationale for why
these changes were made
– Any corrections to previously reported activities or impacts, for example where new information
has come to light (see Box 4, below)
– Any grievances or corrective actions taken on specific activities
– The impact of specific activities funded and, if feasible (i.e. where results are fungible or can be
adjusted to be so) an aggregate result of the portfolio during the reporting period

The choice of mechanism(s) will somewhat impact this reporting process. For example,
organisations choosing to use carbon markets to enact their BVCM responsibilities can likely link to

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 36
those registries as a way to provide public information. Those directly investing will of course need
to provide a platform for disclosing information.

BOX 4: LIVING WITH CORRECTIONS

The reality of any strategy or action based on estimation is that estimation techniques will
improve over time. Similarly, complexity is the reality of working in an uncertain climate,
often in locations with access and capacity challenges, with new or complex technologies and
practices. In short, this means that impacts reported should be noted as potentially open to
reassessment, with corrections made and transparently reported.

To embed this practice it is inevitable that organisations will need to shift to claims that are
less vulnerable to such corrections. For example, a problem with carbon neutrality claims is
that they represent a ‘hard’ binary, i.e. that the organisation IS carbon neutral. Of course, any
change in the underlying report could undermine this claim when looking back on it.

This makes the mechanism for funding and the overall accountability mechanism itself,
unstable. Organisations acting voluntarily for example are unlikely to fund action that
can later damage their reputation. It is therefore essential to recognise that the act of
responsibility lies in the embedding of internal carbon fees and a thoughtful process to use
that fee to fund climate action.

This does not mean impact is unimportant. Organisations should seek to drive ambitious
impact, but retroactive assessment or even failure should not be considered a failure of
responsibility overall, setting aside malpractice or negligence of course.

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 3 - FUND HIGH QUALITY ACTION BEYOND THE VALUE CHAIN 37
 STEP 4 - MAKE CREDIBLE CLAIMS

TO DO LIST KEY DECISION EXPECTED OUTCOMES

1 – Establish clear Use creativity to establish 1 – Claims materials and

organisational claims compelling claims materials, ongoing space for making
protocols and internal making sure to stay within public claims associated with
guidance credibility guideline. BVCM

2 – Create a public space and

materials for making claims,
perhaps checking these with a
credible expert

3 – Make credible claims!

This brief section is linked to the Initial Framework for Corporate Climate Strategies, Gold
Standard also published guidance for organisational claims: Fairly contributing to global Net Zero
- Considerations for credible claims. It is not intended to update or deviate from those principles,
which stand in full and are applicable to BVCM aspects of an organisational strategy. Table 2,
below, lists the high-level principles to consider, followed by some observations that organisations
should consider in light of them, related to BVCM:

PRINCIPLE CRITERIA

make measured, accurate and – Absolute and/or sweeping statements should be

truthful claims avoided, particularly where they allude to ‘resolving’
climate or other environmental issues.
– Steps should be taken to avoid and remove
inconsistent or conflicting information concerning
climate efforts.

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 PRINCIPLE CRITERIA

be transparent – Claims made should track to publicly available

information and data to back them up.
– A reasonably qualified expert should be able
to reverse engineer claims back to the public
information that substantiates them.
– Caveats, limitations and assumptions should be
publicly stated.
– An easily accessible channel, such as a free public
website, email address, or chat function to raise
concerns should be made available.
– Failures and corrections should be communicated
honestly and transparently, acknowledging that
doing so makes a major contribution to better claims
practice globally.

claims should be verifiable – Claims should stand up to scrutiny and be able to

be assessed by a competent professional for the
veracity and efficacy. Claims should be assessed
accordingly on an annual basis, and prior to any
claims campaigns.

Key Considerations for Applying Principles to BVCM

While the claims principles are for general application, there are specific considerations in the
context of BVCM. Because BVCM involves companies claiming they are acting in a responsible way
on their unabated emissions it is likely to attract scrutiny and criticism. Accordingly the following
are noted:

– Accurately conveying the following information is critical:

– The approaches taken to enact responsibility for BVCM and how these are kept up to date,
ratcheting over time
– The mechanisms used to fund BVCM
– The methods used for and the reported impacts of individual funded actions and
an overall presentation of portfolio level outcomes and impacts (taking account of
proportional contributions)

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 4 - make credible claims 39

 – Corrections made, with rationale
– Taking care to avoid binary or absolute statements such as carbon neutrality, climate positive etc.
can leave room for corrections later if errors are detected or new and improved good practices are
made available.
– The act of responsibility is to fund BVCM, with the impact of BVCM being a critical linked concern.
This is important because a failure to deliver expected impacts should not undermine the
underlying act of responsibility. In the same light, organisations should embrace reasonable
critique as part of the process, rather than as decisive regarding whether to enact the responsibility
in the first place.
– Care should be taken to convey that impact assessment is an estimation rather than direct
measurement and that estimation techniques can and will improve over time.
– Where either the funding of the organisation or the action funded is not uniquely sufficient to
unlock emission reductions or removals (for example where actions of others are required) this
should be honestly and transparently stated. It is very unlikely that either of these conditions for
sufficiency will be regularly met, however this should not be a source of concern. Necessity (i.e. that
the funding is necessary and the action funded is necessary to realise reductions and/or removals)
is the most important consideration.

Ultimately, beyond value chain mitigation is voluntary, and the vast majority of companies do not
currently engage in it. When developing guidance like this, great care must be taken to encourage
more companies to start on this path, not scare them away.

Success in BVCM lies more in mindset and action than in rigid adherence. Genuine intention to
take ownership of unabated emissions and contribute meaningfully to climate action, paired with
ethical business practices and reasonable impact evaluation efforts, constitutes success. As long
as organizations act to the best of their abilities, learn from missteps, and course-correct when
feasible, they are on the right track.

FUNDING BEYOND VALUE CHAIN MITIGATION STEP 4 - make credible claims 40

 NEXT STEPS

This document is primarily a guidance for organisations seeking to create a robust responsibility
strategy for unabated emissions. It is useful however to also note that there are areas for further
development within this space. Organisations should be aware of these given strategies will need
to keep pace with good practice:

– Impact assessment and measurement - robust methodologies / metrics for measuring the
impacts of BVCM across environmental, social and economic dimensions exist for short term
mitigation action, but less for indirect action and enablers. Inevitably measuring outcomes and
impacts of direct action is challenging, if even feasible. This does not mean we should ignore
their potential but it is noteworthy that further good practice guidance is needed in this area and
that organisations should take care to make measured claims about the results of any indirect
action they fund.
Furthermore, greater detail on the levels of data quality expected for BVCM would be a benefit.
For direct action the benchmark remains the latest methodologies used in the carbon markets,
by credible actors such as Gold Standard. Methodology developers and publishers should
begin the process of considering whether they are fit for the purpose of BVCM accounting and
reporting.
– Impact of carbon fee – the expectation is that by internalising the governance and fee-setting
process within an organisation that a more impactful sense of ownership will be realised and
will in turn lead to greater decarbonisation and quality of actions chosen for funding. This has
been the anecdotal experience relayed by early movers but would benefit from a greater body
of knowledge from practitioners. Organisations are encouraged to contribute to the body of
knowledge in this regard and academic scrutiny, particularly for example from the behavioural
sciences on the effect of internal fee vs other mechanisms would be a welcome addition.
– Communities of practice and capacity development – BVCM, although on the up, is still
nascent in terms of how organisations take responsibility for their unabated emissions (which
in turn is not the norm for all organisations). Greater sharing of knowledge and experience and
raising of awareness will be essential for the growth of this responsibility, as well as for reducing
the burden on individual organisations.

FUNDING BEYOND VALUE CHAIN MITIGATION NEXT STEPS 41

Initiatives, platforms and forums of good practice are recommended, particularly from industry
bodies and NGOs.

– Policy innovation and conditions – there is increasing government interest in both private
claims, with regulations emerging in both areas. Many countries for example are considering
how to make best use of the carbon markets towards and beyond their own targets. Clearly
carbon markets are a useful tool towards realising BVCM responsibilities, but other tools exist as
well. Supporting countries to understand that it is the responsibility and associated funding that
need to grow will help to make better sense of policy, regulation and support to the tools needed
to enact it.

Similarly with claims regulations it is the act of responsibility that needs to be conveyed, with
claims judged upon their accuracy and efficacy in this regard, rather than based on the use of a
given mechanism. By setting out the responsibility in this document and through work such as
WWF’s and SBTi’s it is hoped that governments can create the conditions for success, encouraging
and regulating the private sector especially.

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