In collaboration with Bain & Company Scaling Voluntary Carbon Markets: A Playbook for Corporate Action WHITE PAPER SEPTEMBER 2023 Images: Getty Images Contents Foreword 3 Executive summary 4 Introduction 5 1. The VCM in 2024 and beyond – a vision for future carbon markets 9 1.1 A new narrative 10 1.2 Strategy, not philanthropy 11 1.3 Pragmatic recognition of efforts 11 1.4 Transparent disclosure and claims 12 1.5 Mature risk management 14 1.6 Convergence on a global carbon market 15 2. Playbook: How corporations can navigate carbon markets 16 2.1 Define net-zero role for credits 17 2.2 Create value and recognition 23 2.3 Tailor a portfolio 27 2.4 Orchestrate the effort 34 Conclusion: The imperative for action and incentives 39 Contributors 40 Endnotes 42 Disclaimer This document is published by the World Economic Forum as a contribution to a project, insight area or interaction. The findings, interpretations and conclusions expressed herein are a result of a collaborative process facilitated and endorsed by the World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum, nor the entirety of its Members, Partners or other stakeholders. © 2023 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. Scaling Voluntary Carbon Markets: A Playbook for Corporate Action 2 September 2023 Scaling Voluntary Carbon Markets: A Playbook for Corporate Action Foreword Pedro Gomez Head, Climate; Member of the Executive Committee, World Economic Forum, Switzerland Dale Hardcastle Head of Carbon Markets, Bain & Company, Singapore Carbon markets are not new – in fact, they have existed for more than 20 years – yet they remain far from mature. Even as market infrastructure continues to evolve, the voluntary carbon market (VCM) represents an important lever to help accelerate high-impact climate action, protect nature and drive the energy transition towards net zero. Market growth in recent years has attracted scrutiny by critical observers and raised important concerns about the potential abuse of the VCM for corporate greenwashing. This, and the ambiguity inherent in any emerging market, has limited further corporate adoption of the VCM as expected. Yet if participation can be expanded to a wider set of global corporate leaders, the VCM could provide a valuable and immediate tool for climate finance. surveys, interviews and working sessions with corporate members of the working group as well as representatives from key market initiatives. While this document reflects a faithful representation of the learnings derived from participants engaged in that work, it does not necessarily reflect the beliefs of any one organization. To unlock the VCM’s potential positive impact on nature and the environment and to foster increased corporate participation, the World Economic Forum and Bain & Company have convened a working group of high-ambition corporate partners in collaboration with existing market initiatives and stakeholders. Since it was first convened in April 2023, this group has worked to address key market barriers and codify corporate best practices for high-impact participation in VCMs. To complement this work, the Forum and Bain & Company have developed this white paper as a playbook to support the next wave of companies on the verge of entering the VCM. The report reflects 3. Provide an actionable guide for companies new to the VCM that helps mitigate common risks and provides practical examples from leading corporations with experience of carbon markets. This report has four main objectives: 1. Articulate the urgent need for carbon markets to scale up capital allocation in support of the climate transition. 2. Propose ways in which the VCM could evolve to reach its potential as a tool for channelling climate finance. 4. Declare a call to action directed at encouraging private, public and civil society actors to take the steps needed to unlock the VCM’s full potential to accelerate climate action. While the VCM is imperfect and guardrails need to be set and enforced to avoid misuse, the climate crisis is too urgent to continue underusing this source of transition finance. Now is the time to act. Scaling Voluntary Carbon Markets: A Playbook for Corporate Action 3 E