Climate protection contribution as an alternative to climate neutrality

Legislators and consumer protection agencies are closely scrutinizing companies' green claims. This serves to protect consumers and ensure transparency about what the claims really mean.

There have been several lawsuits against companies that have communicated green claims without substantiating them or without having realistic plans to achieve the claimed goal. The main problem is that "action" and "communication" have not aligned. To avoid this, companies are adopting new strategies. In this article, we focus on various claims and introduce the topic of "contribution claims" as an alternative.

What is a contribution claim?

The contribution claim is used when a company invests in an initiative that combats climate change without accounting for emissions reductions in the company's balance sheet. Initiatives can include carbon credits, investments in research and development for innovations to combat global warming, and other activities to support climate action. The claim is often measured by the amount of "invested funds" in a specific initiative or a mix of different initiatives.

When CO₂ certificates are purchased, the company does not report them as emission reductions in its balance sheet, but only as an investment that “contributes to a climate action”.

How much should be invested in climate protection initiatives?

Companies should primarily invest in measuring and reducing their emissions. If they choose to go a step further, they can set an internal carbon price to create a budget for investments in these climate initiatives. Once the internal carbon price is set, the company multiplies it by the company's residual emissions to obtain the contribution budget. The company can then take this money and allocate it to high-impact climate projects.

Which regulation is the key to green claims?

A very important regulation in the EU is the EU Green Claims Directive. The proposed directive requires companies to substantiate the voluntary green claims they make to consumers in commercial practice by meeting several assessment requirements (e.g., taking a full life cycle perspective). The disclosure of climate protection claims and targets must now be explained transparently, and companies must present realistic plans to achieve them.

Why is this a viable strategy?

Companies that choose to make a climate contribution claim focus on supporting the global transition to net zero rather than making a corporate-level claim. It's a conservative approach to communicating climate action while maintaining the same level of investment in it. Contribution claims also allow companies to take a much broader investment approach in initiatives beyond carbon credits. Here's an overview of the two most common strategies .