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Renewable Energy Certificates (RECs) are a popular way for companies to align with the Greenhouse Gas Protocol’s scope 2 emissions guidance and other regulatory requirements. However, recent studies and growing concerns about their real-world impact have led organizations to shift away from RECs in the market.

As Science Based Targets puts it: “We also share the growing concern about companies using low-impact instruments to reduce scope 2 emissions in their books without driving real-world change.”

The Shortcomings of RECs

While RECs help companies meet scope 2 GHG Protocol objectives, they have been criticized for their limited real-world impact on carbon reduction. This has led to companies like IBM and Walmart expressing concerns about the effectiveness of RECs in achieving their environmental goals.

“While REC purchasing may allow us to more quickly say we are supplied by 100% renewable energy, it provides less certainty about the change we’re making in the world.”

Walmart

The current GHG Protocol allows for RECs to meet accounting standards without requiring real-world impact. As a result, companies relying on RECs can be vulnerable to PR blowback and accusations of greenwashing.

“We show that the widespread use of RECs by companies with science-based targets has led to an inflated estimate of the effectiveness of mitigation efforts,” reports Nature Climate Change. “If this trend continues, 42% of committed scope 2 emission reductions will not result in real-world mitigation.” (emphasis added)

Anticipated Changes in the Regulatory Landscape

Updates to the GHG Protocol, widely expected in 2023, may change how companies can utilize RECs to account for scope 2 emissions. Pending regulations, such as those from the SEC, could also limit or even phase out the use of RECs for emissions accounting.

As a result, companies that rely on RECs run the risk of investing in an outdated solution. They may soon find themselves out of alignment with updated regulations and facing increasing demands for credible environmental responsibility from customers, investors, employees, and other stakeholders.

The Next Phase of the Climate Challenge

Companies that strive to achieve their carbon goals, while satisfying GHG regulations and other requirements, will find themselves in need of verifiable solutions that have a real-world impact. The key to success lies in finding a solution that is accurate, durable, and irrefutable, while addressing an organization’s scope 1, 2, and 3 emissions comprehensively.

In contrast to RECs, which only pertain to scope 2 energy use, Climate Vault’s rigorous approach of purchasing, retaining, and leveraging carbon permits from government-regulated compliance carbon markets provides a complete solution for an organization’s emissions across all scopes.

Working within the compliance markets allows companies to mitigate the PR and brand risks associated with greenwashing and address questions of additionality. The Climate Vault approach reduces an organization’s carbon footprint—from their products to their portfolios—permanently, aligning with both business interests and planetary well-being.

Ready to take the next step and stand confidently behind your environmental action? Reach out to the team at Climate Vault to learn more about knocking out your scope 1, 2, and 3 emissions and committing to your sustainability goals.