A New Generation of Labels Provides Companies a Credible Way To Talk About Climate Action

They are increasingly aware of the impact of their own purchasing decisions, and are calling for radical transparency on the value chains of the companies they support, the products they buy, and the events they attend.

As a result, businesses face pressure to transparently communicate the climate impact of their products and events, but also their own corporate climate journey. But with the right strategy, companies can address the needs of their most important stakeholders, their clients, protect their reputation, and unlock a host of other business benefits.

Putting true climate impact front and centre for all to see

One powerful way for companies to communicate about their climate action is through the use of climate labels. Credible labels provide instant and full transparency to the customer, spelling out the steps that the company has taken to reduce their emissions and the global climate action projects they have supported. Solutions like these provide customers with the relevant details they need to make more informed decisions, and to utilise their purchasing power to make a difference.

While the consumer push for transparency around corporate climate efforts is clear, many companies are still failing to prioritise sustainability. However, the businesses that do address their customers' expectations can benefit from:

1. Enhanced consumer trust
   Instant and full transparency can enhance consumer trust and lead to customer loyalty and customer referrals. Consumer research on the Funding Climate Action label by South Pole found that 78% of respondents trusted that credible climate-preservation efforts had been taken when viewing the label (conducted in December 2022 with 1,500 participants across Europe and the US).
2. Differentiating themselves from competitors
   Climate labels can help companies to differentiate themselves from their competitors by showcasing their commitment to sustainability – beyond compliance. A visible commitment to climate action can attract new customers who actively look for companies who share their values.
3. Boosted engagement and sales
   Companies can embed climate action into their brand image and reputation which in turn boosts engagement and sales. In a recent survey it was reported that 69% of companies captured more financial value than expected from climate initiatives alone.

The call for a new claim: funding climate action

The rise in the number of green claims of climate action, the lack of universally accepted definitions, and in some cases, poor substantiation have made it difficult for customers to understand what 'green' claims really mean. Despite the term “climate neutral" having inspired thousands of companies to act for the climate as part of a 20-year global success story, the category has been misused by certain actors and led to allegations of greenwashing and widespread consumer confusion and mistrust. Consumer protection agencies are now calling for viable alternatives as well as more increased transparency around green claims more generally.

To effectively respond to the evolving landscape while maintaining the highest standards of credibility, South Pole has developed a new actionable vision of a climate funding claim that is aligned with the Paris Agreement, and that builds on the SBTi's beyond value chain mitigation guidance. The claim “Funding Climate Action'' can be used by companies to demonstrate that they are contributing to climate action beyond their value chain through high-quality certified mitigation contributions, in line with their residual carbon emissions.

The Funding Climate Action label
To empower companies to communicate their 'Funding Climate Action' claim effectively, with maximum transparency, South Pole has developed The Funding Climate Action label. The label indicates that an organisation has successfully passed a comprehensive, verified process to ensure credible climate action. Organisations display this climate action directly to their stakeholders via a bespoke QR code and personalised landing page that provides detailed information on the organisation's climate action within and beyond their value chain. This level of detail and transparency enables companies to communicate their sustainability goals and related progress more effectively.

The Funding Climate Action label by South Pole has passed consumer tests on transparency and desirability* with flying colours:

• 84% of consumers are more likely to purchase a product with the Funding Climate Action label
• 83% feel well informed by the label's landing page
• 82% understand the label's meaning immediately

Transparency in corporate climate action is critical in tracking our collective progress towards global net zero emissions and a world where climate change is no longer a threat to life on earth. When corporate emission reduction plans are under scrutiny, it pushes corporate sustainability teams to pursue the best possible solutions for reducing a company's overall emissions.

Companies working to transition to net zero emissions have a responsibility to communicate their plan to the public with honesty and clarity, and a strong incentive to address the growing consumer demand on transparency and more informed purchase decisions. South Pole's new Funding Climate Action label allows them to do exactly that.

* Research conducted in December 2022 with 1,500 participants across Europe and the US