What is causality in the context of value chain interventions?
The complexity and dynamic nature of global supply chains can make it a challenge to track value chain interventions to reduce emissions. Sourcing from multiple suppliers and often limited traceability have implications on claiming and reporting emission reductions in the value chain. The concept of Supply Sheds can help by allowing companies to invest in a group of suppliers within a market rather than an individual supplier.
However, with multiple actors involved in value chains, to be able to claim the climate benefits of an intervention a company needs to be able to prove that its actions are what led the intervention to take place. The concept of causality can help them do that.
How do we define causality?
The Value Change Initiative Guidance (Value Chain Interventions – Greenhouse gas accounting & reporting guidance version 1.1) defines causality as a demonstration that an investment (or other equivalent action) of a company is what caused the intervention to happen. This means that a company is able to prove that its actions had a material role in the occurrence of a value chain intervention, and by extension the resulting benefits in the form of emission reductions or removals.
The investment leading to an intervention can also be made by a group of companies acting collectively to take advantage of a Supply Shed, in which case those companies can co-claim the intervention in their reporting.
After proving causality of the company’s actions, the results of an intervention can be verified by auditors to ensure that the intervention is leading to the claimed greenhouse gas reductions or removals. This enables companies to credibly claim value chain emission reductions in their reporting.
How can a company prove the causality of its actions to induce an intervention?
To be able to report on value chain interventions in its Scope 3 inventory, a company needs to prove the causality of its actions for making the intervention happen. A company can be responsible for an intervention through financial investments, but also in-kind or other forms of substantial contribution can be used to demonstrate causality.
Examples of ways to demonstrate causality include:
• Receipts for purchased equipment
• Dated and signed written proof of in-kind support (labor, materials, training, etc.)
• Dated invoices for work performed (such as data collection)
Let’s take the example of a Shea nut company that is investing in new, cleaner energy sources. The company has directly paid for cleaner-burning cookstoves that will now be used to process the Shea nuts along its supply chain. To prove causality to an auditor, the company would provide dated receipts of the equipment purchase, as well as dated and signed proof of distribution and usage of the cleaner-burning cookstoves.
The proof of causality must include evidence to support the date when the activities actually began. This is important for demonstrating that the activities were not taking place prior to the company’s actions, and that the activities were indeed made possible by the company’s contributions.
Credibly report on your value chain interventions
SustainCERT’s value chain solution ensures value chain interventions deliver impact, and that the GHG outcomes are credibly claimed and used to report progress toward Scope 3 targets.