Why REI, Allbirds and 20 other consumer brands are launching climate transition funds

In January, Recreation Equipment, Inc. (REI), Allbirds, Kleen Kanteen and some 20 other consumer brands will set up “climate transition budgets,” funding them via an internal fee of $15 per ton on their ongoing carbon emissions. They’ll spend the funds on decarbonizing their supply chains and reducing global emissions.

Climate transition budgets are part of a new climate action certification, The Climate Label, also launching in the new year. Companies can seek certification of a corporate entity, subsidiary or brand, although not of individual products or services. It’s replacing the well known Climate Neutral Certified label, which will sunset at the end of 2024.

In addition to decarbonizing its own operations and making progress toward its net zero target, REI has maintained Climate Neutral Certification since 2021, mitigating the climate impact of its ongoing emissions by supporting global carbon projects. It’s among the first companies transitioning to the new Climate Label program. 

“We think it’s really important to take accountability for our emissions as brands. Having a direct fee for your emissions that goes into funding emissions reductions is a great way to ensure you are doing that,” said Gregory Gausewitz, REI senior manager for product sustainability. 

Investing in climate action in proportion to emissions

The Climate Label, supported by the non-profit Change Climate Project, provides a money-for-ton framework for companies looking to mitigate the impact of their ongoing carbon emissions. By setting aside a fixed dollar amount per ton of emissions, money-for-ton mitigation guides companies to set climate action budgets in proportion to their ongoing climate impact.

Money-for-ton mitigation differs from the more well known ton-for-ton approach. In ton-for-ton frameworks, often called carbon neutral, companies purchase and retire one carbon credit, representing a ton of avoided or removed carbon emissions, for each ton of ongoing emissions. That’s the idea behind the popular Climate Neutral Certified label, which also came from the Change Climate Project. 

In theory, ton-for-ton carbon mitigation provides a consistent metric for measuring climate impact: one ton of carbon avoided or removed for each ton emitted. It has come under scrutiny for misleading consumers with unclear claims and underdelivering on implied climate benefits. 

Money-for-ton mitigation has its own strengths and weaknesses. The unit of measurement is money spent on climate action, not the impact of that spend. Thus it’s difficult to monitor and measure its real climate benefits.   

But money-for-ton mitigation opens the door to a wider range of climate action opportunities, such as funding climate solutions in early stages of development that have uncertain outcomes but high potential payoffs. Money-for-ton mitigation funds can also support climate initiatives with long time horizons, such as education, policy advocacy or research, which can’t be measured against current emissions. 

Spending the climate transition budget

The program’s carbon fees will ratchet up each year. The fee will start at $15 per ton of Scopes 1, 2, and 3 emissions in 2025 and increase to $21 by 2027. By the end of the year following certification, companies will have to spend their transition funds across two categories — abatement activities within and beyond their value chains. 

“What I see as a really big unlock from the new certification is any certified brand has to go invest that budget in decarbonization solutions… We know that if brands want to achieve their reduction targets in the future, they need to be investing in solutions now,” said Gausewitz. 

Value chain abatement

Companies must use at least 10 percent of their transition budgets toward value chain abatement. That can include purchasing lower-carbon electricity, fuels and materials, as well as carbon capture equipment. The label encourages brands to focus spending on reducing their biggest emission sources. 

To participate in the program, companies must set near-term emission reduction targets, aiming for 50 percent reduction by 2030, and report on progress. But there’s no requirement to meet those targets to qualify for annual recertification. “Our view is it’s better to have companies at the table funding projects that are eligible for the standard,” said Change Climate Project CEO Austin Whitman. “It’s better to do that than have them not at the table.” 

Beyond the value chain

Companies must spend the balance of their transition budgets on reducing emissions beyond their value chains. This can include purchase and retirement of carbon credits as well as policy advocacy, employee education and other initiatives. 

The Label includes detailed guidelines on what types of carbon credits qualify, and encourages participating brands to follow the Oxford Offsetting Principles. 

Advancing net zero goals globally continues to be a critical part of REI’s climate strategy. Although it’s made steady progress toward its Science Based Targets initiative-approved net zero target, “one of the challenges of decarbonizing our business is that there haven’t been many readily available opportunities to go reduce our emissions immediately,” said Gausewitz. 

To date, REI’s carbon credit strategy has centered on nature-based carbon removal projects, including restoration of outdoor spaces. The brand plans to use its transition funds to incorporate more low-carbon materials into its products and to create a more circular business model via its used gear offering. 

Allbirds, Alter Eco, Klean Kanteen, MiiR, Nomadix and more than a dozen other consumer brands have also pledged to participate in The Climate Label program in 2025. 

“The purpose and power of the label is not to try to define a single thing that all companies are going to be doing, but define at a higher level that companies are investing proportionate to their emissions,” said Whitman. 

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