What’s happening with SBTi and Carbon Credits?
In this article we explore the recent discussion papers released by The Science Based Targets initiative (SBTi).
In this article we explore the recent discussion papers released by The Science Based Targets initiative (SBTi), following criticism over their stance on carbon credits in the greater push for decarbonization. These publications signal a potential update to the Corporate Net-Zero Standard, which could require leaders to dramatically reassess their existing strategies and prepare for a more stringent landscape.
SBTi and its Role in Corporate Sustainability Efforts
It’s well known (and researched) that the world needs to drastically cut its emissions to avoid the worst effects of climate change. But how much should each company contribute to these efforts? That's where SBTi comes in.
Bringing together major actors on the world climate stage, such as CDP, the United Nations Global Compact, and others, SBTi was born from a growing recognition that voluntary corporate climate action needed a robust, scientifically grounded framework to be truly effective.
Since its inception in 2015, SBTi has provided companies around the world with a roadmap based on the latest climate science.
Currently, there are 5,500 companies with validated SBTi targets and over 3,000 companies with net-zero commitments.
Scope 3 Emissions and the Corporate Net-Zero Standard
In 2021, SBTi launched its Corporate Net-Zero Standard, providing a framework for companies to set and measure progress against net-zero targets following a 1.5°C pathway, in line with the Paris Agreement.
While Scope 1 and 2 emissions (direct and indirect emissions from operations) have traditionally been the primary focus of corporate climate action, Scope 3 emissions make up 75% of the average company’s footprint. They arise from activities upstream and downstream of its operations, encompassing everything from purchased goods and services to end-of-life treatment.
Earlier this year, the SBTi board came out with a statement planning on allowing companies to expand on their use of Environmental Attribute Certificates (EACs), such as carbon credits, for Scope 3 emissions reduction. This led to internal member backlash, calling for evidence-backed plans and greater transparency. Following the controversy, SBTi published three key research findings emphasizing the need for companies to prioritize rapid, deep decarbonization within a company's value chain, effectively pulling back the board’s original plan to increase the use of carbon credits for Scope 3 reduction directly.
A Deeper Dive into Decarbonization
SBTi’s discussion papers offer us a sneak peak into what we can expect from the new Corporate Net-Zero Standard framework, highlighting the timely need for companies to focus on tangible decarbonization efforts in their value chains as well as increased transparency around their carbon credit use.
SBTi’s key findings:
Current corporate climate action insufficiently addresses Scope 3; significant gaps exist and they must be addressed and thoroughly researched.
Engaging with value chains is key to unlocking emissions reduction - this includes activities like supporting suppliers in setting their own science-based targets, collaborating on product design and innovation, and influencing consumer behavior towards more sustainable choices.
Various types of carbon credits are ineffective in delivering their intended mitigation outcome, including for the purpose of offsetting carbon emissions.
Companies should focus on achieving deep emissions reduction within their own operations and value chains (Scope 1-2-3) before considering carbon credits.
There is still a role for high-quality carbon removal credits for residual emissions, but there must be more rigorous criteria to ensure the quality and integrity of carbon credits, focusing on permanence, additionality, and avoidance of leakage.
Key Takeaways for Corporate Sustainability Professionals
While these technical papers do not immediately change the requirements for companies with existing targets, the goal is for SBTi to use the learnings from the publications to inform their revisions to the Corporate Net-Zero Standard.
Here’s what to keep in mind:
Stay Informed: Closely monitor SBTi's ongoing review process and include your voice!
Reassess Existing Targets: Evaluate your current targets with the evolving SBTi criteria and consider necessary revisions.
Increased Scrutiny of Carbon Credit Quality: If your company relies heavily on carbon credits, expect to face increasing pressure to ensure the quality and integrity of the carbon credits you use, and focus on projects with robust methodologies and verified impacts.
Prioritize Scope 3 Engagement: Develop robust strategies for addressing Scope 3 emissions, including collaboration with suppliers, customers, and industry partners.
Embrace Innovation: Explore emerging technologies and foster a culture of sustainability to drive continuous improvement. Work with companies in your industry-sector to determine best practices.
Communicate Transparently: Maintain open and transparent communication with stakeholders regarding climate commitments, progress, and challenges.
In conclusion: companies that proactively adapt to the evolving requirements and embrace innovation will be better positioned to mitigate risks, capitalize on emerging opportunities, and maintain a competitive edge in a rapidly changing market.
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