“Too many newsrooms chasing the news, but missing the story.”
Inspired by Tortoise Media – the slow newsroom – this article unpacks the recent controversy surrounding the corporate climate action group, the Science Based Targets initiative (SBTi). The initiative was founded to produce science-aligned decarbonisation standards and guidance for organisations, and has become “the de facto standard embraced by the climate action ecosystem”.
Last month, after announcing that it intended to revise its standard to allow corporations to offset a larger portion of their emissions, the world-leading organisation received intense backlash from its employees and advisors, who feel the move is not science-based. Since then, the story has been snapped up in the type of media feeding frenzy that has become all too common in the climate space.
Was SBTi wrong to revise its position on offsets? Are carbon credits all nonsense? And does purchasing offsets really hinder corporate climate progress?
Let’s take the time to see the fuller picture; then it’s up to your curious mind to decide!
9th April 2024: A statement from the SBTi Board of Trustees on the use of ‘environmental attribute certificates’
Following a 6 month consultation, SBTi’s leaders released a statement announcing a change in its approach to offsets, or rather ‘the use of environmental attribute certificates (EACs) for abatement purposes’.
It said, ‘… when properly supported by policies, standards and procedures based on scientific evidence, the use of environmental attribute certificates for abatement purposes on Scope 3 emissions could function as an additional tool to tackle climate change. Consequently, SBTi has decided to extend their use for the purpose of abatement of Scope 3 related emissions beyond the current limits.’
Simply put, more offsets permitted for certain areas of corporate emissions reduction.
To understand why this is a big deal, we need to rewind to the pre-SBTi era. In the early 2010s, carbon offsetting was becoming very popular amongst businesses. Some say this was because it was an ‘easy’ way to look like they were doing the right thing. Others, that the corporate world’s understanding of science-based action was still in its infancy, and that they were trying their best to navigate in uncertainty.
Either way, offsetting carbon emissions without reducing them was not consistent with keeping global temperatures well below 2℃, which was the global ambition at the time. So, a handful of individuals founded SBTi, aiming to “(raise) climate ambition in the corporate sector by driving the adoption of climate targets in line with best practices, and with science.” (Pineda, A, SBTi)
In those early days, SBTi did not count offsets as a reduction towards science-based targets. Period. Over time and as the best-available science evolved, so did its framework. However, offsetting is still withheld for only residual emissions;
‘After a company has achieved its long-term target and cut emissions by more than 90%, it must use permanent carbon removal and storage to counterbalance the final 10% or more of residual emissions that cannot be eliminated.’
So, the inclusion of more offsets is a fairly significant change in approach. One that not everyone approves of…
11th April 2024: SBTi staff revolt over offsetting plan
In response to the Board’s statement on EACs, SBTi’s staff circulated an open letter criticising the announcement. You can read the text of the entire letter here, but in summary, they had 3 main concerns:
- The Board ignored standard operating procedures and governance processes
According to SBTi’s staff, the decision* to increase offset allowances in the revised Corporate Net Zero Standard was neither approved by the appointed, independent Technical Council nor were the staff consulted. This decision was made solely by the Board, which goes against Board-approved protocol.
*On April 12th the Board issued a new statement clarifying that no change had been made to the standards. Any change would “be conducted according to previously approved SBTi Standard Operating Procedure.” - The statement may have damaged the trust of critical stakeholders
Staff are concerned that the decision was not backed by the ‘rigorous research, clear governance and procedures, and public consultation’, for which SBTi is known. This risks damaging the trust of stakeholders, which they have spent a decade building. - The statement undermines the ongoing work by SBTi staff to make recommendations around the considered use of EACs
As mentioned earlier, SBTi has been exploring the use of EACs, but according to its staff, the Board’s statement came before proper analysis and synthesis of the evidence was complete. Offsets are a divisive topic, so the announcement of how they will feature in the revised Corporate Net Zero Standard needed to be done carefully, with rigorous scientific evidence to back it up. Staff feel the Board’s announcement has undermined their work and may have damaged much-needed credibility in this space.
So it’s not so much what the Board said, but how they went about saying it that SBTi staff begrudge. That begs the question…
Why investigate the use of offsets in the first place?
SBTi made no secret of its decision to reconsider the use of offsets for reducing Scope 3 emissions (a class of emissions which occur in the value chain of a company, but which aren’t directly caused by the company. Think emissions in the supply chain, or employees’ commuting emissions). It had put out a public Call for Evidence and was in the process of assessing the results.
The aim was “to help the corporate climate action ecosystem understand whether different instruments can credibly drive decarbonization and support corporate emission reduction claims.”
But how can offsets drive decarbonisation? Haven’t we always been told that offsets are for the lazy or the disingenuous? That they disincentivise reduction at the source and don’t deliver any real impact?
New research and analysis paints quite a different picture; one credible enough to catch the attention of SBTi, who – despite recent turmoil – remain the leading voice in science-based, corporate climate action.
You can read a fantastic article providing further commentary on the SBTi Board’s decision to include EACs in Scope 3 abatement here. To steal the writer, Lucy Almond’s hard work, here are 2 recent studies on the use of carbon credits by corporates:
Ecosystem Marketplace (EM) – The Role of Carbon Credits in Corporate Climate Strategies
- Both EM and MSCI found that the companies voluntarily buying carbon credits are around 1.8 times more likely to be decarbonising year-on-year than non-credit purchasing peers.
- EM also found that voluntary carbon buyers are 3 times more likely to be addressing Scope 3 emissions, and are 3.4 times more likely to have an approved science-based climate target.
We Mean Business – Accelerating corporate climate finance through carbon markets: overcoming the challenges
- Together with the Intercontinental Exchange (ICE) and Bain & Company, We Mean Business found that 71% of companies said the voluntary carbon market enables them to decarbonise more, not less.
- Furthermore, 51% of companies said climate finance is “use it or lose it”. So if they don’t spend the money, it will just be absorbed back into the company.
This research says that carbon credits incentivise rather than disincentivise decarbonization. On the other hand, there are studies claiming to have proven that offsetting schemes do almost nothing to limit global heating.
So who is right? This is where the rest of the SBTi Board’s announcement, as well as the staff’s backlash, is important. Here’s what comes next in the Board’s original statement:
“SBTi has decided to extend their [offsets] use for the purpose of abatement of Scope 3 related emissions beyond the current limits. This will entail the definition by SBTi of specific guardrails and thresholds as well as the rules to be applied for these certificates to be considered valid for Scope 3 emissions abatement purposes respecting the principles of mitigation hierarchy.”
Guardrails, thresholds and rules that respect the mitigation hierarchy
If, after proper analysis, SBTi does end up increasing the offsetting threshold (and their staff have made it clear that’s a big ‘IF’) it will only allow high-quality projects as defined by SBTi. It will ensure the “guardrails” it puts in place to monitor them are science-aligned, and that the revision still respects the “mitigation hierarchy”. Like the waste hierarchy (Reduce, Reuse, Recycle), the mitigation hierarchy ranks decarbonisation activities according to their ability to minimise greenhouse gas emissions. It follows Avoidance, Minimization, Restoration and then Offsets.
As long as SBTi remains committed to its mission – to drive corporate decarbonisation aligned with the ambition set in the Paris Agreement – we should be able to trust that any change in approach is acting in global interest. ‘Trust’ being the operative word; this organisation needs its stakeholders to trust it’s acting in alignment with its mission. No wonder SBTi’s staff reacted to the breeched protocol like they did!
A first draft of the revised Corporate Net Zero Standard will be issued in July 2024.
Conclusion
In a perfect world, 100% of organisations would have set science-based targets decades ago, and they would have been hitting every milestone early since. In reality, climate targets are being missed around the globe. Coupled with the accelerating nature crisis, the pressure to act in as many ways as we can, right now, is mounting.
Carbon markets certainly aren’t perfect. However, they are established and have proven that they can attract large sums of climate finance. With better rules and “guardrails” around the types of projects that get financed, it could have a real impact on both decarbonisation and the natural world.
“If the [carbon market] remains underutilized, the world will miss an opportunity to funnel potentially billions of dollars into climate action… Waiting passively for the perfect solution is not an option – corporations have no choice but to navigate the uncertainty and learn in the open.”
World Economic Forum, 2023
Be curious!
- Research the regulatory and governance bodies behind carbon markets: Integrity Council for the Voluntary Carbon Market (ICVCM), Woodland Carbon Code and Peatland Code, etc.
- Read our recent article on the emerging biodiversity market: Selling Biodiversity: Should We Do It?
- Read the sustainability policies of your most used brands and products – have they set science-based targets? Are they hitting them? And do they talk about offsets?
