The gold standard for net-zero targets is in meltdown, while academics claim that voluntary carbon reduction standards may be hindering green innovation. By David Burrows.
In case you’d missed it, the Science-based targets initiative (SBTi) is having a bit of a time of it. There has been a staff revolt and a few weeks of unsavoury headlines after the gold standard in emissions accountability seemed to endorse carbon offsets as a means to address companies’ greenhouse gas emissions. Maybe SBTi had missed all the unsavoury headlines about these controversial offsets or credits? (the initiative actually calls them ‘environmental attribute certificates’, so perhaps a Google search for those came up with nothing?).
Anyway, the go-to fact-checker for those looking to avoid accusations of greenwashing when making grandiose net-zero statements is under the cosh. A press statement on April 9th detailed a consultation on the use of offsets and said it had consequently “decided to extend their use for the purpose of abatement of scope 3 related emissions beyond the current limits”. And then things, unsurprisingly, kicked off. “There are trillions of dollars to be made out of hot air,” said one aggrieved staff member at SBTi, capturing the zeitgeist.
SBTi brows raised
But not quite yet, because nothing had actually changed. “As part of the revision of the corporate net-zero standard we are exploring changes to tackle the challenges that exist around scope 3, including exploring responsible use of environmental attribute certificates (EACs) with the right guardrails and limits,” explained a sheepish Luiz Amaral, SBTi’s CEO. In May he was forced to defend his team again following an investigation by Bloomberg headlined: How one of the most revered climate groups descended into chaos.
A first draft paper on potential changes will actually be published sometime this month (July). Cue a flurry of offsetting PR last week, with six NGOs supporting SBTi should it relax the rules – but only for “high-quality credits”. Five of the six organisations are US-based; Flora & Fauna is the only UK-based signatory to the letter. Other NGOs, including WWF and Greenpeace have previously voiced their concerns over the potential changes to carbon offsetting guidance.
Meanwhile, the Climate Crisis Advisory Group of scientists, said ongoing reforms and new standards could “mobilise billions of dollars of private money” to support projects that actively reduce carbon emissions and provide a large range of co-benefits for communities and their surrounding environment. “The world needs voluntary carbon markets to achieve their potential in scale, impact and fitness for purpose, in order for them effectively help combat the climate crisis,” CGAG said, as it published a new roadmap to help the voluntary carbon market overcome recent criticism and rebuild trust. “Scientific research shows that all the major approaches to creating carbon credits work – if done properly,” wrote founding member professor Mark Maslin from UCL in a piece for The Conversation.
Mark Carney put finger to keyboard too. In a piece for the FT, the UN special envoy on climate action and finance and a former governor of the Bank of England, acknowledged the frailties of the current market for carbon credits but urged people to stop debating them and starting building them. “Far from a distraction, there is growing evidence they will help more companies commit to ambitious net-zero goals and decarbonise faster,” Carney said.
SBTi’s Amaral says the changes SBTi is making could prove to be “the most consequential voluntary standard of the decade”.
Easy money?
BloombergNEF estimates the offsets market can grow from about $2bn (£1.6bn) today to more than $1trn by 2050 if SBTi eases its rules. Critics of offsets say the charity can’t afford to open the floodgates; supporters of the controversial market say the world can’t afford to ignore the role of offsets in tackling climate change.
The recently-published ‘State of the voluntary carbon market 2024’ report by Ecosystem Marketplace shows the overall carbon market transaction volume declined by 56% year-on-year in 2023. This marked a second consecutive year of decline from the market’s peak in 2021. The contraction did not surprise the likes of David Antonioli, who spent 15 years until June 2023 as CEO at Verra, overseeing its flagship verified carbon standard.
Indeed, the contraction was led by project types that are undergoing natural evolutions (like the REDD+ forest offsetting ones at the centre of investigations by The Guardian that arguably kicked off the current carbon credit chaos), while efforts to restore confidence by the likes of the Voluntary Carbon Markets Integrity Initiative (VCMI) and the Integrity Council for the Voluntary Carbon Market (ICVCM) will take time to bear fruit (and for confidence to be restored). Which all means this is “the perfect time for corporates to take a step back and wait to see what comes out of these important processes”, Antonioli noted in a blog.
White FLAG
Will they also step back on carbon reduction programmes? Some will certainly spy an opportunity to shy away from this aspect of their ESG for a little while.
In March, media reported how hundreds of firms had been ‘removed’ from SBTi’s approval process for short and long-term net-zero commitments. These were the companies that had signed up to the Business Ambition for 1.5°C campaign, under which they committed to set science-based targets and have them validated by January 31st 2024 – but then failed to do so. And instead of them simply vanishing from the SBTi’s online dashboard, they had the unwanted tag of ‘commitment removed’ placed alongside their entry.
The reasons for the miss-step are varied. Some, like JBS, appear to have given up on the SBTi process altogether: the introduction of new requirements and draft methodologies for agriculture-based companies “fundamentally altered the previous understandings between JBS and SBTi”, the company told Just-Food in June. The final report on the Business Ambition for 1.5°C noted that “[t]he introduction of FLAG [forest, land and agriculture] requirements have been challenging for some companies. However, retailers went on to successfully set targets at the highest rates.”
In a survey of 971 companies who had committed to the ambition, a good number saw it as a PR opportunity (43%) and a chance to get investors off their back (45%). However, a far greater number said they joined to showcase leadership (79%) and to accelerate decarbonisation (72%).
The science of SBTs
On the subject of corporate climate action it’s worth noting the (short) paper led by Yann Robiou du Pont from Utrecht University, Netherlands, which focuses onthe issue with the emissions targets setting methods, and the limited claims they can substantiate. The analysis highlights how SBTi-validated companies are “likely to experience reputational benefits, attract investment from green investors, and in larger numbers may soften upcoming standards and regulations, potentially slowing down the necessary market transition”.
In June, the number of companies and financial institutions with SBTi-validated science-based targets worldwide hit 5,500. The academics raise concerns about the reliance on a voluntary approach to target-setting and decarbonisation. Co-author professor Joeri Rogelj, from Imperial College London, said: “Companies setting their own individual targets risk complacency that we can’t afford.”
The authors also argue that individual companies cannot claim to be 1.5°C aligned on the basis of an emissions target alone because their role needs to be “contextualised in terms of innovation capacity”. Their paper, published in Science, says the SBTi validation process “may inadvertently favour larger existing companies, stifling innovation and skewing the playing field against emerging competitors. This is because Paris-aligned targets for larger, established companies often assume that they can simply keep their current market share of emissions, leaving no capacity for emissions from the activities of emerging companies,” they add.
For example, a new plant-based meat manufacturer that needs to grow its emissions ten years from now while it scales up a new, highly efficient method of producing those foods, may be squeezed out of the market because, in this model, their operation would mean overshooting the Paris-aligned climate goal. As a result, it seems to make “little sense” to call any emissions targets that are far into the future ‘Paris aligned’, Robiou du Pont tells Notebook. “[…] companies that actually try innovating should keep trying, and hopefully meaningfully inform regulations to protect innovation,” he adds.
