How should companies reach Net Zero?
Corporate sustainability guidance has changed drastically in recent years. In the 2000s carbon offsets were heavily promoted while more recently the focus has switched to emissions reduction targets.
The Science Based Targets Initiative (SBTi) helps define best practice for organisations seeking to meet net zero targets. It emphasises the development of long- and short-term reduction targets, without requiring companies to do anything to manage their ongoing emissions.
This week, the SBTi provided a summary of their recent Beyond Value Chain Mitigation Survey, which asks what companies should do about emissions reductions outside their value chain. The framing of this issue as ‘beyond value chain’ does little to mobilise corporate action and risks undermining the effectiveness of the work of the SBTi.
What is SBTi?
To provide organisations with guidance on how to implement a sustainability strategy, some of the largest NGOs worldwide joined forces to create the Science Based Targets Initiative (SBTi). Set up in 2015 by World Resources Institute, World Wildlife Fund (WWF), Carbon Disclosure Project (CDP) and the United Nations Global Compact, SBTi established the Net Zero Standard, which provides a framework for corporates to develop 2050 net zero pathways to limit global temperature rise to well below 2 degrees Celsius, while pursuing efforts to limit warming to 1.5 degrees. The framework requires companies to set long-term and short-term reduction targets, guided by a scientifically-assessed measure of the reductions that are necessary to decarbonise.
What is the BVCM Consultation?
SBTi predominantly focuses on reducing emissions and reaching net zero in the long term. The Net Zero Standard does not place any requirements on companies to manage or compensate for their ongoing emissions; rather it classifies this issue as ‘beyond value chain mitigation’ and outside of the company's emissions footprint.
The approach adopted by the SBTi is increasingly criticised in the market, as it does not require companies to manage and monitor their ongoing emissions. The consultation sought to address the criticism that SBTi was not adequately addressing the Voluntary Carbon Market or aligning to the existing integrity initiatives such as the VCMI and ICVCM.
This week, the SBTi released the summary of its Beyond Value Chain Mitigation (BVCM) public consultation and survey responses. Our key takeaways are that the SBTi BVCM guidance does not go far enough, clearer guidance needs to be provided by SBTi and further work needs to be done by the SBTi to align with initiatives. In the consultation summary, 93 entities responded that the SBTi should provide either better guidance for corporates to utilise carbon credits or should explicitly require corporates to use carbon credits in addition to internal decarbonisation.
Our key takeaways
1. The SBTi should produce updated guidance and requirements for companies that addresses both short- and long-term emissions targets and treats ongoing emissions as a liability.
The focus of the SBTi on reducing emissions and long-term targets risks giving the impression that companies should not take responsibility for compensating for their ongoing emissions, and this should change. Additionally, by framing ongoing emissions management as ‘beyond value chain’ it gives the false impression that carbon credits, or other forms of addressing environmental liabilities, are a nice-to-have.
2. Carbon removal is a nascent sector and needs substantial investment to develop.
While the SBTi acknowledges the need for carbon removal to address residual emissions, it does not require this until 2040. Interim targets are needed now to support the development of the sector and ensure that it is a viable pathway to address residual emissions before 2050.
3. The SBTi should simplify their guidance and align with other initiatives such as the VCMI and ICVCM to encourage action and avoid fragmentation.
Sectors such as finance, real estate, and infrastructure are establishing their own approaches to decarbonisation partly in response to the shortcomings of mainstream guidance such as the SBTi.
4. Corporates need clarity now in order to generate comprehensive sustainability strategies that will result in the reduction and removal of greenhouse gas emissions.
In recent decades, corporate sustainability advice has swung like a pendulum. Corporates are now looking for clarity. To reach net zero, we need to ensure that companies take responsibility for their ongoing and long-term emissions reductions.
Unless these issues are addressed, SBTi will likely struggle to mobilise the investment and action needed to meet net zero.
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