Organizational Governance

The SBTi Drama Underscores the Urgent Need for Valid Scope 3 Solutions

Whether carbon credits ought to be used to account for Scope 3 emissions is a debate that must continue — involving many more stakeholders, so that views on both sides of the fence are heard and considered.

By Tom Idle | Published 6 months ago | About a 7 minute read

Image: Lum3n (SBTi logo added by SB)

“Come for the carbon accounting, stay for the DRAMA! 😮🍿.” Sustainability communications stalwart Solitaire Townsend’s recent LinkedIn post, updating her 21,000+ followers on the latest developments at the Science Based Targets initiative (SBTi), made for entertaining reading. “If you’ve not been following the minutiae of climate geekdom recently, you might have missed an absolute rollacoaster.”

SBTi’s announcement that it might let brands use carbon offsets to meet their Scope 3 greenhouse gas emissions reductions met with serious backlash — not least from the organization’s own staff. Some declared the move “non-science-based” and in an internal letter, asked for Board members to be removed.

The announcement raised eyebrows even higher due to the fact that carbon credits are an approach being heavily pushed by Jeff Bezos’ Earth Fund, one of SBTi’s biggest financial backers.

Overall, there is widespread concern that the proposal will seriously disrupt corporate climate-action efforts. If firms can simply pay to pollute, why would they bother investing in cutting carbon along their supply chain?

As Joanna Cabello, a senior researcher on climate justice at SOMO — the Centre for Research on Multinational Corporations, pointed out: “Being able to use offsets, companies can appear to be addressing their emissions on paper while actually adding, and enabling others to add, more greenhouse gases to the atmosphere.”

At best, emissions are theoretically cancelled out by offsetting projects — such as forest-conservation schemes that claim to be removing, reducing or avoiding ‘equivalent’ emissions — a zero-sum game, she adds. “This might explain why, despite the more than 20 years of carbon offsets operating under various schemes, greenhouse gas emissions continue to rise as well as fossil fuel production and consumption.”

The vehemency of industry reaction means SBTi will have to seriously consider its options, rather than simply ploughing on. (We will find out in July, which is when the organization has promised to make another statement.) But the dramatic episode has raised a number of interesting debates as to the role of offsetting and the ongoing struggle for companies trying to deal with their supply chain impacts.

SBTi has had a hugely positive impact

It is easy to overlook the impact SBTi has had on corporate sustainability. In a relatively short time, it has been instrumental in galvanising action among thousands of companies. Today, around 80 percent of the world’s economy is covered by some sort of net-zero commitment — largely thanks to SBTi’s groundbreaking mechanism for standard setting. The fact that the Board is making statements with which the rest of the organization fundamentally disagrees suggests the organization has grown too quickly for its internal governance process to be able to keep up.

The upheaval has been a PR disaster for the organization, whose credibility has taken a battering.

“I don’t think they are really understanding how central and important these decisions are to a huge, global community of companies,” Townsend told Sustainable Brands®. “It’s not just a technical conversation about rules. This goes deeper — to what people think is really going to make a difference in the world, to the people that have stuck their neck out with their bosses and their boards. This is playing with people’s lives, livelihoods and their careers.”

The trouble with offsets

Of course, SBTi’s apparent change of heart was warmly welcomed by the carbon-offsets market, waiting in the wings to engage many more corporate customers. The tool enabling brands to theoretically neutralize their carbon footprint by investing in environmental projects has been mired in controversy and skepticism for decades. There have always been unanswered questions about the credibility and transparency in the offset projects themselves, with many critics arguing that some projects claiming to reduce or sequester carbon do not provide additional environmental benefits beyond what would have occurred without funding from carbon offsets. The concept of ‘additionality’ has been a crucial missing piece of the jigsaw; without it, offsets may simply give companies a license to maintain business-as-usual emissions, undermining the overall goal of global emissions reduction.

Then there’s the issue of permanence. For example, reforestation schemes have proved incredibly popular for serving up environmental credits. But trees planted today might be cut down or destroyed by wildfire decades later. Such issues only complicate the efficacy of carbon offsets as a reliable tool in corporate climate strategies, and they are yet to be resolved.

That hasn’t stopped some arguing that emissions offsets should count towards science-based targets in the same way that renewable energy certificates (RECs) are currently counted by SBTi towards companies’ Scope 2 targets.

“Given the instrument is slightly different, but the functionality is the same, if SBTi is going to continue to allow RECs to be used to meet Scope 2 targets, they should allow verified renewable energy carbon credits to be used as well,” Rich Gilmore, CEO of Carbon Growth Partners, commented on LinkedIn. “If they don’t, they are excluding much of the Global South from participating in the financing needed for the energy transition. Why should a US company get to use certificates from a wind farm in the US, but an Indian company can’t use verified carbon units from a wind farm in India? It makes no sense, and is unfair and confusing.”

If not offsets, then what?

This latest drama followed SBTi’s decision in March to “remove” over 200 companies’ climate commitments — Microsoft, Diageo and Walmart among them. The stark survey results from the organization shows just how tough companies are finding it to address Scope 3 emissions — and thus, meet their long-term net-zero targets. Among the firms that did not meet SBTi’s deadlines, more than a fifth (21 percent) said that tackling Scope 3 emissions was currently “too big a challenge.” In a wider survey, 54 percent of companies said Scope 3 was the biggest barrier in setting net-zero targets.

One possible solution companies might turn to is insetting. Investing in offsets derived from projects happening within the supply chain — such as clean-energy generation, agroforestry or reforestation — is largely seen as a sound alternative to buying environmental credits created elsewhere. Embedding carbon removal directly into a firm’s supply chain, and aligning with SBTi goals while supporting carbon removal, could also become more compelling.

A bumpy ride ahead

Either way, the SBTi drama has helped to raise the issue of tackling Scope 3 as one of the fundamental corporate sustainability topics that demands attention, investment and focus.

“It’s absolutely impossible for any company to reach Scope 3 goals and net zero unless the rest of the economy does so to a greater or lesser extent as well,” Townsend added. “Companies are completely dependent on each other to deal with their material issues, and we can only reach Scope 3 together.”

Whether carbon credits ought to be used to account for Scope 3 emissions is a debate that has been raging for years, and it’s one that must continue — involving many more stakeholders, so that views on both sides of the fence are heard and considered.

In the meantime, brands should get used to being confused and frustrated as the net-zero standard-setting landscape continues to evolve.

“My advice is to be really honest with people inside your organization that this is going to be a bumpy ride and will continue to be a bumpy ride,” adds Townsend. “We’re dealing with an unprecedented challenge and there’s not going to be a nice, smooth, glide path to net zero. It’s going to be a fight every step of the way — and that’s okay, as long as people are prepared for that.”

Tom Idle

Content creator extraordinaire.

Tom is founder of storytelling strategy firm Narrative Matters — which helps organizations develop content that truly engages audiences around issues of global social, environmental and economic importance. He also provides strategic editorial insight and support to help organisations – from large corporates, to NGOs – build content strategies that focus on editorial that is accessible, shareable, intelligent and conversation-driving.

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