Global carbon ratings agency BeZero Carbon has published a new report on the Science Based Targets initiative, and calls for the framework to be updated if it is really going to drive climate action – particularly around the use of carbon credits.
- Carbon ratings agency BeZero Carbon is calling on the SBTi to review its frameworks and approaches, in particular with reference to the voluntary carbon markets.
- While the voluntary carbon markets need to scale rapidly, its important to retain the SBTi’s demand that companies focus on internal mitigation before offsetting.
- SBTi is encouraging carbon credit purchase for ‘beyond the value chain’ and this could contribute to the current scaling up taking place in the carbon markets.
According to The SBTi and its implications for global decarbonisation from carbon ratings BeZero Carbon, the Science-based Targets Initiative (SBTi) has significant potential to support global decarbonisation, but it must evolve its current framework to accelerate climate action if companies are to effectively meet their climate change goals. This includes a clearer framework on the use of carbon credits as part of a corporate Net Zero strategy.
Does the SBTi encourage investment in carbon credits?
The report is particularly interesting given the September 2022 launch of the SBTi “strongly recommends that companies take immediate action above and beyond their science-based targets to contribute to reaching global net-zero through beyond value chain mitigation (BVCM).” Beyond value chain mitigation is an approach where companies are recommended to invest in mitigation and investment actions for the good of society as a whole – and which can include carbon credits.
The use of carbon credits is minimised within the SBTi’s best practice guidance, which is that value chain emission reductions should be prioritised in terms of corporate action and that carbon offsets should only be used to mitigate/offset a maximum of 5-10% of a company’s emissions footprint.
Issues that BeZero Carbon raises about the SBTi’s approach
What the report does highlight is that there are areas that could be prioritised in terms of refining the SBTi’s approach. In particular the report mentions a number of issues which have been raised in the past: accounting discrepancies; shifting baselines; missing methodologies, target implementation challenges; lack of clarity around the use of the Voluntary Carbon Market (VCM).
What the carbon ratings agency particularly takes issue with is the lack of acknowledgement of the role of the voluntary carbon markets in reaching net zero.
While the report states that this is understandable given the historical lack of transparency within the VCM, it concludes that as the market addresses these integrity issues and continues to scale, the SBTi has an important role to play in providing companies with clear guidance around the purchase of carbon credits.
This in turn will provide a roadmap for companies to develop climate leadership and help to accelerate the pathway to net zero globally.
Other criticisms of the SBTi
In February 2022, German advocacy group the New Climate Institute criticised the SBTi as a ‘platform for greenwashing’, publishing a report that argued that the SBTi had verified the climate plans of a number of multinationals as compatible with a 1.5° or 2°C trajectory – when that wasn’t the case.
Nestlé, Ikea and Unilever are among brands the New Climate Institute found did not live up to the 1.5°C-compatible label they’d been awarded. Out of 18 reports assessed, the reports author’s said that 11 companies had contentious targets, in large part due to the technicalities around targets and reporting.
At the time, SBTi’s managing director Alberto Carrilo Pineda said that many of the issues identified in the report had been solved by changes to its methodology in October 2021.
The SBTi is today considered the most credible verification of science-aligned action in the market. This is why BeZero Carbon is looking for improvements – there are remaining challenges in both the sustainability reporting and voluntary carbon market frameworks, and they must be addressed if targets are to be met and credibility maintained.
Focus on the voluntary carbon markets accelerates
At the moment both the Integrity Council for the Voluntary Carbon Markets (ICVCM), as well as the Taskforce on Scaling Voluntary Carbon Markets (TSCVM) are working on standardisation within the voluntary carbon markets. The hope is that by creating a consistent, transparent, trackable and credible approach to investment the voluntary carbon markets will reach the scale necessary to achieve the net zero 2050 goals.
One the supply side the ICVCM is working on agreeing frameworks for the development of the global voluntary carbon markets, while on the demand side the TSCVM is exploring a global benchmark for carbon credit quality.
In a further nod to standardisation, the LSE recently launches its own Voluntary Carbon Market on the London Exchange. While not directly affecting the voluntary carbon markets themselves, it set out guidelines and frameworks that investment funds trading in carbon credits must follow if they are to be listed and traded on the exchange.
There are a number of different factors in play in the voluntary carbon markets at the moment and every move towards a more stable market should be positive. That is, at least in part, what BeZero Carbon is trying to address. Louisa O’Connell, head of net zero research at BeZero Carbon said: “To continue to decarbonise effectively, the SBTi’s framework needs to evolve to consider a number of emerging factors.
“An important part of this evolution is providing additional guidance to give companies the confidence to use carbon credits effectively as part of their Net Zero strategies. This is critical to achieving our collective 1.5°C goals.”