Sustainability leaders have spent the past week digesting the 100-plus pages of Version 2 of the Corporate Net-Zero Standard from the Science Based Targets initiative (SBTi), the most influential rulebook for setting and hitting emissions goals.
The feedback has been largely positive, with the SBTi earning praise for recognizing a broader suite of mechanisms that companies can use to act on climate. But the applause was not uniform. Some said the the expanded focus was based on shaky evidence, while others lamented that, for all the changes, SBTi remained an unreasonably powerful actor.
“Version 2 quietly clarifies SBTi’s role,” said Alicia Seiger, director of climate at the Chan Zuckerberg Initiative and a visiting scholar at Stanford University, in her summary of the changes. “It’s becoming an evaluator and recognizer of corporate climate effort rather than a manager of the global carbon budget, and that’s a fit-for-purpose move.”
Here’s our round-up of the key points from a week of debate.
Avoiding the breaking point on Scope 3
For many companies, value-chain emissions are the single most troubling part of the current SBTi process, which offers a relatively restricted range of options for setting Scope 3 targets. So restricted, in fact, that many businesses in some sectors, including auto manufacturing, will likely not be able to continue to commit to them.
“The previous version set the bar, but with the best will in the world, companies could not deliver on commitments made,” said Bridget Wise, a sustainability analyst at Secaro, a supply-chain intelligence platform. “This meant that while it may have been ambitious, SBTi was on a path to becoming ineffective and less influential.”
SBTi listened to feedback from companies and greenlit several new approaches, including the use of environmental attribute certificates, such as credits for purchasing low-carbon steel, sustainable aviation fuel (SAF) and other cleaner commodities. This comes with risks, noted some nonprofits. There’s a “lack of an evidence base on whether these more flexible mechanisms will work,” warned the NewClimate Institute in its review of the standard.
Some advocates saw it the other way, arguing that even more flexibility is needed to create a stronger market for the certificates. This includes looser rules on matching the timing of credit purchases to mitigation measures and allowing certificates to be traded, said Adam Klauber, chief sustainability officer at SAF producer World Energy.
Going slow on carbon credits
SBTi’s attitude has always been that companies must focus first on their own emissions. That remains, but the nonprofit also clarified its stance on how carbon credits can complement this work. Companies can now earn voluntary recognition for credit purchases and, from 2035 onwards, will be required to use carbon removals to neutralize a steadily increasing fraction of their ongoing emissions.
That pace of change is too slow for some. “The few companies that want to and can afford to counterbalance their emissions with permanent carbon removal and credible environmental attribute certificates should be allowed to claim net zero fulfillment today, either for their full emissions, or a more narrow operational net zero claim,” said Robert Höglund, head of climate at Milkywire, a Swedish company that helps businesses meet climate and nature commitments.
Others chafed at both the SBTi’s decision and it’s ability to influence so many companies. “The latest guidance essentially says: Do your best for the next nine years, gold star for trying, and don’t worry yourself with ongoing emissions until 2035,” wrote Tommy Ricketts, CEO of carbon credits rating agency BeZero, on LinkedIn.
In a subsequent post, Ricketts mentioned SBTi’s “obsession” with value-chain abatement and referred to a group of Soviet-era approved decision-makers. “It is like the nomenklatura in the USSR deciding how many toothbrushes to manufacture each year. SBTi has now decided it’s also going to set industrial strategy for most global sectors.”
Splitting Scopes 1 and 2
The current standard permits combined goals for Scope 1 and Scope 2 emissions, allowing companies to use gains in one area to make up for slower progress in the other. In one of the less-heralded changes, SBTi said that companies will now have to set separate targets for each scope.
“The separation of Scope 1 and 2 targets will challenge many companies — but it’s the right call,” said Charlotte Bande, managing director at Quantis, a sustainability consultancy. ”Near-term targets have too often been met through Scope 2 reductions alone. Companies now have to look seriously at their own industrial processes, which is where a large part of the work they directly control actually lies.”
