Article
The Science Based Targets Initiative is accused of greenwashing.
April 2024
SBTi
Neutrality & Net Zero
Article
The Science Based Targets Initiative is accused of greenwashing.
Made by
With the contribution of
Jean-Marc Jancovici
partner
Alain Grandjean
partner
Laurent Morel
partner
Juliette Decq
Carbone 4 Academy director
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Why is the SBTi's intention to count carbon credits as emission reductions problematic? A Carbone 4 analysis
The Science-based targets Initiative (SBTi) was founded in 2015 by the World Resources Institute (WRI), the Carbon Disclosure Project (CDP), the United Nations Global Compact and the World Wide Fund for Nature (WWF), with the intent of "develop[ping] standards, tools and guidance which allow companies to set greenhouse gas (GHG) emissions reductions targets in line with what is needed to keep global heating below catastrophic levels and reach net-zero by 2050 at latest."[1] (i.e. 5% reduction in emissions per year). For almost 10 years, this initiative has helped increase the number of climate commitments made by companies, and contribute to bridge the gap between business and science. On April 9th, however, the organization's Board of Trustees issued a statement authorizing the use of "Environmental Attribute Certificates", including carbon credits, to achieve scope 3 carbon footprint reduction targets. The Board's decision is in line with the position of historical offset players such as the Voluntary Carbon Market Initiative(VCMI), with which SBTi recently formed a partnership[2]. While the organization's employees and Technical Council have criticized this statement as “undermining [their] government processes”[3] , this stance by the board is first and foremost scientifically questionable. Final validation of this intention, which could take place in July, would mark a clear step backwards in the ambition historically carried by the initiative, and would dangerously delay the collective action required for the ecological transition.
Since its creation in 2015, SBTi has become one of the most well-known climate-related labels: by the end of 2023, it announced that it had approved the targets of over 4,000 companies. So far, its rise to prominence has made the subject more accessible, provided a clear, albeit perfectible, framework, and enabled the setting of emissions reduction in line with climate science. With the targets of many of the pioneering certified companies set for 2025 (and those of the following ones shortly thereafter), compliance with the commitments made is about to be verified. Unfortunately, in most cases, companies seem to be falling short of the mark, despite an already accommodating framework that allows them to set intensity targets[4] : of the 56 commitments due in 2025 or earlier, and listed for scope 1+2+3 in SBTi's Monitoring report 2022[5], only 18 (around 30%) have reached more than 70% of their target[6]. This finding should have prompted us to reflect on the flaws in the current system, to better assess the credibility of commitments upstream (for example, by making public the resources deployed by the companies in terms of investment and governance), and to realize that, in the face of climate change, failure to question one's business model inevitably leads to marginal/negligible actions. The submission of SBTi targets must come from an in-depth analysis on the company's "business" resilience, from the point of view of both physical risks and transition risks and opportunities (assessments carried out for example by means of prospective scenario analyses respecting planetary boundaries[7]). This reflection should enable the company to confirm or rethink its strategy, in order to make its activity and its product and service offers useful in an economy compatible with the planetary boundaries[8],[9]. Unfortunately, the SBTi Board, without consulting the opinion of its Technical Council[10] , has preferred to change the rules of the game rather than endorse this statement of truth to its financial backers.
The first reason why this option is inconsistent is definitional. The carbon footprint is an inventory of the emissions on which an activity depends to function; however, the purchase of carbon credits in no way affects these dependencies. A company that has purchased carbon credits to "offset" its emissions has not lessened its exposure to emissions-related risks.
The other argument is a physical one. Two major families of projects structure the credit market: projects aimed at avoiding emissions, and projects aimed at capturing CO2 from the atmosphere. Neither can "offset" the CO2e accounted for in a carbon footprint:
The deadlock of offsetting, from a physical point of view, has led to a broad consensus among carbon accounting bodies to exclude any fungibility between carbon credits and corporate carbon footprints. All authoritative bodies on climate reporting (UNFCCC, ISO 14064, GHG Protocol...), and more recently the CSRD[12] , prohibit the subtraction of carbon credits from emissions. The SBTi, too, until now, had insisted on this point[13] . Validating the use of carbon credits to achieve scope 3 reduction targets would therefore constitute a backtracking and a deviation from the SBTi approach. However, incentives to finance decarbonization projects outside the value chain can be implemented without diminishing ambition in terms of emissions reduction or giving in to the logic of offsetting: carbon credits are useful and contribute to the common effort, provided they are conceived as a complement to the action undertaken in one's own value chain (see conclusion).
The use of carbon credits would perpetuate the illusion that a company can get rid of the problem all by itself, using only money . However, one of the main virtues (and the main difficulty) of the famous Scope 3 lies precisely in the need for cooperation that it implies: it enables a company to situate itself in its network of interdependencies, to involve other players beyond itself, through a game of mutual influence. Many companies may still underestimate the scale of the efforts required to reduce Scope 3 emissions: offering ways of getting around the difficulty, by opening up the use of carbon credits, would maintain the illusion of an easy ecological transition, and delay the implementation of transformative actions. However, the real lesson for a company submitting an SBT objective should be the following: greening one’s activity marginally, without actually questioning business-as-usual practices, will not be enough; the ecological crisis calls for a profound rethinking of business models.
The direction taken by the Board of Trustees isalso counter-productive from the point of view of financial flows, as it sends out the wrong signals and confuses the debate: a high-carbon industry could tomorrow, through the purchase of carbon credits, be considered "aligned with a 2°C trajectory", while a small business specializing in building renovation, that has chosen to invest to develop its business, would be considered less virtuous. Allowing the use of carbon credits would, in short, be tantamount to favoring companies capable of paying a very high price (the very companies for which the transformations required for decarbonization are the most complex) for these modern-day climate indulgences.
Allowing emissions reduction through carbon credits is often presented by offset proponents as a great incentive for the financing of offset projects. This stance is debatable as well, as reducing climate performance to a single figure, resulting from the subtraction between emissions and credits, focuses the discussionon the quantity sequestered rather than the quality of projects. The influx of demand for carbon credits runs the risk of encouraging the development of the least costly and lowest-quality projects. The existence of labels, which tends to ensure a minimum level of quality, is not an absolute guarantee[14] , and is not sufficient to direct flows towards the best projects (serious governance, consideration of biodiversity, etc.).
Other approaches are possible to meet both the need to decarbonize our activities, and the need to deploy projects to finance the transition. This is what the Net Zero Initiative[15] is working on, by proposing a reportingmethod based on the logic of contribution to the goal of global carbon neutrality, i.e. the idea that a company should take part in a collective effort, rather than seeking to offset its emissions on its own. The framework proposed by the Net Zero Initiative isbased on three non-fungible levers of action:
Because this approach insists on not neglecting any one of these three pillars, it is more robust, fairer, and more effective.
For all these reasons, we feel that this approach, which is still under development, provides some answers to the challenges raised by the crisis facing SBTi. We hope it will provide food for thought in the future.
1.
SBTi website translated by Carbone 4, https://sciencebasedtargets.org/about-us#what-we-do
3.
Letter from employees cited in Clancy, H. (April 11, 2024). Read the leaked protest letter from SBTi staff angry over the new carbon offset policy. Greenbiz. https://www.greenbiz.com/article/read-leaked-protest-letter-sbti-staff-angry-over-new-carbon-offset-policy
It should be noted that the Board has since indicated that governance principles will be followed in making the final decision on the implementation details.
4.
Intensity-based targets aim to reduce emissions per unit of output or per euro. This approach is particularly aimed at fast-growing companies and/or those that contribute most significantly to the transition, but in practice, many companies are adopting it.
6.
In other words, they accounted for 70% of the expected reduction in emissions.
7.
8.
9.
In the European market, this work will, in any case, be required by the CSRD (LINK TO ARTICLE 2 OF THE CSRD), provided that it is used as a tool for strategic overhaul and transformation, rather than as a mere exercise in regulatory compliance.
10.
Letter reprinted in Clancy, H. (April 11, 2024). Read the leaked protest letter from SBTi staff angry over the new carbon offset policy. Greenbiz. https://www.greenbiz.com/article/read-leaked-protest-letter-sbti-staff-angry-over-new-carbon-offset-policy
11.
IPCC, WGIII, Chapter 7
12.
CSRD, Delegated Act, AR 45 (f)
13.
See the rules for calculating short-term targets for March 2024, p. 10: https://sciencebasedtargets.org/resources/files/SBTi-criteria.pdf
14.
Thomas, P-L. (August 30, 2023). Verra, a leader in carbon credits, called out once again. La Croix. https://www.la-croix.com/Economie/Verra-leader-credits-carbone-nouvelle-fois-epingle-2023-08-30-1201280701
16.
See, in particular, the work of IPCC Working Group 1.
17.
See, in particular, the work of IPCC Working Group 2.
18.
See, in particular, the work of IPCC Working Group 3.
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