The Science-Based Targets Initiative (SBTi) has proposed an update to its standards that would allow companies to set more flexible targets for their Scope 3 emissions, while emphasising more green procurement and income.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
In the draft second version of SBTi’s Corporate Net-Zero Standards published on Tuesday, the organisation said instead of the current fixed targets, companies will need to focus on their most relevant Scope 3 emissions sources. Scope 3 emissions are those generated by suppliers and consumers of a firm’s products and services.
“The draft standard proposes increased flexibility options to set targets for green procurement and revenue generation, instead of setting an emissions reduction target,” SBTi said.
The organisation said that it was taking “a more nuanced approach” towards addressing indirect emissions, as more than half of the businesses it surveyed said that tackling Scope 3 emissions reductions was their most significant challenge when trying to set net-zero targets.
Launched in 2021, the SBTi’s Corporate Net-Zero Standard aims to help companies set consistent emissions reductions targets in line with the Paris Agreement goal of limiting global warming to 1.5°C. So far, nearly 10,000 have committed to set SBTi targets and over 20 per cent of these businesses are in Asia.
The latest draft also addressed the SBTi’s position on the use of carbon credits, which last year drew significant protest from non-governmental organisations and even the organisation’s own staff. SBTi later reversed its approval of carbon credits being used to offset remaining emissions.
The new draft maintains the SBTi’s position that it does not allow the offsetting of emissions using carbon credits from activities outside a company’s value chain. However, it encouraged companies to buy high-quality carbon credits to “incentivise additional decarbonisation and mobilise climate finance at scale.”
SBTi said that its recognition process for third-party carbon credit frameworks is under development.
The Voluntary Carbon Markets Integrity Initiative (VCMI), an international non-profit which is developing guidance for how firms should use carbon credits, welcomed SBTi’s efforts. VCMI added that it would be launching Scope 3 guidance at the end of April that is “designed to fill the gap which has been identified by SBTi.”
SBTi acknowledged the need to scale up carbon removal capacity, and is seeking feedback on three options being proposed: requiring companies to set removal targets, optional recognition for companies that set such targets, or flexibility for firms to address expected residual emissions, either through emissions reductions or removals.
Zero-carbon energy requirement
The latest draft also proposed that companies now report Scope 1 and Scope 2 emissions separately, and to commit to moving to low carbon electricity no later than 2040.
The current standard allows companies to set aggregated targets across the scopes, where Scope 1 represents direct emissions from a company’s operations and Scope 2 covers indirect emissions from energy use.
“Academic research has identified that this practice, when combined with the use of unbundled renewable energy certificates (RECs) and guarantees of origin (GO) certificates, may delay decarbonisation,” SBTi said.
As such, the new standard is aimed at ensuring companies source their electricity from “zero carbon sources”, it added.
Companies are also expected to buy and use clean energy in the same markets where they operate, wherever possible. Those that may not have access to zero-carbon electricity are allowed to contribute to other zero-carbon grids but as “an “interim measure” only.
SBTi’s new standards also propose more flexibility on the rules for smaller companies, especially those from lower-income countries.
Two categories are introduced – Category A, which includes large and medium-sized companies operating in higher-income geographies, and Category B, which are small and medium-sized companies operating in lower-income geographies.
Category A companies are required to follow all of the SBTi criteria, while some criteria will be optional for Category B.
The SBTi will be using the European Union’s definition of company size under the Corporate Sustainability Due Diligence Directive and the World Bank’s classification of low versus high income countries.
Some of the differentiated criteria include a requirement for all companies to publicly commit to achieving net-zero emissions by 2050, with Category A firms expected to announce their ambitions in 12 months while Category B firms get 24 months to do so.
Category A companies are also expected to obtain third-party assurance for their emissions reports and set Scope 3 emissions targets, which are optional for Category B.
SBTi is currently inviting feedback from businesses and stakeholders on the draft of its new standards.
Alberto Carillo Pineda, SBTi’s chief technical officer said the new draft standard reflects lessons the organisation has gleaned from thousands of businesses globally that it works with, those with and without targets. It has also relied on work done by other standard setters, non-governmental organisations, policy makers and regulators.
“This is an iterative process and the public consultation will help us identify the changes we can make to ensure SBTi’s revised standard creates impact at scale as effectively as possible,” said Pineda.
