Watering down the scope

Partly due to its rapid expansion, the SBTi recently released an updated draft net zero standard open for consultation, with the aim of providing more detail and guidance for businesses setting targets. But among numerous helpful suggestions, including tailored guide for different emissions and company sizes, the 133-page document fundamentally weakens the standards businesses must meet in order to validate their net zero claims, compared to the original 2021 document.

The most serious is the change in policy with respect to scope 3 emissions. Accounting for 70-90% of corporate emissions, these are the emissions which come from a companyʼs supply chain, as opposed to their direct emissions. While the original guidance required large companies to reduce scope 3 emissions by 90% by 2050, the new standard omits this requirement entirely, merely stating that reductions should be “in line with pathways consistent with limiting warming to 1.5°C.ˮ Instead, to have their targets validated, companies only have to address ‘the most relevantʼ emissions, including ‘significantʼ emissions sources representing 5% or more of the total, and ‘emission-intensive activitiesʼ, those representing 1% of the total or more than 10,000 tCO2e/year. Worse still, large companies are “not requiredˮ to set long-term scope 3 targets at all.

This watering down appears to be the result of pressure from businesses to allow them to tick the net zero box while taking less action to decarbonise. Scope 3 emissions in particular are notoriously difficult – and costly – to measure, track and reduce, due to the complexity of global supply chains. After internal pressure, in April 2024, the SBTi was forced to backtrack on a plan which would have allowed its members to address Scope 3 emissions by buying carbon  offsets, instead of decarbonising, something its corporate clients were calling for.

To maintain its credibility for bet practise, the SBTi should strengthen its requirements for scope 3 emissions targets, and reassert the 90% overall reduction in emissions across the board, as in the original guidance. The science clearly calls for this level of cuts: the latest UNEP Emissions Gap report, for example, said that to be on track for 1.5°C, global cuts of “42 per cent are needed by 2030 and 57 per cent by 2035ˮ. Business must play a substantial role in making this happen.

Secondly, although highly ambitious, this is the level of decarbonisation companies need to achieve in order to be ‘in line with 1.5°Cʼ, as the guidance still claims its members should be, so SBTi should make this explicit and remove any loopholes that obscure that end.

Lastly, it is difficult to overestimate the indirect damage incurred by letting companies off the hook for long-term scope 3 action, as this undermines the integrity of net-zero claims more broadly. SBTi should use their significant influence to avoid this and maintain high standards, lest they risk further damaging the shaky reputation of corporate green claims.

Taking Responsbility: Ongoing vs Residual Emissions

To its credit, the guidance does propose more detail and greater recognition as to how companies can neutralise residual emissions by funding high quality carbon removal projects, after their decarbonisation target has been met, as well as funding climate and nature projects ‘beyond the value chainʼ from day one, in order to take responsibility for ongoing emissions as they decarbonise.

Regarding the first – addressing companiesʼ residual emissions (about 10% of the total) – the guidance proposes three options. Firstly, mandating funding for carbon removal project as the company decarbonises, secondly, recognising (but not mandating) such funding, or thirdly, a combined approach where companies have the option to decarbonise further, reducing residuals to 5% or even 0%, instead of just funding removals.

The flexibility these options provide is welcome, but the guidance should mandate that targets are made and set to address residuals by funding high quality carbon projects, rather than merely providing ‘recognitionʼ, which will result in low uptake. They should further set out guidance for what carbon removal projects counts as high quality, such as Edenʼs Carbon Credit Integrity Standards.

The language and emphasis on addressing ongoing emissions by funding climate and nature projects ‘beyond the value chainʼ is also welcome, but the SBTi should mandate, not just recognise, bold targets that are relative to the companyʼs overall emissions.

It is right to say that companies should ‘take responsibilityʼ for their ongoing emissions as they decarbonise – if the average decarbonisation rate is c.4% per year, that leaves 96% of emissions in year one (92% in year two, 88% in year three…) which are currently not required to be addressed. In Edenʼs view, companies should allocate funding for high  quality climate and nature projects to address their ongoing environmental impact that exceeds one third of their budget for addressing residuals, and using the SBTiʼs carbon pricing guidance in their Above and Beyond document.

Currently, terrestrial ecosystems are responsible for absorbing a quarter of anthropogenic carbon emissions…The maintenance of the existing land carbon sink and its enhancement represent a substantial contribution to mitigation pledges and scenarios.  UNEP Emissions Gap Report 2023

Funding beyond value chain is not a mere ‘nice-to-haveʼ. As discussed in previous articles, climate modelling by the UNEP and IPCC clearly shows that achieving net zero by 2050 is only possible assuming the simultaneous, rapid restoration of natureʼs carbon sinks, such as rainforests, wetlands, corals, oceans, as these naturally remove huge amounts of CO2 from the atmosphere, alongside decarbonisation. The new guidance only offers ‘recognitionʼ to voluntary action to address ongoing emissions, once again leaving the door open to inaction. As with residuals and scope 3, SBTi should instead mandate targets for beyond value mitigation, recognising that it is an essential part of net zero.

Keeping the bar high

Corporate Net Zero Standards may not win prizes for literature, but their impact on climate, climate politics and public trust in companies are huge. Just as it is the responsibility of businesses to take action on their emissions, it is the responsibility of the target setting organisations to keep the bar high on net zero. To maintain both, the SBTi should use this consultation as an opportunity to reaffirm the strict requirements set out in their original standard, remove loopholes around scope 3 emissions, and create mandatory beyond value chain targets. While corporate actions and attitudes may ebb and flow; global carbon emissions will only rise further and further.

Bibliography

https://www.bbc.co.uk/news/articles/cly3pnjyzp4o

https://sciencebasedtargets.org/consultations/cnzs-v2-initialdraft

https://www.theguardian.com/environment/2024/apr/11/climate-target-organisation-faces-staff-revolt-over-carbon-     offsetting-plan-sbti

https://www.ipcc.ch/assessment-

report/ar6/#:~:text=The%20Synthesis%20Report%20was%20released%20on%2020%20March%202023.&text=The%    https://www.unep.org/resources/emissions-gap-report-2024

https://www.unep.org/resources/emissions-gap-report-2023

See Also

https://edengreenspace.co.uk/articles/carbon-credit-integrity -standards https://edengreenspace.co.uk/our-projects

https://edengreenspace.co.uk/articles/nature-based-solutions-fight-climate-crisis

The post Watered Down: Net Zero Standards Once Again Risk Falling Short first appeared on ESG Foundation.

The post Watered Down: Net Zero Standards Once Again Risk Falling Short appeared first on ESG Foundation.

When it comes to environmental finance, there is an unavoidable problem: no individual can watch every tree being planted or every piece of ocean plastic being collected. Nor can they calculate and measure every gram of carbon being drawn down by every inch of peatland or forest or coral reef. In their essence, environmental projects are complex, highly varied and take place across the world in a host of different ecosystems, and we cannot independently justify all our beliefs about them, just as we cannot independently justify our belief in climate change or environmental degradation.

Instead, we must rely on the evidence and research of others, and our own ability to infer the truth. This problem, known as the problem of epistemic dependence, is pervasive throughout many commonly held beliefs. Yet there are few examples where it is more pertinent than our beliefs about environmental projects and their efficacy. This is no surprise, when recent greenwashing scandals have eroded our trust again and again. No one wants to fund a project which they cannot trust, but it is incredibly difficult to be completely certain that a project is doing what it says it does.

As a curation platform, Eden Foundation aims to restore this trust, by investigating and monitoring the efficacy of projects on behalf of others. This trust directly depends on the strength of the principles and practices we employ to carry out our work. The following Methodology sets out those principles. In particular, three core topics need to be covered.

Firstly, a methodology must explain the principles and means by which it identifies credible and effective environmental projects.

Secondly, it must explain the necessary criteria which donors must meet in order to fund those projects.

Thirdly, it must explain the ways in which it funds and monitors the environmental impacts created by the projects. In Eden’s view, only once these questions are answered can we expect others to place their trust in us, and by extension, in environmental projects more generally.

It is important to remember the overarching reason why it matters for us to have trust in environmental projects at all. Namely, because our planet is under threat. By the latest IPCC estimates, we are on track to surpass 2°C of warming above pre-industrial levels by 2100, the direct result of human-caused greenhouse gas emissions and the degradation of our natural carbon sinks. Although awareness of the climate and nature crises has never been higher, human civilisation is falling vastly short of meeting the required targets with respect to global carbon emissions, biodiversity loss and global pollution. We also know that merely cutting carbon emissions will be insufficient to address the climate crisis. Instead, in order to limit warming to 1.5°C, halt biodiversity loss and promote sustainable consumption, humanity must rapidly take action to simultaneously decarbonise, stop polluting, increase biodiversity and restore our natural carbon sinks. We need to restore our planet, and this requires vast amounts of funding to be channelled into effective environmental projects across the world. There’s no time to waste.

Principles of Governance

Eden’s methodology is the direct result of our core values as a social enterprise and non-profit. Everything we do stems from these core beliefs. Together, they form a necessary moral basis for being anti-greenwashing.

Trust and Transparency

Our work aims to channel funding to environmental projects that can be 100% trusted to do what they say they do. This requires trust in the project itself as well as trust in our oversight of the project’s work.

Effective and Holistic

A project cannot just be trustworthy, it must also be effective. And the most effective kind of funding is holistic – funding whose impacts are spread across a range of projects, addressing a range of environmental issues (climate, nature, pollution etc) simultaneously.

Anti-Offsetting

While we strongly support the funding of climate projects, we are strongly against schemes which allow companies to shrug off responsibility for their environmental harms. ‘Carbon neutral’ or ‘carbon offsetting’ claims, for example, can distract and delay internal decarbonisation efforts, and can therefore be greenwashing: https://edengreenspace.co.uk/articles/anti-greenwashing-methodology

The post Eden Foundation’s Anti-Greenwashing Methodology sets out the principles it follows as an organisation when curating, monitoring and funding environmental projects first appeared on ESG Foundation.

The post Eden Foundation’s Anti-Greenwashing Methodology sets out the principles it follows as an organisation when curating, monitoring and funding environmental projects appeared first on ESG Foundation.