The Science-Based Targets initiative (SBTi) tells companies whether their targets for cutting greenhouse gas emissions (GHG) are ambitious enough.
For example, if a company says it wants to cut GHG emissions by 50% by 2030 compared to 2020, the SBTi verifies whether this 50% is enough. It does this by comparing it to the decarbonisation pathways needed to keep global warming under 2°C above pre-industrial levels. Many of the world’s largest companies have emissions targets that are verified by the SBTi.
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What has gone wrong at the SBTi?
The SBTi’s board of trustees released a statement on April 9, 2024, announcing that it intended to allow the use of what it calls ‘environmental attribution certificates’, which includes carbon offsets, to meet Scope 3 emissions targets. Or, in its own words: “to extend their [environmental attribute certificates] use for the purpose of abatement of Scope 3 related emissions beyond the current limits”.
Scope 3 emissions are the emissions generated by a company’s supply chain rather than its own buildings or machinery. Meanwhile, carbon offsets are typically bought to support claims of carbon neutrality. A company that buys a single carbon offset is “offsetting” one tonne of CO₂ by avoiding or removing emissions. For example, the proceeds of the sale of an offset may support a forest preservation project that helps avoid new emissions entering the atmosphere through deforestation. Avoidance offsets are commonplace and cheap but rely on assumptions to estimate their impact. Removal offsets are rare and expensive but exact and more robust.
The SBTi’s announcement was met with anger by some of its staff, who published an open letter stating the Board of Trustees “undermined our Standard Operating Procedures and governance policies”. According to press reports, a private letter signed by staff and advisers asked the CEO and board to retract their statement and resign.
SBTi CEO Luiz Amaral then published a blog post on the company’s website on April 19, defending the original statement. The statements contain an obscure debate about the SBTi’s internal procedures and policies but, regardless of who is right or wrong about questions of protocol, one must wonder why the board of trustees did not anticipate this predictable response or discuss the statement first with its staff and advisers.
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By GlobalDataCompanies should still avoid carbon avoidance offsets
The SBTi’s own internal kerfuffle aside, companies should steer clear of carbon avoidance offsets regardless of any changes the SBTi makes. 2023 was a damaging year for the avoidance offset market, with key players such as Verra, the market’s leading verifier, and South Pole, a major offset retailer, caught up in scandals that led to both of their CEOs resigning. Many businesses quietly stepped away from the market as a result and the EU began work on legislation which would prevent companies from saying they were carbon neutral if the claim was supported by offsets. Some corporations began investing in carbon removal offsets, which physically remove CO₂ from the atmosphere rather than avoid its release.
The problem with scandals in the offset market is that they have a knock-on effect on the companies that have invested in the underlying projects. Even if offsets help achieve an SBTi-approved target, they still expose corporates to the risk of greenwashing accusations, which is increasingly becoming a legal issue rather than just a public relations one.
There is also the risk that any decision made on offsets can be reversed by a future CEO and board of trustees, which is a distinct possibility given the broad reputational damage the offset market suffered in 2023. The SBTi said any guidance it gives on offsets would include ‘guardrails and thresholds’ and that it would not validate the quality of offsets as ‘other entities are better positioned to deal with this activity’.
Unfortunately, 2023 showed that no entities are positioned to deal with this activity and that previous ‘guardrails and thresholds’ have not provided much security to businesses. The quality of standard avoidance offsets will always be debatable and subject to different assumptions, and this will always create difficulties for the companies that buy them.
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