The Science Based Targets initiative (SBTi) today published an initial draft of its revised Corporate Net-Zero Standard for public consultation.
The draft standard sets out what SBTi calls a science-based, innovative and pragmatic framework that enables more businesses worldwide to join the 3,000 with net-zero targets or which have committed to set them. It is informed by the latest climate science, regulation, and recognized standards and frameworks, as well as feedback from businesses about what they need to achieve the collective ambition of a net-zero future.
Through public consultation, the SBTi is empowering businesses and other stakeholders to feed back on the proposals, ensuring that the standard remains both rigorous and practical. Key areas of proposed revision include:
Focus on action – the draft standard splits out scope 1 and scope 2 emissions to reflect the unique challenges decarbonising each of these categories. Proposals include a commitment to move to low-carbon electricity no later than 2040.
New options for tackling scope 3 emissions reductions – the area over half of businesses surveyed by the SBTi cited as the most significant challenge in net-zero target setting. The draft standard proposes increased flexibility through options to set targets for green procurement and revenue generation, instead of setting an emissions reduction target. In focussing on direct suppliers and/or those in emissions-intensive sectors to align with net-zero, this proposal intends to focus action in the most emission-intensive activities and those where companies have the highest influence.
Opportunities to scale carbon removals and mobilise climate finance above and beyond the requirement for the direct decarbonisation to meet emissions reduction targets – the draft standard sets out options for consideration to address unabated and residual emissions. This includes looking at formally recognising companies which are investing in Beyond Value Chain Mitigation (BVCM) and the introduction of interim carbon removal targets.
Tracking and communicating progress against targets – the draft standard introduces an assessment and communication of progress against targets requirement, to enhance accountability and recognise companies leading on decarbonisation.
Simplified requirements for medium-sized companies in developing markets and SMEs – through the introduction of streamlined requirements reflective of capabilities and resources, providing a springboard for universal voluntary corporate climate action.
Opportunity for step change
Craig Mackenzie, Senior Lecturer in Sustainable Enterprise at the University of Edinburgh Business School responded on LinkedIn.
He said, “Voluntary carbon markets face a structural lack of demand, partly because the main corporate Net Zero standard from SBTi has a strict requirement that companies abate their emissions first and only use offsets for the residual emissions at the end of their abatement journey.
“This is well intentioned. Companies shouldn’t be using offsets as an excuse not to reduce their own emissions.
“However, given most companies won’t be ending their abatement journey till near 2050 this kills off demand for offset credits today – which in turn means its hard to invest in building the removals industry… so there will be few credits available in the 2040s when massive demand starts to emerge – and we get an almighty carbon credit crunch with sky high prices.”
However, Mackenzie said the SBTi consultation was good news. “The draft suggests a change that could take a big step towards fixing this problem. CNZS-C18: ‘Companies shall set and implement removal targets to increase the volume of removals between now and the net zero target year. This means that rather than only starting to offset their residual emissions near 2050, companies start buying credits now and gradually ramp up their purchases.”
He said that there was one caveat. “This is only to allows for offsetting prospective residual emissions (up to 10 per cent of the total), and only for companies which legitimately have this residual, and cannot be used for replacing NZ mitigation activity.” However, Mackenzie concluded, “Caveats aside, this is a potential game changer that could significantly boost early demand for removals credits (e.g. Woodland Carbon Code) and reduce the risk of a carbon credit crunch.”
SBTi said that to ensure a smooth transition from its existing Corporate Net-Zero Standard (V1.2) and Near-Term Criteria (V5.2), a comprehensive transition pathway will be developed. Recognising the need for urgent climate action, this will ensure that companies continue to feel confident setting targets using the current standard while the development process for V2 continues.
The public consultation will run from Tuesday 18 March – Sunday 1 June, with stakeholders able to find more information in the SBTi’s Consultation Guide or through the associated webinar. Combined with feedback from expert working groups and pilot testing, public consultation input will be critical in ensuring the final standard is as effective as possible.