SBTi: Setting the standard or letting it down?

Earlier this month, the SBTi’s Board of Trustees issued a statement including their intent to extend the use of carbon offset credits for Scope 3 (indirect) emissions abatement. The statement triggered a variety of strong and divided reactions across the industry, including backlash from multiple stakeholders. Notably, SBTi staff released an open letter urging CEO Luiz Amaral to resign. 

Our ESG team has been following these developments as they unfold. So, lets break down the SBTi’s decision, the potential changes in Scope 3 guidance, and how the industry has responded.

What is the SBTi?

SBTi stands for Science Based Targets initiative. It is a collaboration between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF).

SBTi develop standards, tools, and guidance for companies to set GHG emissions reduction targets in line with what is needed to limit global warming. The criteria SBTi develops has built a global reputation for being consistent with the latest climate science.

What has happened?

The SBTi Board of Trustees issued a statement on 9 April which announced plans to revise its flagship Corporate Net-Zero Standard, the SBTi’s core blueprint for companies to bring net zero plans in line with climate science.

Importantly, this statement outlined SBTi’s intent to extend the use of carbon offset credits for Scope 3 emissions abatement. Currently, credits are permitted to be used to address no more than 10% of Scope 3 emissions.

SBTi has stated that a draft proposal outlining potential changes to Scope 3 guidance will be published by July 2024.

Why has this sparked controversy?

SBTi’s statement has been met with fierce backlash for two key reasons:

1. The quality of carbon offset projects has often been contested, with many investigative reports condemning their poor track record in delivering real emissions reductions and driving market transformation.
2. Concerns have been raised that SBTi has breached its own governance process due to a lack of internal consultation prior to the release of their statement.

Many groups have publicly condemned SBTi’s decision, including WWF, one of the SBTi’s co-founders and five leading stakeholders who issued a statement response “offsetting cannot be a substitute for reducing emissions”.

Other critics of offsetting projects have argued that the Scope 3 revisions risk diluting pressure to reduce emissions at their source, distracting businesses from the urgent need to cut emissions at source. 

SBTi’s statement has reportedly caused a rift within the SBTi itself, with staff publishing a letter to the SBTi board of Trustees and CEO condemning their actions. The letter calls for the resignation of the CEO and all board members who supported the policy shift, and demands immediate action to mitigate the reputational damage caused by the statement.

Supporting the SBTi’s statement

Other SBTi partners, including the We Mean Business coalition of corporates, have publicly supported SBTi’s proposals. They state that permitting the wider use of offsets could help businesses meet net zero goals for their supply chains and provide a much needed boost to investment in carbon removal projects. 

SBTi research has found that for large businesses in diverse industries, Scope 3 emissions pose a common obstacle to aligning with the SBTi Net Zero Standard. Challenges include accurately measuring indirect emissions and developing suitable reduction plans.

Advocates of carbon offsets argue investment is urgently needed to scale up carbon removal solutions. SBTi’s decision to extend the use of offset credits has been welcomed by the Voluntary Carbon Markets Integrity Initiative, who plan to expand the use of high-quality carbon credits, and carbon trading association IETA, which plans to launch new guidelines on quality credits.

SBTi’s response

Responding to widespread backlash, SBTi CEO Luiz Amaral published a statement confirming the climate standards-setting body will press ahead with plans to consult on the Scope 3 guidance revisions.

“I acknowledge and deeply regret the concern and distress this situation has caused and want to reassure my SBTi colleagues and stakeholders that the SBTi’s dedication to science-based decarbonisation, public consultation and standard-setting governance is unwavering,” he wrote.

“This deliberation is underway and advancing,” he said. “The SBTi is operating at the very edge of knowledge, and that is why a periodic review of our corporate Net-Zero Standard must follow the approved procedure and be led by evidence.”

Amaral added that “a big part of that journey is listening, reflecting and learning in response to feedback from a wide range of sources”.

“It is perhaps a sign of our maturity as an organisation that we do not shy away from even the most challenging debates – and I for one am not afraid to discuss, revisit and rethink our approach based on scientific evidence and following pre-established processes,” Amaral said.

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