It was the carbon credit ruling heard ‘round the world… One month ago on April 9, 2024, the Science Based Targets initiative (SBTi) sparked heated debate about the pros and cons of counting carbon credits toward a Scope 3 emissions reductions and net-zero targets.
It’s getting hot in here… and not just from global warming.
In a position statement issued by its board of trustees, the leader in science-based corporate climate action standards made waves by stating it would extend the use of environmental attribute certificates, especially carbon credits, for the purpose of abating Scope 3 value chain emissions beyond current limits. Citing that environmental attribute certificates — when supported by effective policies, standards, and procedures — can serve as an additional tool in tackling climate change, the statement clarified that no changes have yet been made to the organization’s flagship Corporate Net-Zero Standard. The process is only now beginning with a first draft of rules, thresholds, and guardrails due to be released later this year in July 2024.
The decision was immediately met with very strong reaction — both positive and negative — from many market actors. SBTi itself was a house divided, with staff calling for the CEO’s resignation. Proponents of the move to allow carbon credits to count toward Scope 3 net-zero emissions targets say recognizing offsets for abatement purposes is a good thing because current rules and uncertainties hinder companies from effectively tackling Scope 3 emissions, which are crucial but notoriously hard to measure. Allowing offsets, they say, would incentivize action, reduce capital costs for needed climate initiatives, and channel more funding into climate-friendly projects.
Critics argue the opposite, essentially. They point to lacking technological capability for measuring carbon credits, which some say gives companies a “carte blanche” on business-as-usual supply chain practices rather than enacting meaningful change. They are concerned that funds spent on carbon credits from outside projects are funds not spent on technological decarbonization improvements within the company. Some are also concerned with fraud based on some isolated cases from the past decade.
Wherever your opinion lands you in this debate, the proposed change could have fairly major implications for how organizations measure and fuel sustainability strategy in the long term. But what about in the short term? (Hint: don’t adopt a wait-and-see attitude and let your sustainability efforts stall.)
Carbon credits are the talk of the town, but they’re only part of the picture.
Every company’s sustainability journey looks different and includes not just one but all three types of Scope emissions (1 and 2 being direct operational and purchased energy use, and 3 the indirect emissions happening further up or downstream in the supply chain).
At Mantis, we believe in implementing economically-minded sustainability solutions upfront. Achieving a net-zero business — or simply a more efficient, better operating one — begins with focusing on direct interventions first, that is, Scope 1 and 2 emissions. Think optimizing facilities through more efficient building envelopes, heating and cooling, and lighting; fuel switching to EVs; and on-site renewable energy generation, to name a few. These sensible, achievable tactics are the real foundation of corporate sustainability.
Once operational emission reductions are underway, companies may then consider additional options on the sustainability menu. Virtually all companies will still have some remainder of unabated emissions and/or Scope 3 emissions. Since these indirect emissions occur outside your company’s direct control, they won’t be easy to measure. But it’s important to try, since they also constitute the majority of most companies’ climate impact, accounting for an estimated 90% of overall emissions
This is where environmental commodities purchasing — like the hotly debated carbon credits issue at hand with SBTi — may become a consideration in your company’s sustainability toolbox.
Aligning Scope 3 emissions reduction strategy with business needs
When it comes to choosing carbon credits, understand that not all are created equal: you can find options of greater or lesser quality and confidence.
At a high-level view, quality certificates give companies a bigger menu of options from which to choose — including more factors that can align to your particular situation and goals. For example, are you interested in carbon removal projects such as forestry or direct air capture (DAC), or abatement projects upstream at the point of emissions? Do you need certain minimum (or maximum) volumes of credits? Will projects in specific geographies align better or worse to your corporate operations or values?
The world of carbon credits is vast, and can be daunting to navigate. One key to success is partnering with an advisor who can help you understand the relative pros and cons among a menu of options, including but not limited to offsets.
To learn more about how your company can reduce emissions and/or discuss the ins and outs of carbon credits, contact a Mantis pro today.
