The Science Based Target Initiative (SBTi) has opened the doors for companies to align their procurement and revenue-generating activities with net zero, instead of slashing Scope 3 emissions from suppliers and customers.
If approved, this would be a radical departure from current SBTi requirements for companies to reduce indirect emissions by 67 percent by 2030, rising to 90 percent by 2050.
The novel approach was included in the latest draft of SBTi’s flagship target-setting guidance for corporates, published today. The hotly anticipated rules govern SBTI’s verification process, which is widely viewed as the de facto global standard for company climate pledges.
The climate target verifier has proposed that companies can set targets on the share of procurement allocated to net zero-aligned suppliers and activities, as well as the share of net zero-aligned revenue.
SBTi did not specify the minimum threshold of targets that it would approve under the new rules.
This is in recognition of the challenges around sourcing Scope 3 emissions data, and allows companies “to prioritise the most emission-intensive activities within their value chain and areas where they have the greatest influence”, the draft guidance stated.
Carbon offsets
Despite broad expectations that SBTi would sign off on the use of carbon offsets to neutralise some Scope 3 emissions, the verifier has stuck with existing allowances for companies to apply offsets only to residual emissions.
These refer to companies’ residual emissions – capped at 10 percent of its total emissions – which are expected in the net-zero target year after all possible abatement measures have been explored.
New tweaks introduced by SBTi will see companies allowed to adopt both near-term and long-term carbon removal targets, or alternatively, address residual emissions via offsets and beyond value chain mitigation (BVCM) routes.
BCVM refers to mitigation efforts for the broader economy outside a company’s direct suppliers, and can include activities such as scaling up low-carbon technologies. SBTi is seeking feedback on the BCVM routes which could be incorporated into its guidance.
SBTi’s new policy on carbon offsets concludes a long-standing saga which began last year when the organisation indicated that it would allow companies to use offsets for broader Scope 3 emissions, even as its guidance was still being developed.
Staff members publicly accused SBTi’s board of bypassing internal policies and making a unilateral decision on the topic. The move also prompted criticisms from green groups and complaints to the UK charity regulator, which oversees the NGO.
CEO Luiz Amaral subsequently stepped down from his position, citing “personal reasons”.
In July 2024, SBTi published a study on carbon credits, based on material submitted in response to a call for evidence in autumn 2023. According to the NGO, the submissions suggested that “various types of carbon credit are ineffective in delivering their intended mitigation outcomes”.
Company categories
One of the more significant changes tabled by SBTi will see companies that apply for verification classed into two groups and subject to a two-tier rulebook. Large companies would fall under Category A and be given 12 months to have their climate targets approved, as opposed to the current allowance of 24 months.
Smaller companies – Category B – would still get two years to validate targets, and SBTI is consulting on whether they should be required to adopt targets for Scope 3 emissions. This group would largely comprise SMEs and firms in emerging and developing nations.
SBTi is seeking feedback on the guidance via an online survey, which closes on 1 June. The organisation expects that companies will be able to use the revised framework to set climate targets from 2027.
