How SBTi emerges from these developments will be telling
The Science Based Targets Initiative (SBTi) recently reported that 239 companies had their “commitment removed” on the SBTi dashboard SBTi uses to track corporate net-zero goals. As of this writing, there are 4,950 companies with approved targets in the SBTi database.
This large number of lost commitments comes from the SBTi policy announced last year that gave companies 24 months to submit science-based targets for validation once a "commitment" is made. The first wave of companies that had their status changed hit on January 31st. Expect more “commitment removed” messages from the SBTi in the near future.
Some companies have already decided to forgo participation with the SBTi. For example, Intel declined to participate with SBTi because the standards do not allow it to account for past reductions or emissions avoided.
Business is booming
SBTi is attempting to scale up its operations due to increasing demand from companies that want to align their emissions initiatives with the SBTi standard. In February, the SBTi announced that the number of companies with validated science-based targets has doubled from the end of 2022 to the end of 2023.
The SBTi is also developing sector-specific standards for high-impact sectors including oil and gas, utilities, automobiles, chemicals, and apparel.
Voices Critical of SBTi
In 2020, the think tank 2 Degrees Investing Initiative quit SBTi over what could be called climate impact. 2 Degrees argued that SBTi shouldn’t say it was “science-based” without evidence linking portfolio decarbonization to real-world decarbonization.
Bill Baue, a climate specialist who was formerly part of SBTI’s technical advisory group has been critical of SBTi’s methods to signify net-zero alignment by companies that follow the SBTi standard.
There has also been criticism that SBTi was the enforcer of its own standard, raising concerns of conflicts of interest.
Last year, the SBTi set up an internal process to hear complaints about the methodology of the standard and decided to formally separate their standard setting and validation practices to increase confidence from companies and investors.
Scope 3 emissions and slow policy get in the way
Unsurprisingly, many companies cite the measuring and reporting of Scope 3 emissions as a reason they can’t meet their commitments. Scope 3 emissions are emissions that come from a company's supply chain and the use of their products or services after they are sold (automobile emissions for example).
As is often the case, policy and politics have gotten in the way.
A recent FT article highlighted the problem from a company perspective:
“Companies argue that governments have not created the policy frameworks needed to achieve the emissions reductions making it difficult for them to move as fast as they originally thought.”
The SBTi is a definite force for good in properly measuring and managing carbon emissions. However, the initiative and other initiatives meant to address climate change and natural capital issues need policy backing them up to compel companies to provide the information investors need. Policy and disclosure can also reveal the strategic changes needed to address these environmental issues.