Last week, the SBTi Board of Trustees endorsed the use of Environmental Attribute Certificates (EACs) and other environmental attribute certificates, or “offsets” toward net-zero and Scope 3 targets. This was a reversal of SBTi's previous policy.
This announcement led to a revolt by SBTi staff, who soon after the announcement wrote a letter criticizing the Board’s actions.
On Friday, the SBTi released a statement that backtracks from their original statement that said companies would be able to use carbon offsets to meet net-zero targets and to count those offsets against scope 3 emissions. The SBTi’s new statement emphasizes that there has been “no change” to its current standards.
The plan now is for a formal draft set of rules to deal with these “offset” issues to be drafted by July. At that time interested parties, including SBTi staff and advisors can review the draft rule and comment.
Offsets are a thorny issue.
Critics of offsets state that it is not always easy to ensure that carbon offset projects deliver the climate mitigation promised. A January 2023 investigation by the newspaper The Guardian, found that more than 90 percent of rainforest carbon offsets by the biggest carbon offset certifier, Verra, were essentially worthless. The threat to forests had been overstated by about 400% on average for Verra projects.
A separate study covering twenty-six carbon offset programs in six countries across three continents found that most carbon offsets linked to mitigating deforestation are failing to keep forests standing or decrease greenhouse gases.SBTi’s original statements that promised to only use “high-quality offsets” did not assuage fears from those concerned that SBTi’s allowance of offsets will compromise the integrity of the “science” behind the SBTi.
This was a governance failure. And can be corrected.
The “science” is the SBTi’s reason for being, so concerned parties, including staff and advisors, were justified in their stance that science should not be compromised.
There have been concerns that corporate entities and the Bezos Earth Fund, which is a backer of the SBTi, and a proponent of carbon credits could have influenced the board's stance without proper input from staff and advisors.
This drama at SBTi reminds us that governance, the “G” in ESG, is always the first issue that a company, its management, and its board need to take care of. It appears that there was a lack of communication between management and employees at SBTi at the very least.
It remains to be seen if there is a larger “confusion of mission” issues at the company, or if the ship has been righted by management's retreat from its original position and recent call for a formal internal and public review of a potential new policy starting in July.
Things like offsets and EACs can be part of a net-zero plan, but with the checkered history of such tools, a promise of “high-quality offsets” with no concrete plan as to how to audit the use of such tools is problematic. The offset market should grow, and we should encourage its growth. But it needs to be done with maximum transparency.
The heavy lifting of net zero plans will always come from not emitting harmful greenhouse gases in the first place. No offset plan should sidetrack such GHG emissions reduction efforts or compromise the science behind them.
To whom is this relevant?
The issues at SBTi are relevant to investors, companies, and regulators, as well of course to those who set the standards at SBTi.
Investors need dependable science-based data to properly evaluate the companies in which they invest.
Companies need to know the rules of the road, so they need standards that are trusted by regulators and investors.
Policymakers need standards that do what they claim to so that they can recommend the use of such standards without the need for countries to create their own.
Each of these parties needs a SBTi that has the trust of the public and produces standards that stand up to scientific scrutiny.