The Science Based Targets initiative (SBTi) has recently revised its scope 3 target-setting guidance as part of its Corporate Net-Zero Standard (CNZS). These changes are relevant for companies aiming to reduce greenhouse gas emissions throughout their value chains.
The SBTi’s revision aims to drive value chain decarbonization while addressing the key challenges companies face. The update explores potential changes to improve scope 3 target effectiveness while also seeking feedback from various stakeholders to deliver a more actionable, transparent, and impactful framework.
Scope 3 emissions encompass indirect emissions within a company's value chain. SBTi underscores that setting science-based targets for these emissions is vital for embedding climate goals into economic activities. Managing these emissions is essential for achieving net-zero emissions by 2050. Currently, companies can choose from various methods to address scope 3 emissions including:
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Scope 3 target setting has become widespread, with 4,205 companies having SBTi-validated targets in place by the end of 2023. Counted together with companies with commitments to set targets, this represents 39% of the global economy by market capitalization. This indicates a strong recognition of the importance of managing indirect emissions.
However, several challenges still remain, including variability in GHG accounting methods, the dynamic nature of value chain emissions, levels of influence and limitations in aggregated emissions metrics.
Exploring new sector-specific metrics to complement GHG targets is something Gilles Dufrasne, Policy Lead on Global Carbon Markets at Carbon Market Watch, believes will be incredibly impactful: ‘Saying that a car manufacturer must have a certain percentage of battery electric vehicle sales, or a steel manufacturer must have a defined amount of green steel would help us move away from the very coarse metric of tCO2e.’ Bloomberg Green
SBTi has set out a five-step process informed by the proposals above to improve the effectiveness of scope 3 target setting. The steps as shown in Figure 1 should be periodically reviewed to ensure all relevant emissions sources are addressed.
The SBTi will continue to refine these concepts by engaging stakeholders for diverse perspectives and conducting further research. The primary areas for further development include:
It will take a while for companies to adapt to these recommendations and implement better frameworks to address the areas outlined in ‘Areas for Further work’.
However, in the near term we expect these recommendations to influence high-level Net Zero strategies and communication. This will involve a more precise strategy for offsetting and a refined approach to supply chain targets.
As a result, SMEs in the supply chain of any company with a Net Zero target (SBTi endorsed or otherwise) should prepare for greater scrutiny on their emissions given Net Zero is impossible without engagement across a company’s entire value chain.
While the ideas are primarily conceptual at this stage and require access to much more supply chain data, we believe the proposed changes are a move in the right direction. These updates will help maintain the level of ambition required to reach Net Zero is maintained and ensure the corporate World doesn't simply give up.
At Trace, we believe companies should do everything within their power to actively reduce their carbon emissions, while also utilising carbon credits as a tool to address emissions that can't currently be abated.
We agree that not all carbon credits are created equally. We partner with organisations like Tasman Environmental Markets (TEM) who go beyond international requirements by carrying out their own rigorous due diligence process for every project we invest in. This ensures the highest levels of quality and measurable, long-lasting impacts for people and the planet, beyond carbon emission reduction. International standards such as IVCVM’s Core Carbon Principles, are also playing a valuable role in improving the integrity and scale of the voluntary carbon market by assessing programs and methodologies.
SBTi will publish a draft CNZS at the end of 2024 and open it up to community consultation and we encourage our customers to submit their thoughts where appropriate.
Curious for more? Check out our co-founder and CEO, Cat Long’s thoughts on the SBTi updates via LinkedIn!
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