Science-based targets and carbon offsetting tracker

The SBTi has acted as a lynchpin in global efforts to deliver a low-carbon and net-zero transition that isn’t based on iterative targets pulled from thin air, but rather based on the latest climate science.

The SBTi’s Business Ambition for 1.5C campaign ran between June 2019 to October 2021. Companies that committed to set science-based targets as part of the campaign had 24 months to set and validate commitments. Organisations with net-zero commitments had an additional extension to 31 January 2024. The SBTi reports that more than 1,000 companies, accounting for $23trn in market capitalisation, joined the campaign over the two-year period.

This builds on a much wider awareness trend that has seen the SBTi record a 100%+ increase in corporate climate commitments between 2022 and 2023.

The SBTi requires companies and financial institutions to submit science-based targets within 24 months of committing. Failure to comply results in being marked as “Commitment Removed” on the SBTi Dashboard, due to a change in commitment compliance policy implemented in January 2023.

According to the SBTi, almost 240 businesses did not follow through on their commitment to set verified net-zero targets or 1.5C-aligned science-based emissions targets.

Time is pressing

edie’s Sustainable Business Tracker found that a little over half (53%) of businesses have science-based targets in place, with a further 18% currently developing such targets. Of the companies that have set science-based targets, 58% have had them validated by the SBTi and 11% have submitted them and are awaiting approval.

The vast majority (88%) of companies that have had targets validated by the SBTi are targeting net-zero by 2040-2050, while only 12% of companies targeting net-zero by 2034 or earlier have had their targets validated.

Additionally, of the companies that have published a Climate Transition Plan based on delivering their net-zero targets, 41% are targeting net-zero by 2040 or later. Only 9% of companies targeting net-zero before 2035 have such plans in place.

Guidance on setting and delivering science-based targets in line with long-term net-zero commitments is varied and the SBTi provides a plethora of guidance models and frameworks as part of its Net-Zero Standard, which requires an intention to cut emissions across all scopes by at least 90% by 2050 or sooner.

edie’s Sustainable Business Tracker asked respondents a range of questions as to the level of guidance they can access on setting and delivering decarbonisation goals. It found that only 30% of businesses believe the “current guidance around net-zero is sufficient to help their business reach net-zero”. In contrast, 46% disagreed with the notion, with the remaining respondents remaining neutral.

The SBTi is also slowly rolling out various sector-specific frameworks for targets. The highest-profile standard is arguably the Forest, Land and Agriculture (FLAG) Guidance.

The FLAG guidance is required for companies that are linked to land-intensive activities across their value chain. This includes forest and paper products, food and drink production and tobacco. The SBTi also recommends, but won’t enforce, that companies that have more than 20% of revenues coming from FLAG activities or companies with FLAG-related emissions that account for more than 20% of their overall value chain emissions should set new goals.

Currently, only 23% of businesses believe that there is ample sector-specific guidance to help firms reach net-zero goals, in comparison to 50% that believe more guidance is required.

Indeed, a lack of clarity and guidance is cited by a survey conducted by the SBTi earlier this year. In total, 54% of respondents identified Scope 3 emissions as a major barrier to setting net-zero targets, in addition to uncertainties about future technologies (53%).

Additional hurdles cited by respondents included a lack of certainty in achieving the target (35%), the absence of a published net-zero standard (27%), no sector pathway available for the company (23%), insufficient emissions data to set targets (22.5%), the abstract nature of net-zero goals (22%), and potential conflicts with regulatory frameworks (18%).

The role of carbon offsets

One of the main questions that businesses are seeking clarity on right now is the role that carbon offsets will play in any future amendment to the SBTi’s guidance and standards.

In April, the SBTi's Board of Trustees confirmed that they intended to allow carbon offsets – formally called “Environmental Attribute Certificates” to be more widely used by corporates. The belief from the Board was that this would help tackle key issues around supply chain action by reducing Scope 3 emissions.

The news itself has led to many of the charities involved in the SBTi pushing back on the intentions of the board, but it is crucial to note that at the time of this Tracker’s publication, nothing has changed.

Under the SBTi’s Net-Zero Standard, absolute emissions reductions must be reduced across all scopes by at least 90% by 2050 or sooner. The remaining 10% can be covered by offsets. A consultation will be launched to revise the Standard later this year and one of the questions seems to be whether this 10% allowance should be increased.

Respondents to the latest Business Tracker are overwhelmingly against the idea of widening the usage of these certificates. A total of 75% of respondents do not believe that the usage of offsets should be increased under official guidance.

The attitude toward carbon offsetting seems to be consistent, regardless of what timeframes are in place for corporates trying to reach net-zero. edie’s survey found that businesses with a net-zero target set for 2040 or later were just as likely to view offsetting as an “integral” part of the plan compared to those targeting 2035 or earlier (both at 43%). However, 89% of businesses with net-zero targets set for 2040 and beyond agree that offsets should only be used for unavoidable emissions, compared to 82% for those with 2035 targets.

Almost half (47%) of businesses with earlier net-zero targets are already utilising carbon offsets, compared to one-third (34%) of businesses with later deadlines for net-zero.

That is not to say that carbon offsets themselves have been villainised. Almost half (43%) of businesses believe that carbon offsetting is an “integral part” of achieving their long-term climate targets. However, 86% of respondents believe that offsetting should only be used for “unavoidable emissions”, meaning businesses are overwhelmingly focused on decarbonisation first.

There is also the issue of investment into the carbon markets to consider. There has been plenty of controversy as to how carbon offset projects are funded and the actual benefits they are able to deliver – both planetary and societal. As such, there is a reluctance amongst the business community to invest in such initiatives. Our survey found that 60% of businesses believe that the carbon credits market is “currently too risky to invest in”.