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SBTi’s Recommendations for Beyond Value Chain Mitigation

January 3, 2023
SBTi’s Recommendations for Beyond Value Chain Mitigation

Net zero targets are popular in the private sector; in fact, organizations covering more than 90% of global GDP have made net zero commitments. 

But although a net zero private sector is a necessary milestone for the green transition, this alone won’t keep our planet below 1.5C of warming. The world also needs the private sector’s help to make net zero happen at a broader societal level.

Corporates should be thinking about their role in the global net zero transition, beyond abating their own emissions. In this blog we explore what this looks like in the context of setting a science-based net zero targets, and the key principles to bear in mind.

SBTi net zero targets

In 2021, the Science-Based Targets initiative (SBTi) released its Corporate Net-Zero Standard, which outlines how corporates can set science-based net zero targets. Net zero targets are considered ‘science-based’ if they align with what the latest climate science identifies as necessary measures to meet the goals of the Paris Agreement, which is limiting global warming to 1.5C. 

SBTi net zero targets rightly focus on rapid reductions in scope 1, 2 and 3 emissions. But, in line with the mitigation hierarchy, SBTi also strongly recommends that companies contribute to societal net zero: thinking beyond their own value chains when decarbonizing. 

As mentioned above, achieving the goals of the Paris Agreement will require joined-up thinking and systemic changes; individual companies acting in isolation won’t be enough. Therefore, for companies to truly be aligned with science-based net zero pathways, they must play a role in global scale changes as well as changing themselves.

Beyond value chain mitigation (BVCM)

The SBTi, therefore, requires companies to go above and beyond achieving a net zero carbon footprint at the company level, referring to this as BVCM, or beyond value chain mitigation.

“Companies should go further and invest in mitigation outside their value chains now to contribute towards reaching societal net zero,” says the Net Zero Standard.

Contributing to global-scale actions sounds like a daunting task, and certainly reaching global net zero will be a major challenge. But there are meaningful actions that every company can take to contribute to this essential goal. 

SBTi’s recommendations

The SBTi’s full BVCM guidance is due this year. However, they have published two blogs elaborating on some details of BVCM. Here we’ve dug into the details of what we know so far.

What does BVCM actually look like in practice?

To date, the SBTi has been quite vague on this. However, in their recent blog outlining ‘no regrets’ short-term actions, they hone in on two specific areas of focus:

Securing and enhancing carbon sinks 

The SBTi gives several examples of carbon sinks that need to be protected in order to abate global emissions, all of natural ecosystems: terrestrial, coastal and marine. By protecting these natural, carbon-rich environments, a huge amount of potential emissions are avoided. The SBTi highlights a study that shows that based on current trends, natural ecosystems can provide 30% of the mitigation needed by 2030 to stay on track for 1.5C. Organizations can make hugely impactful contributions to this as part of their BVCM strategies. What’s more, conserving these ecosystems will have huge co-benefits for both nature and humans.

Scaling permanent greenhouse gas removals

It is now agreed by all climate scientists that achieving the 1.5C goal will require a significant amount of GHG to be removed from the atmosphere by 2050. This can be done either through natural mechanisms, such as growing plants, or using technology such as Direct Air Capture (DAC). Another key consideration is how the carbon can be stored (kept out of the atmosphere) permanently. There are concerns that natural ecosystems are vulnerable to human or natural threats, and so they are not considered permanent. For this reason, many favor technological approaches, although they are still at an early stage of development and so the long-term effectiveness is unproven. Either way, both natural and technological removals need significant investment to help them scale to the levels necessary in the next few decades. Investing in these solutions is another ‘no regrets’ action supported by SBTi.

How do I protect sinks or invest in scaling removals?

The SBTi does not mandate a particular way for organizations to go about BVCM, but in their blog, they do suggest three possible models:

This flexibility will be welcomed by some organizations, that already have schemes in place or ideas about how they can best have an impact given their scope and resources. For others, however, the lack of concrete guidance on how to contribute to tackling such major challenges might be disconcerting. 

Luckily there is already an established mechanism that enables organizations to invest in carbon solutions outside their value chain, regardless of how large or small their capacity and budget for this: voluntary carbon markets (VCMs).

VCMs allow organizations to purchase carbon credits, representing 1 ton of emissions avoided or removed from the atmosphere, from a huge range of project types. These include projects which conserve natural carbon sinks (e.g. REDD+ credits), and which permanently remove GHGs from the atmosphere (e.g. DAC credits).

The SBTi is very clear that using carbon credits purchased through VCMs is not the only option for BVCM. But it is a legitimate choice, and the most established mechanism to channel finance from the private sector towards effective climate solutions outside of their value chains. Indeed, the value of using VCMs in high ambition net zero pathways was recognized last year by an alliance of high profile figures, including Lord Stern, and the former head of the Bank of England Mark Carney.

So, is BVCM just offsetting?

In some regards, using VCMs for your organization’s BVCM has some similarities to offsetting approaches. However, SBTi does not use the term 'offsetting'. BVCM is an approach that focuses less on the idea of negating one’s own emissions through purchasing credits (in order to claim carbon neutrality or net zero emissions), and more on the idea of using available capital to fund worthwhile environmental projects for the good of all society.

Once an organization has reached its net zero target in terms of emissions abatement, it must ‘neutralize’ its residual emissions. This is closer to traditional ideas of offsetting emissions. However, the SBTi requires permanent removals to be used for this purpose, unlike offsetting for which any credits can be used. This ensures that there is genuinely no net increase in atmospheric greenhouse gasses due to that organization's activities.

In general, the idea of offsetting may be falling out of favor due to increasing scrutiny of climate claims, and the evolution of more precise language to describe them. For example, at COP27 a new term was proposed for credits generated by the Article 6.4 mechanism without a corresponding adjustment applied: mitigation contribution units. Similarly to BVCM, ‘mitigation contribution’ recognizes the value of investing in carbon markets to aid global-scale emissions abatement, without making potentially unclear, misleading, or green-washed claims.

How can my organization make sure that our BVCM is effective?

For organizations that choose to use VCMs to achieve their BVCM, it is essential that they only use high-quality credits. Whether nature-based or technological, carbon projects should be rigorously verified for carbon performance, additionality, permanence, leakage, and co-benefits.

Sylvera’s in-depth analysis of credit quality shows that there high-quality REDD+ credits do exist. The market for permanent removals is less established, but companies such as Microsoft and Stripe have formed Frontier, an advanced market commitment to accelerate carbon removal by purchasing an initial $925 million worth of permanent carbon removal between 2022-2030. These longer-term commitments are essential to the rapid scaling of removals.

Evaluating credit quality is a complex undertaking, and that’s where organizations like Sylvera can help you to simplify the evaluation process. Our trusted carbon credit ratings, combined with our actionable insights and analytics, make complex purchasing decisions easy. 

Key principles

To ensure high-integrity claims, make a meaningful impact, and avoid reputational or other risks, organizations should follow these key principles for BVCM:

The mitigation hierarchy can occur simultaneously

The mitigation hierarchy must be followed, but it doesn’t have to be one of chronology, whereby a company reduces its emissions and then purchases carbon credits; it can simply be one of resource allocation, whereby a company allocates the majority of its resources to internal decarbonization, but invests the rest in high-quality carbon projects.

Act now

Although we are yet to see the SBTi’s final guidance on BVCM, organizations claiming to be on a net zero trajectory have enough information to start acting immediately on contributing to global decarbonization beyond their own operations. 

“The urgency of this decisive decade is already well upon us,” says the SBTi. “These efforts must be scaled in the coming months and years to avoid the impacts of catastrophic climate change.”

Focus on conserving natural sinks and permanent removals now

The SBTi’s two areas of immediate focus for contributing to a global-scale net zero transition are protecting carbon-rich ecosystems, and investing in scaling removals. Both emissions avoidance and removals will play an essential role in sticking to a 1.5C-aligned pathway.

Quality credits are key to impact

The VCM is one existing and proven mechanism for effective BVCM that companies can use now. However, this approach will only achieve a positive impact if organizations undertake extensive due diligence to ensure that all credits are high quality. 

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About the author
VP Policy

Ben Rattenbury is a carbon markets, green finance and climate policy expert with more than a decade of experience in the sector. A former Fulbright Scholar at Columbia University, he has also worked with and for the UK financial sector, UK Government, World Bank, and UN Climate Change Secretariat. As VP Policy at Sylvera he leads the team working on Voluntary Carbon Markets intelligence and intersections with wider climate and markets policy.