But first, the organizations in charge of defining the rules of the road have to get the language right.
It was a telling exchange. Over the last few years, the world of emissions standard setting has become increasingly contentious, so much so that even a few words can trigger a fight about whether companies are getting off the hook or being held to account.
Maintaining that influential position requires threading a needle. SBTi needs to maintain sufficient buy-in from companies, which are often wary of stringent standards, while keeping on board policymakers and climate advocates that demand more ambition. (Indeed, a group of NGOs criticized the new SBTi framework, released June 11, as insufficient.) Kennedy described the new standard as sitting in a “sweet spot.” It’s “on the one hand aligned with commercial objectives,” he says, and on the other it allows companies “to make contributions to international climate objectives.”
The standard covers wide ground in significant detail. It assesses companies not based on whether they say they want to hit net zero but whether they’re actually incorporating climate thinking into their operations. While following SBTi guidance is voluntary, the move is a good indicator that this is the new measure of climate success for any business. “It reframes net-zero transition as a continuous improvement journey rather than a point in time,” says Kennedy.
One example is how SBTi suggests companies should calculate their use of clean energy. Power market experts have debated whether companies should match their power consumption with clean energy generation on an hourly or annual basis. The latter approach became commonplace under SBTi’s first standard. And matching on an annual basis has helped seed the market for companies purchasing renewable energy. But some experts and companies now complain that it doesn’t reflect actual usage. SBTi leaves annual matching intact as a baseline while opening the door to hourly matching.
Finally, SBTi’s treatment of “market-based measures” offers an attempt to move beyond the stalled debate over carbon offsets. The new guidelines don’t dismiss these tools, but instead create a clear-cut hierarchy. Companies should first do what they can to cut emissions from their own operations. Then, they should focus on emissions reduction in systems they rely on (think of an airline helping fund the creation of a sustainable aviation fuel ecosystem). Separately, high-integrity offsetting remains a last-resort solution but doesn’t erase the obligation to decarbonize. This is complex, but it should signal a continued market for many low-carbon solutions.
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