Decarbonising Scope 3 Emissions: A Guide to Insetting Strategies and Funding Climate Hardware Startups
Learn how to decarbonise Scope 3 emissions through insetting strategies and funding climate...
By: Johannes Fiegenbaum on 10/4/24 1:03 PM
This guide provides sustainability managers with an in-depth roadmap for setting near- and long-term science-based targets (SBTs) through the Science-Based Targets initiative (SBTi). It covers key steps such as understanding your company’s GHG emissions inventory, setting targets for Scope 1, 2, and 3 emissions, leveraging sector-specific guidance, and ensuring alignment with net-zero standards. The guide also highlights the importance of reducing reliance on carbon credits and the need for transparency and ongoing validation of targets.
The Science Based Targets initiative (SBTi) is a collaboration between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). SBTi provides companies with a clear framework to set science-based targets for reducing greenhouse gas (GHG) emissions, aligned with the goals of the Paris Agreement. With growing participation from businesses, SBTi has become the largest validator of corporate climate targets, having approved the 2030 goals of around 6,000 companies. However, many of the largest corporations are still falling short, as Corporate Climate Responsibility Monitor reports.
However, SBTi has faced criticism regarding the stringency and effectiveness of its standards, especially with regard to Scope 3 emissions and carbon credits. It’s important for businesses to understand both the potential and limitations of the initiative before embarking on this path. For more insights on sustainability standards, check out A Complete Overview of ESRS Standards.
SBTi offers businesses a structured, science-aligned pathway to contribute to global climate action by setting targets to reduce emissions. But beyond environmental benefits, SBTi can future-proof businesses by improving competitiveness, resilience, and accountability to stakeholders. The initiative's framework is designed to push companies beyond incremental improvements, though critics argue that current standards may not be stringent enough, particularly when it comes to addressing Scope 3 emissions.
Definition of Scope 3 Emissions
Scope 3 emissions are the indirect emissions generated throughout a company’s value chain, both upstream (e.g., production, transportation) and downstream (e.g., use of sold products). These emissions are typically the largest component of a company’s overall carbon footprint but are often the hardest to measure and manage. You can learn more about managing emissions in your business through the Mastering Life Cycle Assessment guide.
Challenges in Addressing Scope 3 Emissions
SBTi requires companies to set targets for Scope 3 emissions only when they account for more than 40% of a company's footprint - which applies to most companies. However, these targets do not have to be fully aligned with a 1.5°C pathway. As such, many companies fall short of the reductions required to address the critical emissions within their value chains. This limitation has led to calls for more stringent standards, as companies can sometimes overstate their progress by focusing on easier-to-achieve Scope 1 and 2 reductions, leaving their most impactful emissions largely unchecked.
What Are Carbon Credits?
Carbon credits allow companies to "offset" their emissions by investing in projects that reduce or remove emissions elsewhere, such as reforestation or renewable energy projects. While this mechanism offers a way to balance emissions that are difficult to eliminate, the effectiveness of carbon credits in genuinely reducing a company’s overall impact remains contentious.
SBTi’s Position on Carbon Credits
SBTi has historically maintained that carbon credits should not count towards a company’s core emission reduction targets. However, recent developments have triggered controversy. In 2024, SBTi's Board of Trustees made a unilateral decision to consider allowing carbon offsets for Scope 3 emissions, prompting internal disputes and criticism from climate scientists and corporate leaders alike. It is assumed that SBTi has been pressured by business groups with interests in carbon markets to allow for carbon credits to count against scope 3 emissions. While carbon credits can play a role in offsetting unavoidable emissions, prioritising direct emissions reduction is essential, as I emphasise in this piece: CO2 Reduction vs. Compensation for Companies.
External Voice: H&M Group raised concerns over SBTi allowing companies to offset Scope 3 emissions, arguing that real reductions within the value chain should take priority.
Degrees Matter
H&M Group’s concerns reflect broader challenges. With the impacts of climate change already being felt globally, it’s critical to keep global temperature rise within 1.5°C. As H&M points out, achieving net-zero will require companies to first reduce emissions drastically and only balance the last remaining emissions with high-quality carbon dioxide removals. They have set ambitious targets to reduce absolute GHG emissions by 56% by 2030 and 90% by 2040. Offsetting will only be used for the unavoidable 10% of residual emissions. For a deeper dive into emissions reduction vs. compensation strategies, check out CO2 Reduction vs. Compensation for Companies.
How to Align with SBTi
To align with SBTi, businesses must first familiarize themselves with SBTi criteria, assess their emissions profiles, and set near- and long-term science-based targets. It’s also important to focus on the most critical sources of emissions in their value chains. Companies should engage suppliers and partners to tackle Scope 3 emissions, which requires robust data collection, collaboration, and innovation across their entire supply chain.
Best Practices for Success
To ensure success, businesses must integrate emissions reduction into their core strategies, rather than treating it as an external obligation. Transparency, regular reporting, and stakeholder engagement are key to maintaining accountability. Companies must also avoid relying on false solutions, such as standalone renewable energy certificates or unproven carbon removal technologies, which can provide short-term benefits but fail to address systemic emissions challenges. You can also explore further insights on implementing these strategies with Implementing ESG Criteria: A Beginner's Guide.
As a sustainability manager, navigating the complexities of Science-Based Targets (SBTi) can seem daunting. However, with a clear understanding of the steps and requirements, you can align your company’s climate goals with the latest science and international best practices.
By following these steps, you can position your company to meet its climate goals, align with international standards, and build a more resilient, sustainable business model.
The Science Based Targets initiative remains one of the most widely respected frameworks for corporate climate action, but it is not without its shortcomings. As companies begin their journey with SBTi, it’s essential to stay informed of both the opportunities and challenges the initiative presents - particularly regarding Scope 3 emissions and the use of carbon credits. By setting ambitious targets, prioritising genuine emissions reductions over offsets, and staying committed to long-term sustainability, businesses can make a meaningful contribution to climate action.
If your company is looking to reduce emissions, navigate SBTi standards, or understand carbon accounting, I can help. As a sustainability consultant with experience working with startups and established companies, I offer tailored advice and hands-on guidance. From conducting Life Cycle Assessments (LCA) to aligning your strategy with science-based targets, my services ensure your business stays on the cutting edge of sustainability. Get in touch to find out how we can collaborate to meet your sustainability goals.
A solo consultant supporting companies to shape the future and achieve long-term growth.
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