FWD Focus: SBTi's Net Zero Update - A Medium Spicy Take 🌶️🌶️🌶️

Welcome to this edition of "FWD Focus," Planet FWD's newsletter dedicated to keeping consumer brands informed about crucial sustainability developments and regulatory changes.

In this issue, we're serving up a medium spicy take on the ongoing developments surrounding the Science Based Targets initiative's (SBTi) Net Zero guidance and its implications for corporate climate strategies. Consider this a rating 🌶️🌶️🌶️ out of 5 on our spice scale.

As SBTi contemplates updates to its Net Zero Guidance, we're seeing confusion and challenges arise for companies trying to adapt and meet their targets. But don't worry – we're here to cut through the complexity and provide some flavorful insights to help you navigate these changes.

To kick things off, watch our Head of Corporate Reporting and Decarbonization, Charlie Quann, share his hot take on the latest SBTi developments:

The Net Zero Guidance Overhaul: What's on the Table

Based on the latest information from SBTi, here are some key points about the upcoming guidance:

• Scope 3 Focus: SBTi is exploring new frameworks to encourage companies to focus on critical emission sources through transition-specific alignment targets.
• Carbon Credits: The use of carbon credits is still being evaluated, after a controversial statement from the SBTi’s Board in April 2024 sparked an intense debate over the possibility of offsetting for corporate climate targets.
• Alignment Targets: Companies may need to set specific 'alignment targets' and 'policies' for prioritized emission sources and transitions, alongside or instead of aggregated interim GHG emission reduction targets.
• Timeline: SBTi expects to release a draft of the revised Corporate Net-Zero Standard for public consultation by the end of 2024, with the final version coming into effect in 2025.
• Stakeholder Engagement: SBTi is actively seeking feedback from stakeholders throughout the revision process, including a public consultation period of at least 60 days.

Frequent Changes: A Double-Edged Sword

At Planet FWD, we're hearing from customers who are working to understand and adapt to these changes. This latest update, following modifications to FLAG guidance and coming just two years after the original Net Zero standard publication, has sustainability professionals carefully considering the implications for their long-term climate goals.

Our clients are expressing a mix of reactions. While many appreciate SBTi's efforts to refine standards based on the latest climate science, there's also concern about the frequency of these updates. Companies that have already revised their net zero targets are now evaluating how to balance the need for current, science-aligned goals with the practical challenges of implementation and reporting.

This rapid pace of change raises a valid question: Should companies wait for the dust to settle before fully committing to SBTi's Net Zero guidance? While staying current is crucial, the frequent revisions risk diverting resources from actual decarbonization efforts to compliance activities.

The Urgency of Climate Action

These changes come at a critical time when immediate climate action is paramount. There's a risk that the focus on updating targets and complying with new criteria could detract from implementing real decarbonization measures. It's essential to remember that while robust targets are important, they shouldn't overshadow or delay tangible actions to reduce emissions.

The Role of Carbon Offsets a.k.a. Environmental Attribute Certificates

Interestingly, the SBTi's revision maintains a focus on environmental attribute certificates, despite their own data suggesting that carbon offsets may not be the most effective strategy for corporate decarbonization. This approach raises questions about the most efficient pathways to achieve meaningful emissions reductions.

However, it's crucial to recognize the value of nature-based solutions and the ecosystem services they provide in the fight against climate change. Moreover, carbon offsets can serve as a valuable price signal, encouraging business units to decarbonize their operations by internalizing the cost of carbon.

H&M Takes a Stand: A Call for Stronger Climate Action

In a bold move that has sent ripples through the corporate sustainability world, H&M Group has publicly challenged the Science Based Targets initiative's recent stance on carbon offsetting. In a letter to SBTi's Board of Trustees, H&M's Head of Sustainability, Leyla Ertur, expressed deep concern over the potential use of environmental attribute certificates for abatement purposes in Scope 3 emissions.

H&M's main arguments include:

1. Weakening Climate Pledges: The decision could make real decarbonization efforts within value chains less attractive, potentially deterring crucial investments and innovation.
2. Undermining Scientific Foundations: Moving away from robust, science-based standards could compromise the principles fundamental to real climate action.
3. Missed Opportunities: While criticizing the current approach, H&M suggests that there's potential for "robust market-based mechanisms within corporate value chains" that could accelerate actual decarbonization.

This public stance by a major global retailer highlights the growing tension between the need for flexibility in achieving climate targets and the imperative for genuine, science-based action within corporate value chains.

Staying Forward-Focused

As we navigate these evolving standards and corporate responses, it's crucial to keep our focus on the ultimate goal: meaningful climate action. At Planet FWD, we're committed to helping consumer brands not just comply with changing standards, but to drive real, impactful change in their operations and value chains.

Don't hesitate to reach out if you need support in navigating these changes or want to discuss how Planet FWD can assist in your sustainability journey. And to stay up-to-date with the latest announcements, expert insights, and regulatory updates, be sure to subscribe to our newsletter. You'll be the first to know about crucial developments that could impact your sustainability strategy.

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