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Text | Lv Yaning

Editor | Su Jianxun

Technology giant Google no longer claims to be "carbon neutral".

In July this year, Google released its latest environmental report showing that it had stopped purchasing cheap carbon offsets on a large scale.No longer claiming their operations are carbon neutralInstead, it was changed to: achieve net zero emissions by 2030.

Google has been operating carbon neutral since 2007, but this was achieved through the purchase of carbon offsets. Until July this year, Google itself announced the end of this status.

Carbon compensation, also known as carbon offset, is a method of offsetting one's own carbon emissions by purchasing carbon credits. It is a common market-based emission reduction mechanism and also the "last mile" for enterprises to achieve carbon neutrality.

For example, if a company emits one ton of carbon dioxide, it can offset this by funding a forest protection project: the project protects the forest, causing it to absorb the corresponding amount of carbon dioxide. In this way, the company can claim that it has offset its emissions.

But in the past two years, this mechanism has been plagued by troubles: compared with its own technical emission reduction,It is easier to achieve carbon neutrality goals by purchasing carbon offsets, so this "carbon neutrality shortcut" is often seen as a form of greenwashing.

In this context, not only Google, but also major companies such as Disney, Shell, Nestlé, and Gucci have begun to "avoid suspicion" and have withdrawn their "carbon neutrality" rhetoric one after another.

Even SBTi, an internationally renowned organization that certifies the carbon targets of these companies, has turned into a "carbon neutrality assassin" this year. It is not only caught up in the carbon offset controversy, but also accused of greenwashing.

For many companies that are aware of carbon reduction, SBTi is not a strange term. Companies can use various means to say when they will achieve carbon neutrality, butIf you want an official stamp, you need to get the approval of the referee SBTi.。

The full name of SBTi is The Science Based Targets initiative, which is translated into Chinese asScience Based Targets Initiative,Responsible for setting climate target standards and evaluating companies. As the name suggests, "science" is the biggest feature of this organization.

Since its establishment in 2015, SBTi has verified climate goals for more than 5,000 companies, including Google, Apple, Microsoft, Dell... almost all well-known big companies.

If carbon neutrality is likened to an exam, the scientific carbon target standards set by SBTi are the exam outlines, and every change in the exam outline affects the performance of the participants. Therefore, every change in the SBTi standards will trigger heated discussions.

But in April this year, the syllabus took a 180-degree turn because of SBTi's change of attitude towards carbon offsets:For value chain (scope 3) emissions reductions, SBTi went from not allowing the purchase of carbon offsets at all to allowing 10% until it announced plans to completely lift restrictions in April this year.

This is seriously inconsistent with the position that SBTi has previously insisted on, so SBTi is suspected of taking a big step backward on the road of climate governance. This is a climate organization named after science, but its scientific nature is currently being questioned.

Image source: SBTi

Join SBTi, it is easy to enroll but difficult to graduate

The origin of SBTi can be traced back to 2015, a milestone year in the global climate governance process. The Paris Agreement was officially signed at the United Nations Climate Conference that year, and 195 signatories unanimously agreed to limit global warming to 2 degrees Celsius and strive to control it within 1.5 degrees Celsius.

Shortly after the signing of the Paris Agreement, SBTi was formally established. The initiators behind this organization are four international organizations: the Center for Global Environmental Information (CDP), the United Nations Global Compact (UNGC), the World Resources Institute (WRI) and the World Wildlife Fund (WWF).

SBTi has developed the first global science-based standard for companies to set net zero targets, ensuring they are aligned with the goals of the Paris Agreement.

If you open a search engine today, you will find that new companies are joining the SBTi initiative almost every day. However, this is a voluntary initiative, and although there is no regulation requiring companies to verify their carbon reduction targets through SBTi, companies are still scrambling to join.

Data from SBTi’s official website shows that as of the end of 2023, the number of companies with SBTi science-based targets has doubled compared to the end of 2022.

The cumulative number of companies that have approved science-based carbon targets from 2015 to 2023. Source: SBTi

Generally, companies need to take five steps to set science-based carbon targets:

The first step isSubmit Commitment: Send a letter of application to the SBTi indicating the company's intention to set science-based targets.

The second step isSetting goals: According to the SBTi standard, emission reduction targets must be established within 24 months of application.

The third step isSubmission Target: Submit goals to SBTi for official verification.

The fourth step isExternal communication: Announce the goals and inform your stakeholders.

The fifth step isRegular disclosure: Report company-wide emissions annually and track progress toward targets.

The first step, submitting the commitment, is free and requires only filling in the company information and sending an email to SBTi. This simple and quick step can easily lead to a misunderstanding: joining SBTi is extremely easy.

"If a company merely submits a commitment and then conducts a wave of external publicity to gain external attention and traffic, but lacks subsequent goal setting and actual action, it can easily be accused of greenwashing," Zhang Wenquan, a researcher at the Center for Sustainable Transformation of the World Resources Institute Beijing Office, told 36Carbon.

From January 2023, SBTi begins to tighten requirements:If a company fails to provide specific targets within 24 months of submitting its commitment, it will be removed from the list.

In the past, the SBTi would simply remove companies that did not submit commitments from its public database, but now the SBTi will clearly point out companies that fail to submit their work on time before the deadline, and will clearly mark them as "commitment removed", which is equivalent to directly criticizing them publicly.

In March this year, the SBTi updated the list to includeMicrosoft, Procter & Gamble, Unilever, Walmart239 companies, including, were removed from the commitment list for failing to establish and verify their emission reduction targets within the specified time.

Some companies that failed to submit specific targets on time and were marked as "commitment canceled". Source: SBTi

When an enterprise sets a reduction target and submits it to SBTi for verification, it will be required to pay the fee, which varies from US$1,250 to US$16,750 depending on the size of the enterprise and the type of verification project.

"It's a bit like a graduation defense in college. The company writes a paper on its own carbon reduction targets and emission reduction paths according to the template and format required by SBTi. Now it has to be submitted to an expert group to review whether it is qualified. At the beginning of the review activity, the company needs to pay the relevant SBTi review expert fees based on the type of review project." said Yao Chenchen, ESG Director of JinkoSolar.

Relaxing the threshold for carbon offsetting gives green light to greenwashing

The motivation for most companies to join SBTi is simple and clear: first of all, it comes from the promotion of business orders. When large multinational companies join SBTi, they will also have stricter regulations on suppliers in the value chain.

For example, the multinational pharmaceutical company AstraZeneca has explicitly required suppliers accounting for 95% of its procurement of goods and services to join SBTi by 2025.

In addition, suppliers of Decathlon, Nike and H&M are also required to submit SBTi targets.If you don’t join SBTi, your company won’t be able to get orders from downstream manufacturers.。

On the other hand, it is also a call to enhance international influence. After all, SBTi is a global initiative, and giant companies have joined one after another, making it a comparable factor for measuring a company's carbon reduction capabilities.

“All our peers have announced that they will join, so we can’t lose,” said an ESG manager at a new energy company.

The SBTi referees issued the examination syllabus and the companies submitted their assignments voluntarily. This mechanism ran smoothly for a time.

But a huge turning point occurred on April 9 this year, when the SBTi board of directors suddenly announced plans to update the company's net zero target setting standards: companies can use environmental attribute certificates (including carbon credits) to offset scope 3 emissions.

When SBTi was first established, it prohibited companies from reducing carbon emissions by purchasing carbon credits. However, after the signing of the Paris Agreement, the demand for carbon offset projects surged, and SBTi changed from completely rejecting carbon credits to accepting some credits, but the maximum offset credit could only account for 10% of total emissions.

This year, SBTi plans to directly remove the 10% threshold, meaning companies can buy as much as they want to offset scope 3 emissions.

The relaxation of this standard is equivalent to a 180-degree turn.

It is said that the announcement also bypassed employees and advisory groups, causing the internal communications team to believe that the website had been hacked. This directly caused internal dissatisfaction, and employees even wrote a joint letter of objection asking SBTi to withdraw the announcement.

A single stone can cause a thousand ripples, and even external companies that could have benefited from it have raised criticisms.

Fashion brand H&M has previously been one of the supporters of SBTi, but in May this year,Leyla Ertur, Head of Sustainability at H&M Group, wrote directly to SBTi to express her opposition。

“Collaborative financing, plant electrification and renewable electricity development will be more expensive and complex than voluntary carbon market credits and risks leading to corporate inaction on these critical issues,” she said in the letter.

H&M's letter of objection (part). Source: H&M

On the other hand, carbon offset projects are prone to quality problems. For example, Verra, the world's largest carbon credit agency, has been in a credit crisis in the past two years, and has been questioned as to whether most of its projects are ineffective. (36 Carbon previously reported: The world's largest carbon credit company, is its credit bankrupt? | Focus Analysis)

"The SBTi board should have continued to focus on the development of standards and methods for scope 3 carbon emission reductions to address issues such as measurement difficulties, but the SBTi board tried to use carbon credits to 'solve' scope 3 emissions," said Yang Fangyi, Greenpeace's corporate carbon neutrality and forestry carbon sink project consultant.

This can easily send the wrong signal: the solution to Scope 3 carbon emissions is just buying, buying, buying.But this is not the case. Decarbonization of the value chain requires a huge amount of technological investment, and the funding gap will not be completely solved just because a company purchases a carbon offset project thousands of miles away.

“If we want to truly achieve carbon emission reductions in the scope 3 supply chain, the most effective way is to require suppliers to transition to renewable energy in a timely manner."Yang Fangyi said.

This turmoil lasted for several months. On July 2 this year, SBTi CEO Luis Amaral announced his resignation. Although he claimed that it was for personal reasons, the continuous internal and external criticism was likely the catalyst for this resignation.

The Nature of the Controversy: Do Carbon Offsets Work?

On July 30 this year, SBTi finally responded and released an updated report on its plan to revise the corporate net zero emissions standards.

SBTi did not give a clear position on the much-watched scope 3 carbon reduction plan, but only integrated some cases in the document to explore in more detail the potential role of carbon credits in scope 3 emissions. In addition, SBTi did not disclose the direction of the final decision.

The SBTi said more research is needed before a final decision is made, and the draft amendment will not be released until the end of 2024, aiming to take effect by the end of 2025.

From the essence of this dispute, it is still about the degree of recognition of carbon offset by the international community, especially the role of carbon offset in scope 3 emission reduction.

"For example, a company purchases a carbon sink project in a tropical rainforest in a certain area, but this project has nothing to do with the company's own supply chain and cannot directly contribute to the company's emission reduction process. This is the main reason why such projects are prone to controversy," said Zhang Wenquan.

Zhang Wenquan mentioned that the international community is becoming increasingly cautious about carbon offsets, and cases of companies purchasing cheap and low-quality carbon sinks and being accused of greenwashing are often reported in the newspapers, so the potential risks will become increasingly greater.

He suggested that companies give priority to emission reduction methods within their own value chains. Even when purchasing carbon offset projects, they should focus on the remaining emissions that are difficult to reduce and carefully select high-quality carbon sinks.

However, several experts interviewed mentioned that it is not scientific to directly deny carbon offset projects, as it all comes down to a question of "degree".

"Whether it is carbon offsetting or buying green electricity, although the logic of carbon reduction is different, they are all market-based carbon reduction mechanisms that are operating all over the world. This is not a bad thing in itself, because it is all paying for climate governance, but how to control it is something that needs more consideration," said Yao Chenchen.

In addition to giving priority to enterprises’ own emission reduction, Yao Chenchen believesThe referee SBTi can give more detailed status labels. For example, after an enterprise completes the carbon reduction target in Scope 3, whether it is through technological emission reduction, purchasing green electricity, or purchasing carbon offsets, different labels can be designed to avoid confusing them.

The future direction of SBTi will have to wait until the final draft of the standard is released before a conclusion can be drawn. But one clear fact is that cheap and low-quality carbon offset projects have long been the focus of greenwashing suspicion.

Faced with increasingly stringent carbon neutrality certification standards, the most important thing for companies is to do their own part well.