On April 9, 2024, the Science Based Targets initiative (SBTi), a significant organization focused on aligning corporate environmental sustainability actions with global targets to limit climate change, announced plans to expand the use of environmental attribute certificates, such as emissions reduction credits, in tackling Scope 3 value chain emissions as part of its corporate net-zero target-setting standard.

Following a six-month consultation, SBTi shared a communication outlining updates to the Corporate Net-Zero Standard that permit the use of some “Environmental Attribute Certificates,” including carbon credits, to meet Scope 3 emissions reduction targets.

The new decision by the SBTi Board of Trustees follows the organization’s earlier announcement this year about plans to revise the Corporate Net-Zero Standard to provide additional guidance on tackling Scope 3 emissions.

SBTi was established in 2015 with the goal of making science-based environmental target-setting a standard corporate practice. Its core functions include defining and promoting best practices for emissions reductions and net-zero targets in line with climate science, providing technical assistance to companies setting science-based targets, and offering independent evaluation and verification of corporate emissions reduction targets.

In 2021, SBTi launched the Corporate Net-Zero Standard, used to assess and certify companies’ decarbonization commitments to achieve net-zero emissions and serve as a plan for companies to set science-based climate targets. The initial standard criteria required science-based net-zero to achieve a 90-95% decarbonization by 2050 and to neutralize emissions that could not yet be abated.

Scope 3 emissions, which occur in value chain areas outside a company’s direct control, such as the supply chain or raw material use, are often the most challenging to measure and manage. Additionally, Scope 3 emissions often constitute the majority of emissions for many companies. According to a call for evidence published by SBTi in September, environmental attribute certificates could include documents for other energy carriers such as electricity or green hydrogen, emissions reduction credits, or products with a specific emissions factor like green steel.

In its statement, SBTi acknowledged ongoing discussions around the topic but affirmed that when properly supported by science-based policies, standards, and procedures, the use of environmental attribute certificates to reduce Scope 3 emissions could serve as an additional tool in combating climate change. As a result, SBTi has decided to expand the use of environmental attribute certificates to achieve further reductions in Scope 3 emissions beyond current limits.

The decision could potentially have significant implications for markets dealing with energy efficiency certificates, such as carbon credits, and could lead to their broader adoption globally.

SBTi reported that the number of companies with science-based climate targets had doubled in the past year, reaching 4,204 by the end of 2023, compared to 2,079 in 2022. The organization has announced a significant scaling effort to meet the increasing demand for corporate carbon reduction standards and target verification services.

According to the revised standard, the use of energy attribute certificates will be limited to reducing Scope 3 emissions, and the Board has indicated that “specific safeguards and thresholds as well as rules” will be in place for these certificates. Additionally, SBTi stated that it will not be involved in the verification of carbon credits, leaving that activity to “other better-positioned” organizations.

In addition, SBTi announced that it plans to release a draft outlining the basic rules, thresholds, and safeguards for the potential use of environmental attribute certificates, with a target release date of July 2024.