There’s a big difference between an airy assertion that a company has a net zero goal and an audited, verified and mathematically rigorous commitment to a Science-Based Targets Initiative decarbonisation pathway. Now the SBTi is taking it up another notch and moving the goalposts across the value chain with the proposed Corporate Standard Net Zero V 2.0.
The SBTi Corporate Net Zero Standard V1 has been the go-to for entities looking to make credible, bankable claims around their decarbonisation progress. Now, the ante has been upped, with the SBTi releasing the draft of Corporate Net Zero Standard V 2.0 for consultation.
Some of the big changes include requirements for separating out scope 1, scope 2, and scope 3 emissions in terms of target setting. The requirements around scope 3 reporting and targets are also proposed to be mandatory for all large and medium businesses in high-income countries, including Australia.
Spotlight on the value chain
The detail around scope 3 has also been made more rigorous. Under V 2.0, a coal miner, for example, is liable for the emissions caused by someone overseas combusting the exported fossil fuel. And biomass energy won’t qualify as zero carbon energy due to the carbon emissions associated with the biomass value chain.
Some scope 3 line items shine a light on the degree to which carbon load shifting has been occurring.
For example, the capture and re-use of CO2 from industrial facilities for use in the carbonated beverage industry has been a bit of a go-to in the “carbon capture and storage will save us” narrative. But CO2 emitted from opening carbonated beverages is now an item within the minimum reporting boundary for the food and beverage industry, which includes manufacturers and suppliers, and also potentially hotels and hospitality.
(In case you’re wondering, there are some estimates around that cite an average of two to three grams of CO2 per standard can of carbonated beverage, which sounds tiny until it’s scaled up across annual consumption of everything from sparkling water and beer through to energy drinks and sugary soft drinks.)
Boundaries and what is material
Under V 2.0 a scope 3 item is material if it comprises at least five per cent of the total scope 3 emissions. Targets for reduction are to be set, and as an entity proceeds to reduce those emissions, other categories will reach the five per cent threshold within the remaining scope 3 and will then need to be addressed.
So, there’s a progressive move towards whole of value chain decarbonisation.
The definition of value chain is itself comprehensive and takes a whole of life approach to encompass “the activities, resources and relationships the undertaking uses and relies on to create its products or services from conception to delivery, consumption and end-of-life.”
Where primary data on emissions for key activities in the value chain is lacking, the new standard proposes entities can lean into “non-emissions metrics and targets” for example, a target for procurement from entities that are aligned with the 1.5-degree trajectory, or a target for share of revenue generated from “net-zero aligned products and services.
“This draft standard maintains its focus on the mitigation hierarchy by prioritising the reduction of emissions across company operations and value chains” the standard states.
“At the same time, this draft acknowledges the urgency of addressing emissions released into the atmosphere today and the critical role that companies can play in mobilising finance for mitigation activities beyond their value chain.”
Architects may need to consider the operational emissions of the buildings they design
For property owners, builders and developers, tenant emissions in operational buildings will be a major line item. The new standard also proposes that those involved in the design of buildings such as architects, will ideally consider the operational emissions of projects within their own scope 3.
Franchise owners will be accountable for the upstream and downstream scope 3 emissions of all franchisees if the franchisees have minimal or no control over their procurement process.
Why 1.5 degrees is still relevant
The introduction to the draft notes that the world “breached” the 1.5-degree average global temperature rise target in 2024, nonetheless, the SBTi retains this for benchmarking, target-setting and reporting. The thinking is that if enough entities adopt the pathway and act quickly, we can restrain further temperature increases.
- Read the new standard and have your say here