Net-zero pledges have not just seen enormous popularity among corporates, they were also a key topic at the COP26 in Glasgow last month. According to the Net Zero Tracker, 33% of the G20’s largest companies by revenue have set net-zero targets until 2050 and while net-zero pledges covered just 19% of the global economy in 2019, they now cover nearly 70%. So far, formal standards surrounding the target and the ways to reach it have been lacking, which led to the Science Base Targets initiative’s (SBTi) development of the Net-Zero Standard, which was officially launched mid-November.
What is the difference from the existing 1.5°C trajectory?
In order to align with the standard, it is mandatory to commit to carbon neutrality by 2050, as detailed by the Paris Agreement. While the existing SBTi 1.5°C Standards only defined an emission reduction trajectory until 2030, the new Net-Zero Standard distinguishes between near-term (until 2030) and long-term targets (until 2050). This distinction between short and long-term targets is a much needed development following the rapid growth in corporate net-zero pledges in recent years, allowing companies to begin to credibly align with and verify long-term commitments while retaining accountability for shorter-term progress.
Furthermore, net-zero targets must encompass emissions along the whole value chain, including indirect Scope 3 emissions, in the long term targets. As for short term targets, scope 3 emissions should continue to be included if they constitute more than 40% of total emissions. Only a small share of remaining emissions can be compensated through carbon offsets which permanently remove equivalent volume of CO2. The SBTi provides guidance on the maximum permitted use of offsets as between 5-10% of total emissions, which should be limited to residual emissions which are not possible to eliminate.
For most companies, the new standards will require a deep de-carbonisation (90-95% across scopes 1, 2 and 3) and a structured approach to target-setting both for the near as well as the longer term. This could pose particular challenges to sectors that are currently heavily reliant on carbon offsets and those for which the GHG protocol guidance is currently being updated, including forestry, land-use and the agricultural sector. Lastly, the Net-Zero Standard implores companies to follow the mitigation hierarchy, prioritising reducing their own emissions and those of their value chain ahead of investing in climate change mitigation projects elsewhere.