Companies are making net-zero emissions targets right and left. Some say they are already carbon neutral or net-zero, but until Thursday, there was no global standard for setting credible net-zero targets backed by climate science.
The Science Based Targets initiative’s (SBTi) net-zero emissions standard has rigorous requirements in line with the Paris Agreement’s pathway for limiting average global temperature rise to below 1.5 degrees Celsius.
Many experts deem transportation-related emissions “hard to abate” because of the reliance on fossil fuels, higher upfront costs for some sustainable solutions, long asset replacement cycles and technological constraints.
During the net-zero standard launch Thursday, several industry experts echoed the need for “radical collaboration” among competitors, governments and supply chain partners.
SBTi’s standard will not allow for heavy reliance on offsetting emissions to reach net-zero. Most companies will have to cut direct emissions (scope 1), indirect emissions from electricity and heat (scope 2) and emissions along the supply chain and from end users (scope 3) by 90% to 95% by or before 2050.
The scope of the challenge
Supply chains are a major source of scope 3 emissions for retailers and other companies, but getting suppliers, logistics providers and carriers on the same page is no easy feat. Companies have much more control and influence over their scope 1 and scope 2 emissions.
Under this standard, companies will be required to include 95% of scope 1 and 2 emissions and 90% of scope 3 emissions, a significant jump from the 67% the initiative has required for other targets.
“Scope 3 emissions make up the vast majority of most firms’ greenhouse gas inventory, yet they’re the most difficult to monitor because they occur outside the boundary of company operations,” said Tyler Cole, director of carbon intelligence at FreightWaves.
More than 90% of Pepsico’s (NASDAQ: PEP) emissions come from scope 3 emissions along the supply chain, Noora Singh, senior director of sustainability at the company, said during the SBTi net-zero emissions standard launch.
Singh said scope 3 is where Pepsico faces more emissions-reduction challenges, but the company is engaging with its supply chain partners and striving to bring suppliers on the net-zero journey, she said.
“Roughly 600 companies have set science-based net-zero emissions targets, and only seven have approved net-zero targets under the new standard. These leaders are primarily global consumer packaged goods, retail or health care companies with massive tiers of suppliers. As they implement strategies to reduce emissions, the small to medium businesses in their global supply chains should expect to provide emissions data in the very near future,” Cole said.
Carbon offsets, mitigation, neutralization
Getting as close to zero emissions as possible and understanding the scope of the climate crisis is essential, said Doreen Stabinsky, professor of global environmental politics at the College of the Atlantic, during the launch event. She said the mechanisms to remove carbon from the atmosphere have limits.
Some transportation and freight companies already market themselves as carbon neutral or net-zero emitting companies because they purchase carbon credits to offset emissions. But there are many criticisms of carbon offsets, including double counting and lack of transparency.
To comply with SBTi’s net-zero standard, unavoidable emissions will have to be mitigated outside of company operations or neutralized using credible strategies. SBTi plans to create guidelines for ensuring accountability and transparency for potential emissions mitigation measurement, reporting and verification.
The need for a net-zero emissions standard
The planet has already warmed more than 1 degree C, and every tenth of a degree of additional warming will exponentially increase the chances of sea level rise and extreme weather, such as droughts, fires, heat waves and floods, Stabinsky said.
The risks of inaction are getting higher and higher within companies as well. Competitors, customers and shareholders are putting pressure on companies to act, Emily Hickson, head of advocacy at corporate leadership organization The B Team, said during the launch event.
She said the government policies needed to promote drastic climate action have been lacking, but regulation is stepping up.
“That enabling policy is coming, and companies need to get ready for it,” Hickson said.
The net-zero emissions standard gives industry a chance to create change alongside or ahead of government regulation.
This announcement comes days before the approaching COP26 climate conference, which begins in Glasgow, Scotland on Sunday. Thousands of people will be tuning in to see how governments will respond to climate change.
Emissions targets for 2050 are meaningless if we don’t act this before 2030, Stabinsky said, adding that, “This decade is the critical decade to act.”