Posted on July, 11 2024

This discussion paper sets out WWF’s perspective on the Science Based Targets initiative’s (SBTi) revision of Scope 3 requirements, addressing the need for SBTi to simplify target setting, and give companies more ways to invest in emissions reductions in their value chains. In addition, we discuss the need to channel more corporate finance to the Global South and for conserving and restoring nature. 

Summary

Above all, WWF is clear that corporate climate action should primarily focus on in-value-chain emission reductions and transforming sectors and markets. Mobilizing corporate investments in their own operations and within their own value chains is most impactful, because that is where companies have the greatest incentive to act and most influence to drive deep decarbonization and systemic market transformation across sectors and regions.

Investments in in-value-chain emissions are also a proven and effective way to reduce risks, and channel substantial climate finance into value chains in the Global South and into broader nature action. Rapid emission reductions from global value chains will significantly reduce climate risks to vulnerable communities and countries, and reduce adaptation and loss and damage needs.

Many of the in-value chain investments corporates make to deliver their targets flow to the Global South via multi-national company supply chains. And SBTi’s new FLAG (forest, land-use and agriculture) standard addresses direct drivers of nature loss and will accelerate investments in sustainable agriculture and nature conservation and restoration through company supply chains.

While progressing towards net zero emissions, some companies are facing challenges setting and implementing Scope 3 science-based emissions reductions targets, often due to having complex supply chains, and limited ability to influence suppliers.

The recent SBTi board announcement saying that it would allow companies to use Environmental Attribute Certificates (EACs), including carbon credits to meet their targets, without following its own standard operating procedures, has impacted the credibility of the SBTi. This risks undermining the important role that the SBTi is playing in reducing corporate emissions and financing a decarbonized global economy. 

The SBTi must be science-based, follow good governance and be solutions-oriented to remain a credible standard for corporate climate action across all sectors and regions.

To address the challenges companies are facing, SBTi should consider an array of options that improve the feasibility and effectiveness of emission reductions, including modifying target setting methods, focusing on the most material and highest impact emissions categories, considering a wider range of metrics, refining sector pathways, improving overall operational excellence, and the targeted use of market mechanisms.

WWF supports the targeted use of some market mechanisms, such as EACs and carbon credits within company value chains, as long as the SBTi includes appropriate safeguards to ensure impact and transparent claims and reporting. For example: Energy attribute certificates for electricity, such as renewable energy credits; other ‘energy carrier certificates’ for green hydrogen, green gas or sustainable aviation fuel; ‘certified commodities’ conveying a specific emission factor, such as green steel; and insets - market mechanisms, including carbon credits and certified commodities, issued for activities inside a company’s value chain.

This will provide companies facing Scope 3 challenges more options to meet their targets, while continuing to drive market transformation of their value chains. 

WWF does not support the use of offsets - carbon credits from outside company value chains used to counterbalance value chain emissions - to meet company climate targets (except for residual emissions), because they would redirect efforts away from the investments and innovations needed for driving systemic change and deep decarbonization in companies’ value chains. WWF also opposes their use in justifying climate neutrality or net zero claims when companies are off track or miss their targets. 

However, to drive additional finance to the Global South and nature, WWF believes it would be helpful to grow a high quality and credible voluntary carbon market for companies to make additional investments beyond their value chain and to neutralize any residual emissions (those remaining emissions within a company’s value chain that are hardest to abate given existing technologies). WWF supports companies to invest in neutralizing residual emissions today through greenhouse gas removals as long as it doesn’t substitute action on in-value-chain emission reductions. 

For investments beyond their value chains, WWF encourages companies to fund different types of mitigation projects, including nature-based solutions, identify the adequate finance vehicle for each of them, and not solely rely on carbon credits as a funding vehicle.

In lieu of developed countries delivering the needed public climate finance to developing countries, some have argued that corporations should deliver the needed funding through offsets. WWF fully recognizes that companies have a role to play, but their priority must be investments in their value chain, because this is a more effective way to mobilize corporate climate finance and tackle the climate crisis. 

Voluntary corporate climate action is an indispensable element of building a net zero future. But to succeed, it needs to be complemented by government regulation and finance. Voluntary programs should not be overburdened.