Target-setting overhaul offers more options for reducing Scope 3 emissions

Proposed new guidelines from the Science Based Targets Initiative (SBTi) include a significant overhaul of the system for setting and hitting Scope 3 emissions targets, one of the thorniest challenges faced by sustainability teams. 

The SBTi’s current net-zero standard requires Scope 3 to be treated in much the same way as Scopes 1 and 2: Companies must measure the emissions associated with each and begin to reduce them at a rate that puts them in line with the global goal of limiting warming to 1.5 degrees Celsius. The approach has frustrated many companies, partly because they often have limited visibility into supply chains and, as a result, struggle to measure — let alone mitigate —the emissions generated within them.

The updated standard, released earlier this week, outlined a different way of doing things. Rather than treat Scope 3 emissions as a single entity, the SBTi proposed that companies set separate targets for the value-chain activities — procurement of concrete or business travel, for example — that generate the most emissions. 

Flexible mechanisms

Crucially, the SBTi also offered a tentative blessing to an emerging emission-reducing mechanism: indirect mitigation, also known as value-chain intervention or insetting. With this method, companies help fund decarbonization projects of suppliers, such as paying farmers to use regenerative agriculture methods, and earn credits that count against Scope 3 totals. Because confirming a link with a specific supplier in a complex chain is often challenging, companies can also earn credit for interventions that take place within a “supply shed” — a group of suppliers, usually in the same region, that provides similar goods.

Take the example of a company trying to reduce emissions from steel procurement. It may have funds available for the purpose, but can’t identify the facilities that produce the steel it uses because they are too far back in the supply chain. “Many companies have Scope 3 in their accounts but don’t know who the emitter is,” said an experienced sustainability consultant who asked not to be named because he works with clients on Scope 3 matters. “If I give you an instrument to invest in mitigation, I’m expanding your options.”

Domino effect

Allowing supply-shed methods is a “very positive” step, added Patrick Flynn, founder of Switchboard, a climate consultancy. Flynn is a former global head of sustainability at Salesforce, where he helped introduce the Sustainability Exhibit, contract language that included a requirement that direct suppliers set science-based targets. While impactful, Flynn noted that this “domino” strategy, in which your supplier is supposed to pressure their suppliers to decarbonize, takes time and is less effective as you travel further back in the supply chain. Indirect mitigation, said Flynn, allows companies to move quicker.

The SBTi is now soliciting feedback through an online survey, until June 1. One issue to look for in future drafts is additional detail on the accounting rules for indirect mitigation. These rules will need to strike a balance between giving companies the flexibility to invest across a supply shed with the need to keep funding targeted to a specific Scope 3 emission. Without such a restriction, investments may end up flowing to cheaper projects that don’t help decarbonize the target activity.

The SBTi won’t have to start from scratch to craft these rules. Earlier this year, the Advanced and Indirect Mitigation Platform, which is being tested by Amazon and others, began a pilot of cross-sector guidelines for accounting for value-chain interventions. SustainCERT, a company that verifies carbon projects, now has over 30 interventions listed on its registry. 

These advances, together with feedback from companies that are struggling with Scope 3, likely motivated the SBTi’s proposed changes, suggested Sarah Leugers, chief growth officer at Gold Standard, a standards body for climate and development projects. “They’re seeing those tools emerge while also seeing how difficult it is to influence suppliers,” she said. “So they are creating flexibility.”

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