Net-Zero: Urgent Beyond Value Chain Mitigation Is Essential
13th Sep 2022
The Science Based Targets initiative’s (SBTi) Net-Zero Standard is the world’s leading framework for setting corporate net-zero targets in line with climate science. It sets out clear abatement (i.e. value chain emission reduction) requirements, clarifying that most companies are expected to align their near-term emissions reductions with 1.5°C and make reductions of at least 90% through long-term science-based targets to reach net-zero before 2050.
The Standard also strongly recommends that companies take immediate action above and beyond their science-based targets to contribute to reaching global net-zero through beyond value chain mitigation (BVCM). BVCM refers to mitigation action or investments outside of a company’s value chain. This includes activities that avoid or reduce greenhouse gas emissions, and those that remove and store greenhouse gasses from the atmosphere. For more information, read our BVCM FAQ.
To support companies’ BVCM activities, we were pleased to announce in the first installment of our BVCM blog series that the SBTi will publish a BVCM guidance paper in 2023. However, due to the urgency of the issues at hand, this blog outlines no-regrets actions that companies can take now, with a focus on important natural ecosystems such as tropical forests and peatlands and the need to scale up nascent carbon removal technologies.
It should be noted that these suggestions are not necessarily intended to count towards neutralization to reach net-zero at the corporate level, but to contribute towards reaching the societal net-zero goal.
Defining credible corporate net-zero
Over the last decade, there has been increased acknowledgement by the public and private sectors – driven by the science – that companies must contribute significantly more to global climate mitigation efforts. As such, the SBTi was launched in 2015 to develop robust methodologies based on the latest and best science for how much companies should reduce value chain (i.e. scope 1, 2 and 3) emissions to be consistent with the Paris Agreement goals.
As the warnings from climate science have increased in urgency, both the private sector and the SBTi have been compelled to adapt. The IPCC has stressed the need for society to reach net-zero by mid-century to preserve a decent chance of keeping global temperature rise below 1.5°C. This has led to an influx of net-zero commitments - more than 90% of global GDP is now committed to net-zero. But not all net-zero targets and commitments are created equal - in fact, self-declared net-zero claims are often woefully inconsistent and based on variable metrics.
In response, the SBTi launched its Net-Zero Standard in October 2021 to bring credibility and consistency. More than 1000 companies are now committed to securing SBTi-validated science-based net-zero targets.
Need to act beyond value chains
The principle at the heart of the SBTi’s Net-Zero Standard is the mitigation hierarchy. This hierarchy says that companies must prioritize value chain emission reductions ahead of actions or investments to mitigate emissions outside their value chains to achieve net-zero. However, the Standard also explicitly states that “companies should go further and invest in mitigation outside their value chains now to contribute towards reaching societal net-zero”. This means that while absolute emissions reductions must be prioritized, companies must also invest in BVCM to help the global economy align with 1.5°C and net-zero.
It is important to understand that BVCM includes but is not limited to carbon removals. While permanent removals are necessary to neutralize residual emissions at the net-zero end date (e.g. 2040, 2050), investments in reducing and avoiding emissions are critical right now. In fact, the Standard recommends that businesses focus on securing and enhancing carbon sinks (terrestrial, coastal and marine, etc.) to avoid the emissions that arise from their degradation. Examples include purchasing high quality, jurisdictional REDD+ carbon credits that support countries in raising the ambition on, and in the long-term, achieving their nationally determined contributions. There is also a critical need for companies to invest in nascent greenhouse gas (GHG) removal technologies (e.g. direct air capture (DAC) and storage) so that the technology is available to neutralize residual emissions at the long-term science-based target date.
Action on tropical rainforests and peatlands is vital
While tropical forests constitute less than 7% and tropical peatlands less than 1% of the earth’s terrestrial surface, they represent a significant portion of total carbon emissions and sequestration. The land sector - including tropical forest and peatlands - could provide 30% of the mitigation needed for 1.5°C by 2030. However, nature-based solutions that could protect the world’s tropical rainforests and peatlands receive just 3% of total global climate finance and the United Nations Environment Programme (UNEP) estimates that financing must triple by 2030 to provide a chance of staying below 1.5˚C. The result of this lack of finance is sadly evident: 3.75 million hectares, an area the size of the Netherlands, of primary tropical forests were destroyed in 2021 releasing 2.5Gt CO2 (more than the annual fossil fuel emissions of India).
Humanity has little to no chance of avoiding the catastrophic impacts of climate breakdown unless it finds a way to end deforestation this decade. Even if every company adopted and implemented a science-based target, there are no current trajectories for staying below 1.5˚C without protecting the world’s remaining tropical forests.
The SBTi will issue the Forest, Land and Agriculture (FLAG) guidance in September 2022, addressing deforestation and peatland conversion within a company’s value chain, but significant land use change occurs outside of the supply chains of companies with science-based targets and must also be addressed. The SBTi recognizes this and strongly encourages companies to invest in BVCM, including tropical forest protection and peatland restoration, in the transformation to net-zero.
While it is encouraging to see some companies already taking climate action beyond their value chains, unfortunately the uptake of this recommendation has been slow. The urgency of this decisive decade is already well upon us and these efforts must be scaled in the coming months and years to avoid the impacts of catastrophic climate change.
Scaling carbon dioxide removals
Although carbon dioxide removal (CDR) cannot be perceived as a substitute for deep emission reductions, according to the IPCC Sixth Assessment Report, “the deployment of CDR to counterbalance hard-to-abate residual emissions is unavoidable if net zero CO2 or GHG emissions are to be achieved”. Even under the most ambitious scenarios, a significant level of CDR is still required to reach net-zero.
Currently, the durable CDR market is in its infancy. Demand from corporates is increasing, but supply is limited. According to recent research the demand for technical CDR by 2030 is projected to lie between 30.7 - 623 MtCO2 per year, resulting in a total market size of $3.6 - $56 billion. Despite this, supply is projected to lie between 210 - 450 MtCO2, which under a worst case scenario could result in a shortfall of 413 MtCO2.
New initiatives are set to make an impact
Fortunately, some new initiatives are beginning to have an impact. For example, the Lowering Emissions by Accelerating Forest finance (LEAF) coalition, the largest-ever public-private effort to protect tropical forests at the jurisdictional level, mobilized $1 billion of financing in 2021 to halt deforestation.
The recently announced Frontier is an advance market commitment (AMC) to buy an initial $925M of permanent CDR by 2030. It aims to accelerate the development of CDR technologies by guaranteeing future demand.
The Global Peatlands Initiative is an effort by leading experts and institutions to save peatlands as the world’s largest terrestrial organic carbon stock and to prevent it being emitted into the atmosphere
In 2017, Wetlands International launched the Indonesian Peatland Partnership Fund, also called “Dana Mitra Gambut Indonesia (DMG-Indonesia)”, which supports partnerships between local NGOs and communities to restore and sustainably use peatlands.
Although initiatives like this are promising, there is still much more investment needed to reach net-zero before 2050.
Please consider these examples as BVCM investments that do not necessarily count towards neutralization, but will contribute towards society reaching the net-zero goal.
The time to act is now
The SBTi is conducting research to develop guidance for BVCM for release in 2023. However, a rapid scale up of actions within and outside of corporate value chains is required in a period of months, not years.
We urge all businesses to act immediately. All companies must reduce value chain emissions in line with science, but we strongly encourage companies to go beyond this and take urgent action to mitigate emissions outside their value chains. We hope these no-regrets options to invest in tropical rainforests, peatlands and CDR will guide investment decisions. By using this dual approach of science-based targets and BVCM, companies can align with 1.5°C and play their part in achieving a net-zero global economy before 2050.