June 12, 2024
The public battle over the direction of the Science Based Targets Initiative (SBTi) as it considers the role and integrity of carbon offsets and other market-based solutions is extremely important.
The dispute also has larger significance: it is also a proxy war reflecting the growing tension between slow and steady business progress on the one hand, and the need for more profound change based on what climate science tells us is needed on the other.
It is highly likely that this tension will grow in the years ahead. Almost halfway through the “decisive decade” during which it’s broadly recognized that the world needs to reduce emissions by 45 percent compared to a 2010 baseline, two undeniable realities are clashing.
First, companies, investors, governments and other key actors have made commitments and are working toward them, in ways that were unimaginable a decade ago. This is to be celebrated and advanced.
At the same time, emissions are not only far off the Paris target, but they also remain above 2010 levels, and continue to increase, albeit by a slowing rate.
The SBTi battle is unfolding amidst these two competing realities, as the debate between “pragmatism vs. ambition” intensifies.
We should not be diverted by the breathless reporting on who said what to whom. The real question is more fundamental: how will we achieve the level of progress, that’s needed within existing structures and initiatives, to achieve the emissions reductions the science makes clear are a non-negotiable?
The dawn of the 2020s saw the explosion of commitments and collaborations, promising new efforts to make good on the vision of the Paris Agreement. A few years, one pandemic, a disrupted energy market, and multiple geopolitical conflicts later, the reality of what it will take to deliver on these goals is forcing hard decisions.
In short, the decisive decade is in some ways becoming the dilemma decade, as companies come to grips with significant tradeoffs arising from new developments and perspectives.
Reporting and Disclosure: The rise of CSRD and other mandatory reporting requirements is producing more transparency, enabling the allocation of capital to the most sustainable companies, and ideally, comparability in reviewing companies’ relative performance. These new requirements are also diverting time and money away from performance towards measurement, creating disincentives for companies to make ambitious commitments, and putting pressure on “social” issues where verification is more challenging.
Scope 3: On a related front, the need to address and report on Scope 3 emissions is clear: that’s where most of large companies’ emissions are. Many companies have made ambitious Scope 3 commitments as part of their net-zero strategies. Making good on these commitments, however, depends on forces that are sometimes out of the control of the companies making them. Slow progress towards a cleaner energy system in Southeast Asia, amongst other regions, long timelines for decarbonizing hard to abate sectors, and supply chains that often fail to create supplier incentives to decarbonize all mean that progress on Scope 3 is halting at best.
Unknown Unknowns: The iconic—some would say notorious—formulation by former US Defense Secretary Donald Rumsfeld comes to mind as well when considering dilemmas. The rise of generative AI has sparked energy hungry and emissions producing data centers that have laid waste to some companies’ climate targets. Can AI also deliver climate benefits? Absolutely, but the race to develop and deploy new technologies has sparked a problematic “emissions now, reductions later” mindset.
In short, the tradeoffs reflected in the simmering debate within the SBTi are also found elsewhere. Their origin is actually quite simple: they reflect the non-linear nature of the energy transition, and the constant battle between pragmatists and those calling for all out ambition.
The tension between pragmatism and ambition will always be present. For the time being, the pragmatists appear to have more momentum on their side, not least as companies are adjusting to the environment where regulatory compliance plays a new role. The dilemmas companies face are real. We can handle a short pause to learn from these dilemmas, consolidate gains, and draw new lessons.
While that may seem rational in the immediate term, it is not sufficient to meet the challenge to make decisive, and rapid, progress.
The debate on how to reconcile the need for maximum mitigation with offsets with real integrity is important not only to the SBTi; it also represents a broader battle between ambition and pragmatism. We ultimately need both: without ambitious—and public—goals, progress will be insufficient. Without the hard work of translating the goals into action; they will be nothing more than words on a page.
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