H&M Group has voiced significant concerns regarding the Science Based Targets initiative’s (SBTi) proposal to integrate environmental attribute certificates (EACs) and voluntary carbon markets (VCMs) into Scope 3 emissions management. In a letter from H&M’s Head of Sustainability, Leyla Ertur, to the SBTi Board of Trustees, the company stresses the importance of focusing on absolute emissions reductions within corporate value chains rather than relying on offsets, which could undermine genuine decarbonization efforts. H&M’s stance highlights the broader debate about the best strategies for achieving corporate net-zero targets and the role of market-based mechanisms in sustainability practices.
SBTi, since its inception in 2015, has been pivotal in promoting science-based environmental targets as a corporate standard. Its Corporate Net-Zero Standard, launched in 2021, serves as a crucial framework for evaluating and certifying companies’ decarbonization efforts. Scope 3 emissions, which include indirect emissions from supply chains and product usage, are particularly challenging to measure and manage but constitute a significant portion of a company’s overall carbon footprint. H&M’s letter argues that the proposed reliance on EACs for these emissions could diminish the incentive for companies to invest in deeper, more meaningful emissions reductions within their own value chains.
Potential Impact of the SBTi Proposal
The SBTi’s plan to allow EACs for Scope 3 emissions could significantly affect the market for energy attribute certificates, including carbon credits. This decision could extend the use of such mechanisms to thousands of companies globally, influencing the broader corporate approach to decarbonization. Notably, the SBTi has seen a substantial increase in the number of companies with validated climate targets, with figures more than doubling from 2,079 in 2022 to 4,204 by the end of 2023. This growth indicates a rising demand for robust corporate decarbonization standards and target validation services, highlighting the importance of maintaining rigorous and science-based guidelines.
H&M’s Position and Recommendations
In its communication to the SBTi, H&M emphasized that allowing EACs might weaken corporate climate commitments by making it easier for companies to opt for cheaper offsets instead of investing in genuine decarbonization within their value chains. The letter suggests that a focus on “science-based targets for beyond value chain mitigation” would be a more suitable application for VCMs, thereby ensuring that companies remain committed to substantial emissions reductions internally. H&M also pointed out the potential for collaborative financing of innovation and technology deployment to drive more effective decarbonization efforts.
Key Inferences
– Allowing EACs for Scope 3 emissions could reduce the drive for real emissions cuts within corporate value chains.
– There is a significant increase in companies adopting validated climate targets, reflecting the urgency for clear and rigorous guidelines.
– H&M proposes focusing VCMs on “beyond value chain mitigation” to uphold the integrity of corporate climate pledges.
The ongoing debate between H&M and the SBTi underscores the complexities in setting effective and credible corporate climate targets. While market mechanisms like EACs and VCMs offer flexible pathways to offset emissions, they may inadvertently deter direct investment in sustainability innovations and decarbonization initiatives within value chains. H&M’s advocacy for absolute emissions reductions aligns with the broader need for transparent and actionable climate strategies that prioritize genuine, long-term environmental benefits over more immediate but potentially superficial solutions.
