This interview was originally published on the Greenbiz site here.
Tobias Parker, Director at Anthesis, had a chance to sit down with John Davies, Senior Vice President at GreenBiz, to talk about how SBTi’s new net zero standard will impact corporations. Tobias outlines how the new SBTi standard is “as rigorous as you could probably get” by calling for 90% reductions by 2040. He also touches on the differences between Scopes 1, 2, and 3, and how companies are viewing their actions within those goals. Tobias also discusses the controversy around the SBTi stating carbon offsets cannot be used, as they are currently defined, to help companies reach their targets.
Watch the full interview recording here or read the transcript below.
John: Welcome to GreenBiz studio, I’m John Davies, Senior Vice President at GreenBiz and I’m excited to be speaking with Tobias Parker, Director of Anthesis. Welcome Tobias!
Tobias: Thank you, John, it’s great to be here.
John: So, Tobias, what has the impact of the SBTi’s Net Zero Standard had upon the market in terms of helping to clarify what it means for businesses?
Tobias: It’s a really interesting question! It has been really positive and also long overdue because in reality everyone’s wanted to be net zero. Everyone’s wanted to say they’re going to be net zero for some time. That has created a huge issue in terms of understanding what net zero really means for a business. To give you an example, we do a lot of work with the Science-Based Targets Initiative, so we’ve seen this coming. But many other organisations have been reaching for definitions of net zero that have not necessarily been that robust. What that’s led to is some sort of difficult dynamics, so it’s a critical period right now.
To talk about that in a bit more detail, I went to COP26 in Glasgow, and it was really interesting to hear how the term net zero had been picked up by the activists outside. A lot of the youth movement in particular were talking about net zero being complete greenwash. That to me felt actually quite saddening. We could see the Science-Based Targets Initiative, which had just announced what this standard does and is and means for a business, and yet outside at the same moment the youth movement was saying ‘look this is just greenwash’.
When you look at the Science-Based Targets Initiative version of net zero, it’s not complete because this is a dynamic evolving space. But it is as rigorous as you could probably get and they’re really setting the standard very high here. They’re talking about absolute reductions to 90% by 2040, maybe slightly later. So that feels really robust and would actually require transformation. Many organisations would have to – in some cases totally or fundamentally – change their business models in order to achieve that. Others would have to undergo significant change in transformation as well, so it does mean complete transformation of our economy as it currently is.
And so, if that definition of net zero is the one that becomes the dominantly understood and accepted definition of net zero and organisations can achieve it, then we’re on to something. But what we also see is that because of the lead time to building up to the point where net zero from SBTi came about, there’s been a lot of claims made out there. It was still unfortunate that whilst it’s created clarity in some respects, there’s almost a battle for space here; it’s a bit like the battle for standards.
To give you an example, B Corp is a really good movement. There’s no two ways about it. We see the businesses coming in; we are a B Corp member, it’s a tough standard to hit. Now, the way they talk about net zero when you become a B Corp member; you have to pledge to become net zero as per B Corp’s definition. It’s not as tough as SBTi’s definition and so whilst the intention is good in terms of moving organisations forward, there is a question as to how we communicate that to organisations. Yeah okay, so there’s a net zero standard here and there’s net zero standard there, now this one doesn’t really, according to science, drive the level of change that’s going to be required. This one does. The risk is that organisations understand the size of the transformation that’s required and just want to make their lives a little bit easier.
The point that a lot of my colleagues make when they’re talking with clients is actually no one business can be net zero. Either we’re all net zero or we’re not; and one business saying ‘yeah we’re net zero’ doesn’t cut the mustard, because fundamentally the economy is not net zero. So, we’ve got to try and shift emphasis on to SBTi as net zero.
As an example, it was recently released by the Corporate Climate Responsibility Monitor by Carbon Market Watch, a new climate institute. They looked at 25 large businesses who pledged to be net zero which equates to 2.7 gigatonnes of emissions reduction. When they did their analysis on it what that pledge really meant was only 0.5 gigatons were actually being committed to being reduced. So, you can see the difference between pledging to be net zero and what organisations are actually planning. So overall it’s been good, but we’ve still got a long way to go.
John: Well, let’s drill down a little bit into that, how we’re going to get there. What activities are you seeing most often that companies are undertaking to move towards their targets?
Tobias: It’s not easy but we are seeing more and more businesses are measuring their footprints and setting science-based targets whether they are actually verified by a science-based targets institute or not. They’re using the methodology so that’s happening but where we get to with many organisations is you look at your scopes one and two emissions so your gas, your electricity, your transportation and you can start to figure out some plans around that: Renewable energy certificates or virtual power purchase agreements, fuel switching, et cetera. But Scope 3 is the real tough one to crack.
So many organisations take a look at this, and they get put off by what they need to do with Scope 3. We know the solutions are not straightforward but what it does do by engaging with Scope 3 – so your supply chain upstream and downstream value chain emissions – is if you take a long-term view, it allows us to bring an innovation perspective on it. And what it means is, in effect, re-engineering, re-orienting our entire value chains. So that brings into play things like circular economy, business transformation, et cetera. So, we see more and more businesses moving towards the realisation that actually to hit this target we’re going to have to reimagine things which is hugely exciting.
Another couple of things; at a slightly higher level we’re seeing things join up. Organisations doing ESG over here, they’re doing net zero over here. This stuff is coming together. And what’s bringing it together is partly a sense of climate risk. You’ve got ESG climate risk coming into inventory, coming into science-based targets, coming into net zero road mapping, coming into action plans and strategies. And so, we are seeing more businesses going on that full journey and joining these things up. So, there’s not a single activity, but a series of activities, a sort of connectivity between these different threads.
And I think probably more tactically two things I’d flag out of the many is that organisations are realising the ones who are going to make the change are the ones who are going ‘this is a governance’, ‘this is a change programme that we need here’. We’ve got to get governance in on the long term to help this organisation make the transformation that needs to be top level governance. So really getting c-suite involved in this stuff, seeing it as a strategic risk and opportunity.
It’s a bit of an old one but we’re seeing it comeback in favour, and this is internal carbon pricing. Really interesting! A lot of companies went down the route of getting internal carbon price some years ago because it got them a higher CDP score, but it never got used. Now because of this climate risk view, it’s a tool that the finance guys are going ‘okay we can actually start to internalise some of this into our financial and strategic decision making’. So, we’re seeing a real resurgence of interest in internal carbon pricing, but not as a sort of tick box exercise, but as a strategic and financial management tool to use. So, you know, there’s definitely an evolution of maturity happening there which is encouraging.
John: We’ve read recently you’ve merged Climate Neutral Group with Anthesis. So how has the Science-Based Targets initiative net zero methodology standard impacted the market for offsets?
Tobias: This comes to a slightly controversial topic and goes back to our conversation earlier about COP26 and the role of offsets. Science-Based Targets Initiative, the gold standard of these sort of climate frameworks, have been consistent saying you cannot use offsets as they’re currently defined to help you meet your targets. So, we agree with that, however what they’ve recognised so against comes back to no one business can be net zero. We can only all be net zero together.
Science-Based Target Initiative has recognised the benefits and the value the systems-wide value of carbon projects, carbon reduction, carbon avoidance and indeed carbon removals projects outside the value chain, because some people just can’t afford to do it. So that financial transfer into projects that across the system lead to greenhouse gas reductions is a good thing. So, they’ve acknowledged that within the net zero standard.
There’s a lot of nervousness in the communities about what was going to come out and rightly so there’s also measures in place to improve the standards. But our clients are looking for this stuff. They want to be investing beyond value chains and so we’re really pleased to bring in the climate neutral group who have deep subject matter expertise in this space and they’ve created various quite innovative certification processes for products. That then brings us back to the sense of thinking about full value chains, thinking about green design, thinking about the materials that go in, thinking about how products are put together. So, for us, the market has really grown significantly post COP and with the launch of the standard, because there’s an acceptance there are some good things that go with offsets. But they have to be done properly and so we definitely welcome initiatives such as the task force for scaling voluntary carbon markets and the like. So overall it’s been good.
John: Great well I know there’s a lot more we can unpack here but our time is getting close to done. So, I’ve been speaking with Tobias Parker, Director of Anthesis. Thanks, Tobias.
Tobias: Thank you very much, John, good to talk with you.
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