For organizations looking to meet net-zero goals, the Science Based Targets initiative (SBTi) is widely recognized as the go-to source for guidance on how to set targets, and how to start taking action. Some have been critical of SBTi, however, for its lack of clarity on how and when companies can use carbon offsets, and claim that the resulting confusion stifles much needed investment in the carbon market.
While in Davos for the 2022 World Economics Forum, SBTi CEO, Luiz Amaral was asked how the organization was planning to clarify its stance on carbon offsetting given the market-shifting effect their recommendations have. He answered that the Beyond Value Chain Mitigation (BVCM) guidance being released in Spring of 2023 is intended to provide that clarification, a summary of which is outlined in a blog post. It urges companies who have – and have not – set science based targets to act immediately on BVCM emissions, stating it is necessary if society is to have any chance of reaching net-zero by 2050.
Defining Beyond Value Chain Mitigation (BVCM)
Beyond value chain mitigation represents all the investments and actions a business takes beyond its Science Based Targets (SBTs) to mitigate emissions outside of its value chain.
What should business sustainability leaders take away from this guidance?
- Mitigating emissions outside your value chain immediately is a “no regrets” action
- BVCM investments should support high-quality carbon sequestration projects which include, but are not limited to, removals
- Nature-based solutions are critical to meeting near-term BVCM carbon sequestration needs
For organizations seeking to make the necessary investments in BVCM outlined by SBTi, the elephant in the room is risk. Purchases of nature-based offsets slowed in the latter half of 2022 due to both economic constraints and a lack of clarity about quality in the voluntary market. If done right, BVCM recommendations combined with high-quality carbon offsets can restore confidence in voluntary markets, and specifically nature-based solutions, by providing clarity and signal in the market.
In this blog, we take a closer look at what constitutes Beyond Value Chain Mitigation, how this guidance clarifies SBTi net zero recommendations, and what next steps sustainability leaders can take.
BVCM is taking on a more prominent, essential role
Under the Net-Zero Standard, setting near- and long-term emission reduction targets and meeting those targets are the priority action for companies. In addition, the standard recommends that companies should go above and beyond their value chain emission reductions now and contribute to reaching societal net-zero through investments and/or actions that further avoid or reduce emissions, or remove and permanently store carbon from the atmosphere. Reducing a company’s emissions is essential in the transition to global net-zero; with mitigation outside of its value chain recommended to accelerate the global transition.
SBTi’s stance on BVCM has significantly evolved since the Net-Zero Standard was issued in 2021, stating in September 2022 that BVCM is an essential component to staying below 1.5°C. SBTi recognizes that without significant corporate BVCM action to protect vital carbon sinks now, even if every company reduced their emissions to net-zero, there is no pathway to staying below 1.5°C. They have also clarified that BVCM is not limited to carbon removals, emphasizing that emissions reduction and avoidance actions are critical and urgent now and that the Standard recommends that companies focus on “securing and enhancing carbon sinks to avoid the emissions that arise from their degradation.”
How BVCM fits into the Net-Zero Standard
Beyond value chain mitigation can be visualized as part of the Net-Zero Standard in the framework SBTi provides in the figure below. The significant pivot for sustainability leaders is that BVCM can take place throughout the duration of abatement efforts. The graphic is also helpful for clarifying the differences in scope 3 emissions removals versus the recommendation for abatement or removals beyond a company’s value chain.
Further clarification on avoiding and removing carbon
Carbon removals are remedial actions that physically draw down carbon from the atmosphere and permanently sequester it. Removals come in technological forms, like direct air capture, and also in natural forms. Afforestation (introducing trees in a previously unforested area), reforestation (restoring degraded forested ecosystems), restoration of degraded mangroves, coastal areas, wetlands, and prairie ecosystems, restorative agriculture, and improved land management are examples of nature-based carbon removals.
Emissions avoidance and/or reductions are actions that keep carbon from getting into the atmosphere in the first place. They include actions that protect and/or enhance biogenic carbon sinks – terrestrial ecosystems (forests, grasslands, wetlands, marshes, peatlands, and soils), coastal ecosystems (salt marshes, mangroves, estuaries), and marine ecosystems (oceans, seagrass beds, kelp forests) that have the ability store a great deal of carbon. Examples of emissions avoidance/reduction actions include conservation initiatives that protect intact healthy ecosystems preserving the existing carbon sink. Interestingly, improved forest management (IFM) projects can drive impact from both the avoidance of emissions by avoiding or delaying planned harvests, and from the removal of emissions by enhancing the forests ability to remove more carbon from the atmosphere.
Both carbon removals and emissions avoidance are critical to meeting our climate goals. Changes to BVCM recommendations highlight this need, and are a big win for nature and the planet. As a result, we could see billions of dollars of investment in the coming years to nature-based solutions, supporting healthier forests, wildlife habitats, and the communities dependent on those ecosystems.
Taking action based on changes to BVCM recommendations
Up until now, companies who align with the SBTi Net Zero Standard have focused on value chain emissions first, only pursuing mitigation through carbon offsets until they had completed reductions within their value chain. But achieving reductions goals will take a lot more time and carbon offsets provide near-term opportunities for BVCM. In addition, forward thinking companies are investing in BVCM now to ensure that the supply of quality removals will be there when they will need to rely on them for their residual emissions.
This pivot in BVCM recommendations surfaces the need for a twofold strategy, where businesses take action immediately by pursuing value chain emissions reductions and investing in carbon sequestration simultaneously to address unavoidable emissions in the meantime. It also encourages a greater scope of mitigation, urging businesses to think beyond their own targets and contribute to the broader societal goals.
Critically, along with the changes to both the urgency and types of mitigation activities needed, SBTi will expect all companies engaging in BVCM to report annually on the nature and scale of their BVCM involvement. That is, how much was spent and what the funds were used for. Transparency around the use of BVCM in relation to emissions reductions is key to building trust that companies are prioritizing their own value chain emissions reductions above offsets.
How should climate leaders interpret this?
For businesses looking to act on BVCM today:
- Prioritize the assessment of emissions beyond your value chain
- Find investment opportunities in high-quality carbon sequestration
- Understand the risk associated with different project types and mitigate with a diverse approach
- Begin sourcing high-quality carbon credits that prioritize near-term climate impact
Ensuring investment in high-quality solutions
With increased focus on nature-based solutions for near-term action, BVCM investments should be made with careful attention to quality. Consider dimensions like the additionality of a project, its potential for leakage, and the durability of its impact as well as the potential for co-benefits to both wildlife habitat and communities.
Ultimately, we can create climate impact with the speed and scale our planet needs. With innovations in measurement and verification technology, credit methodologies and certification standards, we can ensure these BVCM investments are fully realized.