On the use of environmental attribute certificates for Scope 3

In early April, the Science Based Target initiative (SBTi) Board of Trustees released a statement on the use of environmental attribute certificates for Scope 3. The statement caused turmoil within the industry and reactions have been mixed – some welcome it as a potential way to give companies flexibility and directly finance climate solutions, while others worry it will overshadow the need for urgent emission reductions in companies’ own value chains. SBTi CEO Luiz Amaral recently shared a blog to reinstate SBTi’s commitment to their governance structure and to call industry stakeholders to engage on the topic.

This highlights the ongoing debate on the best way to incentivize emission reductions from companies. We recognize the challenges corporates have in decarbonizing their value chains and their need for support and clarity around their Scope 3 action. Our research from 2023 showed that only 52% of companies in Europe and the United States feel fully confident about future Scope 3 regulatory changes, with unclear accounting standards and lack of incentives cited as barriers to corporate Scope 3 action. Meanwhile, for most companies Scope 3 emissions represent more than 75% of their total emissions, meaning that reducing them is fundamental to any Net Zero strategy.

We believe there is a need to clarify the role that high-quality environmental attribute certificates (e.g. carbon credits, Sustainable Aviation Fuel, Renewable Energy Certificates, Scope 3 Impact Units) can play in a credible Net Zero commitment. We look forward to engaging in the market to establish a credible framework for the use of environmental attribute certificates that follows the mitigation hierarchy, prioritizing direct emission reductions and removals in corporate value chains while potentially allowing the use of environmental attribute certificates as an additional or interim solution. Environmental attribute certificates, such as carbon credits, can be one tool among many to achieve faster emission reductions, but they are not expected to be the primary approach endorsed by SBTi. We need clear rules and safeguards for their use that give companies clarity, as well as balance a strong vision for science-based Net Zero with the need for urgent action.

The ongoing discussion also opens the door to evaluating the role of environmental attribute certificates which are embedded in the value chain. Impact Units, developed by SustainCERT, are verified greenhouse gas (GHG) outcomes from value chain Scope 3 interventions. They enable companies to allocate and (co-)claim carbon reductions or removals in their Scope 3 reporting and are allocated based on SustainCERT’s integrated Life Cycle Assessment (LCA) framework and proof of sourcing requirements. The key difference between Impact Units and carbon credits is that an Impact Unit is always linked to the supply chain of a company, whereas carbon credits can be bought from project developers in different locations without a direct link to the reporting company. Additionally, Impact Units can potentially be incorporated into the company inventory.

Third-party verification remains a key aspect of any potential use of environmental attribute certificates to safeguard integrity and ensure real emission reductions and removals. We work every day to bring credibility and trust to climate impact through our work on verification and certification of carbon credits and value chain interventions.

We need to move with urgency on climate solutions. Clarifying the role of environmental attribute certificates in Scope 3 reporting can incentivize funding to market-based climate solutions, provided the right safeguards are in place. We look forward to following how the discussion develops in the coming months.