Why has H&M Reignited Row Over SBTi's Carbon Offsets Stance?

Clothing and lifestyle company H&M has become one of the first major firms to directly criticise the Science-Based Targets initiative for its stance on carbon offsetting.

H&M Group’s Head of Sustainability Leyla Ertur has written to SBTi to oppose its potential move to allow the use of environmental attribute certificates for abatement purposes in Scope 3 – specifically through voluntary carbon markets that occur outside corporate value chains.

In the letter to the SBTi’s Board of Trustees, she writes that it “weakens corporate climate pledges and makes real decarbonisation efforts within value chains less attractive”

Making decarbonisation less attractive

The letter leaves no doubt about H&M’s disappointment at SBTi – a feeling that is likely to be shared by other businesses, following the surprise announcement in April.

Leyla adds: “We firmly believe the priority for any climate strategy should be to take action within corporate value chains to reduce absolute greenhouse gas emissions.

“We have two main concerns with the statement. First, the decision weakens corporate climate pledges and makes real decarbonisation efforts within value chains less attractive.”

She says that allowing companies to replace decarbonisation action with voluntary carbon market interventions would “deter the investments and innovation we need to achieve systemic change”.

Leyla adds: “For example, collaborative finance, factory electrification and renewable electricity development in challenging markets would be more expensive and more complex than voluntary carbon market credits and would risk leading to inaction from companies on these crucial topics.”

Undermining fundamental climate principles

Leyla said the second major objection is that moving away from a robust scientific foundation and a governance structure that allows for transparent and independent science-based standards would “undermine principles that we believe are fundamental for real climate action”.

She adds: “Aside from these concerns, we believe there is an opportunity to allow robust market-based mechanisms within corporate value chains.

“Defining the guardrails, thresholds and principles for these could greatly accelerate actual decarbonisation within corporate value chains by making collaborative financing of innovation and technology deployment less complex.”

How did the controversy blow up?

The announcement that has provoked so much consternation came in April, when the SBTi’s Board of Trustees made a statement about  the use of controversial carbon credits as a way for big businesses to offset their emissions and hit net zero targets.

In the key part of its statement, it said: “SBTi recognises that, when properly supported by policies, standards and procedures based on scientific evidence, the use of environmental attribute certificates for abatement purposes on Scope 3 emissions could function as an additional tool to tackle climate change.

“Consequently, SBTi has decided to extend their use for the purpose of abatement of Scope 3-related emissions beyond the current limits.”

It added: “SBTi considers this step a way to accelerate the decarbonisation of value chains with compensation logic while companies make their way to eliminate carbon emissions at the root through innovation and technology improvements.”

Reaction at the time included that it is "carte blanche" for businesses to "continue business-as-usual for another decade and take no responsibility for reducing the large majority of their emissions" – and that the change will "encourage carbon cowboys".

Keep setting the bar high

Leyla’s letter concludes with a plea to SBTi to think again on carbon credits.

She says: “Achieving global net-zero emissions is a shared responsibility and alongside efforts to cut emissions within corporate value chains, companies should take action to contribute to this wider goal.

“Therefore, we ask SBTi to continue developing science-based targets for beyond value chain mitigation, which would be an appropriate avenue for applying voluntary carbon markets or offsets.”

She adds: “SBTi has been instrumental in setting the bar high for corporate climate ambition.

“We look forward to seeing how the organisation navigates this complex issue and hope it will continue to uphold its commitment to science-based target setting.

“We are open to engaging in further conversations with SBTi and other stakeholders on this important matter.”

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