In July, Google released its latest environmental report, revealing that it has ceased large-scale purchases of low-cost carbon offsets and no longer claims carbon neutrality for its operations. Instead, the company has committed to achieving net-zero emissions by 2030.
Since 2007, Google has maintained carbon neutrality, primarily through the purchase of carbon offsets. However, this status officially ended with the company’s recent announcement.
Carbon offsets, a market-based mechanism, allow companies to counterbalance their emissions by funding projects that absorb an equivalent amount of carbon dioxide. For example, a company emitting one ton of CO2 might finance a forest conservation project that sequesters the same amount, thus claiming neutrality.
Recently, the effectiveness of carbon offsets has come under scrutiny. Many argue that purchasing offsets is an easier, less impactful path to carbon neutrality compared to directly reducing emissions through technological advancements. This has led to accusations of greenwashing—using offsets as a superficial fix rather than addressing the root causes of emissions.
In response, companies like Google, Disney, Shell, Nestlé, and Gucci have begun to distance themselves from the carbon neutral label. Even the Science Based Targets initiative (SBTi), an organization that certifies corporate climate targets, has faced criticism and accusations of greenwashing.
SBTi, founded in 2015, plays a crucial role in setting and verifying climate targets for over 5,000 companies, including major names like Google, Apple, and Microsoft. Despite recent controversies, SBTi remains a key player in promoting scientifically grounded climate action.
Comparing carbon neutrality to an exam, the science-based carbon target standards developed by SBTi serve as the syllabus, with any change in these standards impacting how companies perform. Consequently, every adjustment to SBTi’s criteria sparks significant debate.
Today, companies are eager to join SBTi, even though participation is voluntary. While not mandated by regulations, SBTi membership has grown rapidly. Data from SBTi’s website shows that by the end of 2023, the number of companies with science-based carbon targets more than doubled compared to 2022.
Setting science-based carbon targets involves five key steps:
Submit a Commitment: Companies send a letter of intent to SBTi, indicating their goal to set a science-based target.
Set the Target: Within 24 months, companies establish an emissions reduction target based on SBTi criteria.
Submit for Verification: The target is submitted to SBTi for official verification.
Communicate Externally: The company announces its target and informs stakeholders.
Disclose Regularly: Annual reporting on company-wide emissions and progress toward the target.
The initial step—submitting a commitment—is free and simple, which can create the illusion that joining SBTi is easy. However, the subsequent steps are far more rigorous, making successful participation a significant challenge.
“If a company merely submits a pledge, engages in external publicity, and garners attention without following through with goal-setting and action, it risks being accused of greenwashing,” said a researcher at the World Resources Institute’s Beijing office.
Starting in January 2023, SBTi tightened its requirements: companies must provide specific targets within 24 months of submitting their commitments, or they will be delisted. Previously, SBTi only removed companies that failed to submit commitments from its public database. Now, companies that miss the deadline will be explicitly labeled as “commitment removed,” effectively calling them out for their inaction.
In March, SBTi updated its list, removing 239 companies, including Microsoft, Procter & Gamble, Unilever, and Walmart, for failing to establish and validate their emission reduction targets within the specified timeframe.
When a company sets an emissions reduction target and submits it to SBTi for validation, it must pay an official fee, determined by the company’s size and the type of project, ranging from $1,250 to $16,750.
The liberalization of carbon offsetting thresholds has raised concerns about enabling greenwashing. Many companies join SBTi primarily due to business pressures. For instance, AstraZeneca requires that by 2025, suppliers responsible for 95% of the value of their purchased goods and services must join SBTi. Similarly, suppliers to Decathlon, Nike, and H&M have been asked to submit SBTi targets. Failure to join SBTi can result in losing business from major manufacturers.
The SBTi framework operated smoothly for a time, with adjudicators issuing guidelines and companies submitting their plans. However, a significant shift occurred on April 9, when SBTi’s board unexpectedly announced plans to update net-zero criteria, allowing companies to use environmental attribute certificates, including carbon credits, to offset Scope 3 emissions.
In April this year, SBTi made a dramatic shift in its stance on carbon offsets. Initially, it prohibited the use of carbon offsets for Scope III (value chain) emissions, later allowing a 10% share. However, in April, SBTi announced plans to remove these restrictions entirely. This reversal marks a significant departure from SBTi’s previous position, leading to criticism that it has regressed in its climate governance role. As an organization rooted in science, SBTi now faces growing skepticism about its scientific integrity.
The announcement reportedly bypassed SBTi staff and advisory groups, leading to internal dissent, including a joint letter of objection from staff. The move also drew criticism from external stakeholders, such as H&M, whose head of sustainability, Leyla Ertur, argued that it could discourage meaningful corporate action on critical issues like renewable energy development.
Carbon offset projects are also prone to quality issues. For instance, Verra, the world’s largest carbon credit agency, has faced scrutiny over the effectiveness of its projects. Critics argue that SBTi should focus on developing robust Scope 3 reduction standards rather than relying on carbon credits, which could send the wrong message—that decarbonization is merely a transactional process. True value chain decarbonization requires significant technological investment, which cannot be replaced by purchasing carbon offsets.
To enhance transparency, SBTi could implement differentiated status labels, distinguishing between reductions achieved through technology, green power, or carbon offsets. The final direction of SBTi will become clearer with the release of the updated standard. However, it is already evident that low-quality carbon offset projects are increasingly scrutinized.
In light of stricter carbon neutrality standards, companies must prioritize tangible emissions reductions.
Source: SBTi, H&M, carbonneutralplus, MDE
