We must ensure ethical use of carbon credits

PwC released its Navigating India’s Transition to Sustainability study connected Business Responsibility and Sustainability Reporting (BRSR) compliance for 2022-23 of the apical 100 Indian listed companies. It highlighted that 31% of these companies person their net-zero targets aligning with the government’s 2070 net-zero commitments. Additionally, 51% of specified companies person laid retired their Scope 3 emission, a voluntary declaration nether BRSR of emissions occurring successful upstream and downstream activities.

These see emissions successful activities of stakeholders specified arsenic suppliers, vendors, and adjacent customers, who are not nether the nonstop power of the reporting company. Scope 1 emissions are nonstop emissions by a company, whereas Scope 2 see indirect emissions caused by its energy usage. It is estimated that Scope 3 emissions tin represent much than 90% of full emissions by a institution successful immoderate industries similar automobiles, nutrient and fashion.

The committedness of Indian firms to disclose their c emissions is commendable and surpasses the planetary average. For example, the International Emission Trading Association (IETA) states that 81% of the world's largest companies person yet to found a Net Zero goal. This demonstrates that Indian companies are much transparent astir their sustainability efforts, peculiarly regarding Scope 3 emissions.

Nonetheless, with the evolving scenery of sustainability compliance, determination is simply a increasing statement implicit whether utilizing offset mechanisms similar c credits to conscionable Net Zero targets is ethically sound, particularly successful the aftermath of the Science Based Targets initiative's (SBTi) latest stance connected Scope 3 emissions.

The SBTi debacle: SBTi, known for mounting firm clime standards, precocious sparked a statement by permitting the usage of c credits, formally known arsenic Environmental Attribute Certificates, to counterbalance Scope 3 emissions.

This determination has implications for implicit 4,000 corporations worldwide, including large and insignificant businesses, that person aligned their emanation simplification goals with SBTi's guidelines. Notably, Indian firms similar Tata and Adani, which person committed to SBTi’s Corporate Net-Zero Target, volition besides spot an interaction connected their BRSR.

Recently, the Financial Times reported that continuous lobbying by the US clime envoy with SBTi whitethorn person contributed to making c offsets arsenic an alternate to reducing Scope 3 emissions. The caller relaxation differs from SBTi’s established mandate for companies to eradicate 90% of emissions by 2050.

It’s anticipated that this volition effect successful gross diversion towards the c recognition market, resulting successful a request broadside awesome for c offsets alternatively of existent concern successful decarbonization efforts. This is evidenced by the accrued promotion and request for c recognition successful the African continent vide the African Carbon Markets Initiative (ACMI).

The SBTi relaxation volition beryllium antithetical to Net-Zero commitments arsenic ample corporates volition beryllium capable to bargain c offsets to amusement c neutrality oregon adjacent nett antagonistic c emissions. The SBTi’s assurance of providing circumstantial guardrails and thresholds to operationalize this mechanics is timely to cheque this greenwashing possibility.

However, it is undeniable that the usage of c recognition volition summation much prominence successful firm clime commitments. As reported successful probe from Intercontinental Exchange and the biology radical We Mean Business Coalition, the availability of c recognition encourages companies to instrumentality much ambitious clime actions. Therefore, maintaining the prime and integrity of these c credits is indispensable to guarantee that they lend positively to clime enactment efforts.

Ethical usage of c credits: The IETA precocious launched its guidelines for High Integrity Use of Carbon Credits. These are aimed astatine allowing companies marque informed decisions portion incorporating c credits into their clime targets. While determination are method differences successful the clime models relied connected by SBTi and IETA, the substantive parts of these guidelines tin beryllium universally adopted.

First, determination should beryllium alignment with the Paris Agreement commitments to execute decarbonization. Second, quantification of Scope 1, 2 and 3 emissions based connected planetary standards and verification of the company’s clime illustration by a 3rd party. Third, establishing nett zero decarbonization pathways and mounting up near-term targets should beryllium based connected technological evidence.

Fourth, the usage of c credits indispensable align with the mitigation strategy, which suggests a three-step process wherein the archetypal is the simplification of emissions done interior decarbonization; the 2nd is the power to little intensive activities; and finally, the usage of c credits arsenic an offset mechanism.

Fifth, usage high-quality c credits validated by 3rd parties aft owed diligence. Lastly, determination should beryllium a transparent disclosure of the usage of c credits that covers societal and biology benefits and risks of their c credits.

A heads up for Indian companies: As the speech astir c credits and firm clime enactment evolves, integrity, transparency and ambition indispensable beryllium astatine the halfway of each company's strategy. The developments successful India’s firm sector, arsenic highlighted successful the PwC report, contiguous a promising displacement towards greater sustainability.

To further heighten clime enactment efforts, it's important for these companies to absorption connected improving transparency connected their Scope 3 emissions and to integrate the IETA’s mitigation hierarchy operation to trim these emissions effectively.

A broad home legislative model for Net-Zero compliance is necessary. Although organisations similar SBTi and the MSCI Net-Zero Tracker play a relation successful validating firm c pledges, determination is increasing interest astir companies perchance prioritising the acquisition of c offsets implicit making nonstop investments successful decarbonization. This signifier tin pb to accusations of greenwashing, underscoring the request for much robust verification and accountability mechanisms successful firm clime action.