Many companies have signalled they would rely heavily on carbon offsets to get to net zero
A UN-backed body launched a scheme to verify corporates' net zero strategies on Thursday that is likely to become a standard for regulators and investors to measure companies' climate ambitions.
With rising investor and societal pressure on companies to reduce emissions to keep global warming below 1.5 degrees Celsius (2.7°Fahrenheit) above pre-industrial levels, firms have come up with multiple ways to express climate strategies.
The Science Based Targets initiative (SBTi), a collaboration between the United Nations and commodities- and climate-focused non-governmental bodies, aims make corporate climate pledges comparable and, ultimately, more credible.
"For the first time, the SBTi Net-Zero Standard offers companies robust certification to demonstrate to consumers, investors and regulators that their net-zero targets are reducing emissions at the pace and scale required," Alberto Carrillo Pineda, Managing Director of the SBTi, said.
"We’re now inviting all companies with net-zero targets and ambitions to show stakeholders that their decarburization pathway is aligned with science."
Large companies must convince the SBTi that they have a credible plan to halve their emissions before 2030 and eliminate 90-95% of emissions before 2050 compared with a base year after 2015.
Reductions have to cover greenhouse gas emissions from a company's direct operations and use of electricity, also known as Scope 1 and 2, as well as from the suppliers and end-users of its products, or Scope 3.
Many companies have signalled they would rely heavily on carbon offsets to get to net zero, which means buying or creating carbon offsets in an as-yet small and unregulated market for such certificates.
But to get the SBTi seal of approval, companies can only use offsets to cover a maximum of 10% of their emissions.
Of the up to 10%, only carbon removal projects, such as direct air carbon capture or reforestation will be counted.
Avoided deforestation or capturing carbon from smokestacks and sequestering it (carbon capture and storage), which merely prevents additional emissions from reaching the atmosphere, will be excluded.
Taking part in a pilot scheme, Danish renewable power company Orsted, US companies CVS Health and real estate group JLL, public relations company Dentsu International, Swiss building material company Holcim and Indian digital service provider Wipro met the requirements.
Some sectors, such as forestry and agriculture and oil and gas will have to wait until next year to submit their strategies for verification.