The SBTi scandal raises bigger questions about climate non-profits
Sustainability in the private sector is plagued by false promises, bad incentives and unaccountability, but not-for-profits risk going down the same path
Much has already been said about last week’s announcement by the Science Based Targets initiative’s board that it may (without the support of many of its staff) allow companies to use carbon offsets to meet their climate goals.
Putting the credibility of carbon offsets aside for a moment, the decision appears to stem from a number of challenges that aren’t specific to SBTi, but that desperately need addressing if climate finance is to have a trustworthy ecosystem of not-for-profits.
Over-promising
The sustainability space is laden with initiatives that oversell themselves.
When Mark Carney announced the launch of the Glasgow Financial Alliance for Net Zero (GFANZ) in 2021, he may as well have been wearing his underpants on the outside of his trousers and a long red cape, the way he talked about its potential to save the world.
Spoiler alert: it didn’t save the world. It was an important market signal, though, and it puts out some high-quality research and analysis.
The green bond market didn’t save the world either, despite its promises to reinvent global capital markets back in the 2010s. But it created new conversations within companies, gave some pricing benefits to climate projects, and paved the way for other important innovations.
Similar things could be said about Climate Action 100+, the EU’s green taxonomy and many other big initiatives, including SBTi.
In 2022, technical head Alberto Carrillo Pineda, wrote that SBTi had “positioned itself at the vanguard of climate mitigation for non-state actors” – that it drove “the adoption of climate targets in line with best-practice, and with science”.
SBTi’s name reflects these ambitions. It’s not called the Climate Target-Setting Initiative for Companies. Its scientific credibility is, as they like to say in corporate circles, embedded in its DNA.
That branding has helped it become the only real game in town when it comes to target setting. If a firm wants to write a climate transition plan, or choose a decarbonisation pathway, or disclose its sustainability performance, it can select from a menu of voluntary guidelines. If it wants to set a recognised net-zero target, there is only SBTi.
But, if you've spent years selling yourself to investors and regulators and the wider market as unflinchingly scientific, you cannot cannot suddenly opt for pragmatism when there are difficult decisions to be made.
Incentives and funding structures
In his 2022 blog about SBTi being at the vanguard of science-based climate mitigation, Carrillo Pineda also explained that the initiative had developed “a stronger focus on scaling the number of companies setting science-based targets”.
When it excluded hundreds of companies recently, for failing to set adequate long-term targets, SBTi attributed many of the losses to companies’ belief that Scope 3 was too hard. They felt they lacked the data or the agency to guarantee the level of direct value-chain decarbonisation that SBTi demanded in order to get verified.
SBTi is part-financed by companies paying for verification. So, as French regulator AMF noted in a recent report, there is “a potential conflict of interest within the SBTi, given its partial funding through target validation fees, and the initiative's interest in growth”.
This isn’t unique to SBTi. Its parent organization, CDP, is often accused of having perverse incentives as it moves increasingly towards a private-sector-funded model. Earlier this year, the International Capital Markets Association updated the Green Bond Principles to ensure “a fair [financial] contribution from all for-profit organisations to the continued development of the Principles”.
It makes sense that, if companies genuinely see climate change as a financial risk, they pay for the development of standards and data to manage it in the same way they would for anything else. Charity and taxpayer money shouldn’t be expected to provide eternal subsidies.
It’s also worth noting that third-sector funders have their own agendas. A very concentrated number of largely unaccountable foundations and grant-giving bodies – many linked to billionaires and corporations – have a huge amount of influence over which ideas and standards see the light of day in sustainable finance.
Accountability and public debate
Bloomberg has already written about the potential influence of SBTi’s funders in its decision last week, but another part of the accountability problem sits closer to the surface.
While some non-profits see themselves as having a responsibility to contribute to education and public discussion on complex sustainability issues, SBTi is not one of them.
Like GFANZ, someone has convinced SBTi that the best approach to public engagement is one that combines active promotion with reactive defensiveness. The bit in the middle, in which they explain their decisions and help accurate information flow around the system, is entirely absent. Criticism is seen as an attack, not a challenge, and they only lower the drawbridge to fire out another press release.
These three, interlinked issues – overselling, bad incentives and a lack of public accountability – are already ubiquitous in the private sector when it comes to sustainability. But we are at risk of seeing them take over in the not-for-profit world, too.
Hopefully the current scandal at SBTi will contribute to the much-needed debate about the role of carbon offsets. But it should also prompt a discussion about the purpose of NGOs and membership bodies, and the influence of the entities that finance them.
