New guidance by the Science Based Targets initiative (SBTi) may change the way organizations think about their carbon management strategies. A new report, Above and Beyond: An SBTi report on the design and implementation of beyond value chain mitigation (BVCM), offers long-awaited details on climate change mitigation beyond an organization's own value chain—a key element of the SBTi’s Corporate Net-Zero Standard.
The report responds to growing demand from companies, financial institutions, and other carbon market stakeholders to offer a framework for the role of beyond value chain mitigation in the transition to net zero. Among the recommendations, the SBTi notably introduces the money-for-tonne approach, which encourages organizations to set budgets for climate investments based on a carbon price, rather than base their strategy on the number of tonnes of carbon reduced or removed alone. In practice, this could mark a major shift in the way organizations think about carbon removal investments as part of a broader carbon management strategy, encouraging immediate climate action.
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Beyond value chain mitigation explained
Beyond value chain mitigation (BVCM) is defined by the SBTi as “mitigation action or investments outside a company’s value chain, including activities that avoid or reduce GHG emissions, or remove and store GHGs from the atmosphere.” BVCM can be delivered in a variety of ways, such as the purchase and retirement of high-quality carbon credits or through direct investment in mitigation activities (e.g., equity, debt, or project finance).
Through these investments, organizations can take responsibility for emissions that they continue to release into the atmosphere as they progress toward the delivery of their near- and long-term emissions reduction targets. While investments ‘above and beyond’ decarbonization efforts are highly encouraged, they are not a requirement under the Corporate Net-Zero Standard and do not count as progress toward an organization’s reduction targets.
Adopting a beyond value chain mitigation strategy
While the SBTi introduced the concept of BVCM in the Corporate Standard in 2021, it did not endorse a specific approach for implementing these efforts until the release of this report.
Alongside emphasizing the scientific rationale for funding near-term climate action, the new guidance now provides recommendations and worked examples to support organizations in designing, implementing, and reporting on their BVCM strategy.
The report outlines four key steps to design and implement a beyond value chain mitigation strategy:
Set and work to deliver a science-based net-zero target, including developing a climate transition plan. In line with the mitigation hierarchy, prioritize value-chain decarbonization.
Establish a BVCM pledge, including determining the scale and timeframe of BVCM investments.
Take action to deliver BVCM, including defining quality standards and guardrails for BVCM activities.
Report on BVCM activities and outcomes and make transparent and accurate claims.
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Applying a money-for-tonne approach for BVCM
The SBTi recommends a money-for-tonne approach as best practice for determining the scale of an organization’s BVCM pledge. Using this approach, organizations will determine a budget for funding BVCM activities by applying a carbon price to unabated scope 1, 2, and 3 emissions in a given period (such as the most recent reporting year).
Once a company has determined a BVCM budget, the SBTi suggests using a portion of this budget to deliver quantified outcomes (measured in tCO2e) equivalent to at least 50% of residual scope 1, 2, and 3 emissions. Organizations can then decide whether to allocate the remaining budget toward additional quantified mitigation or unquantified mitigation that meets quality standards, such as funding early-stage research and development in low-carbon technologies.
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Choosing an approach based on organizational objectives
BVCM guidance acknowledges that organizations may need different approaches based on their unique objectives. This still leaves room for other models, including a tonne-for-tonne approach, which typically involves organizations using carbon credits to compensate for annual emissions and is the most commonly used model today. By contrast, a money-for-tonne approach is more consistent with a contribution model—investments are framed by their contribution to global climate efforts, rather than “offsetting” emissions.
By providing best practice applications and examples of different models, the SBTi has taken an important step to provide much-needed clarity for organizations looking to drive immediate climate action, regardless of their chosen approach. With this, organizations can now make a stronger business case for supporting mitigation action beyond their immediate value chains as part of a broader carbon management strategy. This is essential to support emerging industries such as carbon dioxide removal that require large-scale and immediate investment.
What does this mean for carbon dioxide removals?
To scale carbon dioxide removal to the levels needed by mid-century to limit warming to 1.5ºC, significant investment in solutions with both shorter and long-lived storage will be required this decade, as the SBTi acknowledges in the report. While BVCM encompasses a range of climate mitigation activities, it will play a particularly critical role in encouraging near-term support for cutting-edge carbon dioxide removal solutions with large removal potential.
The money-for-tonne approach is likely an important lever for newer carbon dioxide removal technology: Because it does not require companies to ‘match’ a defined amount of unabated emissions with an equal number of carbon credits, it may promote investment into higher-quality carbon dioxide removal solutions that are currently more expensive, over a greater number of lower-cost and lower-quality carbon credits.
Going forward, organizations should monitor the impact of ongoing market developments on the SBTi’s latest recommendations, including the end-to-end integrity framework announced at COP28 between the SBTi and standards bodies such as the Voluntary Carbon Markets Integrity Initiative (VCMI) and Integrity Council for Voluntary Carbon Markets (ICVCM).
Dr. Meera Atreya, Director of EMEA Advisory & Senior Scientist, at Carbon Direct, is an SBTi Technical Advisory Group (TAG) Member and served as an SBTi Expert Advisory Group (EAG) Member on Beyond Value Chain Mitigation (BVCM).
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