Fashion and design brands company H&M Group has expressed concerns over plans by the Science Based Targets initiative (SBTi) to allow the use of environmental attribute certificates (EACs) – and specifically offsetting through voluntary carbon markets (VCM) – to help companies address Scope 3 value chain emissions, in its standard for corporate net zero target setting.

In a letter by H&M Head of Sustainability Leyla Ertur to the SBTi Board of Trustees, published on the H&M Group website, the company argues instead that the focus should be on absolute emissions reduction within corporate value chains.

The publication of the letter follows an announcement from the SBTi in April of its plans to allow the use of EACs in its anticipated update of its Corporate Net Zero Standard.

The SBTi was founded in 2015 with the goal to establish science-based environmental target setting as a standard corporate practice. The organization launched its flagship Corporate Net-Zero Standard in 2021, used to assess and certify companies’ decarbonization commitments to achieve net zero emissions and to act as a blueprint for companies’ science-based climate target setting.

While Scope 3 emissions, which occur in value chain areas outside of companies’ direct control, such as supply chain or use of products, are typically the most difficult to measure and manage, they also make up the vast majority of most companies’ emissions impact, often accounting for more than 90% of emissions overall.

The decision could potentially have a significant impact on the markets for energy attribute certificates, such as carbon credits, extending their use by thousands of companies globally. The SBTi recently reported that the number of companies with validated science-based climate targets more than doubled over the past year, reaching 4,204 at the end of 2023, compared to 2,079 in 2022, and announced a major scale-up process aimed at meeting surging demand for corporate decarbonization standards and target validation services.

In the letter to the SBTi Board, H&M outlined its key concerns with the plan, warning that it “weakens corporate climate pledges and makes real decarbonisation efforts within value chains less attractive,” by deterring decarbonization investment and innovation in favor of cheaper and easier VCM credits, and that it would represent a departure from “a robust scientific foundation and a governance structure,” that enables “a robust scientific foundation and a governance structure.” The letter added that there could instead be an opportunity to accelerate decarbonization within corporate value chains through mechanisms that could make “collaborative financing of innovation and technology deployment less complex.”

Instead of allowing the use of EACs to offset value chain emissions, the letter asked SBTi to work on “science based targets for beyond value chain mitigation,” which it said would be a more appropriate area for VCMs or offsets.

Ertur added:

“SBTi has been instrumental in setting the bar high for corporate climate ambition. We look forward to seeing how the organisation navigates this complex issue and hope it will continue to uphold its commitment to science-based target setting.”