Impact Topic: Climate Action
B Lab’s standards define the performance that a company needs to manage and continuously improve upon to achieve and maintain B Corp Certification. Since 2006, they have been developed to improve their impactfulness and clarity around what it means to be a leading business and to incorporate feedback shared along the way.
In order to achieve these goals, the draft standards have departed from the current framework where companies have flexibility in how to achieve a verified 80-point score, and instead meet specific requirements across the standards’ Impact Topics. While the components of the draft standards have been developed with the existing standards in mind, you can expect to see new topics, designed to optimize and improve our certification processes. After all, the B Corp community is on a journey of continuous improvement.
In the face of escalating global temperatures, 2023 is poised to become the hottest year on record. The urgency of the climate crisis is underscored by scientific data revealing that current efforts to reduce Greenhouse Gas emissions fall drastically short. Addressing this crisis is not just a moral imperative but a crucial business necessity. For B Corp Certification, the Climate Action Impact Topic aims to drive credible action; set science-based targets, prioritize decarbonization, and ensure public policy alignment and a just transition.
Brigitta Nemes, Senior Environmental and Governance Standards Manager, shares why the draft standards call for unwavering commitment and real, impactful efforts.
Recent years have been the warmest on record (with 2023 on track to be the hottest year on record). We can expect even more devastating effects of the climate crisis, as, according to the latest scientific data, the current nationally determined contributions(1) to reduce Greenhouse Gas (GHG) emissions will only result in a 2% reduction by 2030 (from 2019 levels) compared to the 43% necessary to limit global warming to 1.5°C by the end of this century. It is well understood by now that the climate crisis, ecosystem health, and human well-being are all interlinked. No one can thrive if irreversible changes due to the climate crisis lead to unstable societies and unlivable conditions on Earth. It is, therefore, a business imperative to take action to combat the climate crisis and its impacts.
Although progress has been made towards emissions reductions and corporate climate action, the scope and scale are not yet enough. Therefore, the intent of the Climate Action topic is to drive credible action, so that companies meaningfully contribute to keeping global warming below 1.5°C and to reaching global net zero GHG emissions(2) by 2050.
This means companies must address three critical areas, regardless of their size:
First and foremost, a company needs to understand how it contributes to the climate crisis by measuring its GHG emissions annually.
A company must set a science-based target to keep global warming below 1.5°C ensuring the company has a North Star to follow.
In order to avoid empty claims, a company must create a climate transition plan to outline how it will work towards its target, who it will engage with, and what implications its commitment will have for its business model.
While measuring GHG emissions may not have been a priority for every company in the past decade, it should be the norm for any company that claims to follow responsible business conduct (our hope is that all businesses have this ambition). Regulations in different parts of the world are also mandating companies to measure and disclose their emissions (i.e. U.S. Securities and Exchange Commission, Corporate Social Responsibility Directive in the European Union, Plan for the Reform of the Legal Disclosure System of Environmental Information by China’s Ministry of Ecology and Environment). Therefore, conducting an annual GHG inventory is expected from B Corps.
While there is a proliferation of pledges to contribute to net zero emissions, there is limited sign of improvement in net-zero targets. There is growing consensus that for any 1.5°C aligned science-based target the following should be met:
It should cover Scope 1, 2, and 3 emissions(3).
There should be interim emission reduction targets towards a net zero target year to ensure actions are not delayed further.
The minimum emission reduction should be 90% across all Scopes with permanent removal (4) of residual emissions (following the Net Zero Standards by the Science Based Target initiative and the SME Climate Hub).
These criteria are also reflected in the evolving standards for B Corp Certification. It is critical to shift away from misleading and/or overpromising claims where there is a lack of real effort to reduce emissions and there is an overreliance on carbon credits(5) (especially if their credibility is not ensured). The role of carbon credits has further been clarified in the draft standards following international guidance (i.e. Science Based Target initiative, ISO, United Nations High-level expert group on the net zero emissions commitments of non-state entities, Ten Principles of the Net Zero Initiative). It is key to keep in mind:
Purchasing high-integrity carbon credits can facilitate much‑needed financial support toward decarbonizing economies in the Global South.
However, carbon credits do not count in the company’s overall GHG emissions reductions.
If the net zero target contributing to net zero emissions globally is reached, the company needs to demonstrate that it used credible (third-party verified) removals for the residual emissions. This may be, for instance, through the purchase of high-integrity carbon credits.
When zooming in on the company’s climate transition plan, there are two areas that are gaining more attention due to their overall criticality for a holistic impact: aligning the company’s public policy advocacy activities with its climate ambition and ensuring a just transition(6) (see also AAA Framework for Climate Policy Leadership, Environmental Defense Fund; The 4 A's of Climate Leadership - Policy, We Mean Business Coalition; Just transition Climate Transition Action Plans, 2022 - Guidance, We Mean Business Coalition). Therefore, the latest draft of the standards for B Corp Certification has integrated specific requirements in these areas focusing on larger companies. In addition, to emphasize that the biodiversity and climate crisis are interrelated, the draft standards also advise companies to embrace nature-based solutions and Indigenous Peoples’ local knowledge and traditional knowledge (building on their good stewardship nature conservation practices) in their climate transition plan.
Climate is everyone’s business. Efforts must be stepped up as the planet cannot afford any more delays or greenwashing.
The second consultation will run from 16 January 2024 to 26 March 2024.
(1) Nationally determined contributions: are countries’ self-defined national climate pledges under the Paris Agreement, detailing what they will do to help meet the global goal to pursue 1.5°C, adapt to climate impacts, and ensure sufficient finance to support these efforts. (UNDP)
(2) Net zero GHG emissions: are achieved when anthropogenic CO2 emissions are balanced globally by anthropogenic CO2 removals over a specified period. (IPCC)
(3) Scope 1, 2, and 3 emissions: Scope 1 emissions are direct emissions from owned or controlled sources, including the combustion of fuels such as natural gas, diesel fuel, and gasoline in factories, fleets, and office buildings. Scope 2 emissions are indirect emissions from the generation of purchased energy (including electricity, heat, or steam). Scope 3 emissions: are all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions. These include, among others the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the company (including employee travel and the handling and distribution of the company's products), outsourced activities, waste disposal, the use of your products by customers, etc. There are 15 types of Scope 3 emissions identified by the GHG Protocol Corporate Standard and detailed by the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. (adapted from GHG Protocol Corporate Standard)
(4) Removal: withdrawal of greenhouse gas from the atmosphere as a result of deliberate human activities. Types of removals include afforestation, building with biomass (plant-based material used in construction), direct air carbon capture and storage, habitat restoration, soil carbon capture, enhanced weathering (mixing soil with crushed rock), and bioenergy with carbon capture and storage. (Net Zero Guidelines, ISO)
(5) Carbon credit: tradeable certificate representing the mitigation of a specified amount of greenhouse gas emissions (Net Zero Guidelines, ISO)
(6)Just Transition: in order to tackle pressing environmental challenges like climate change, pollution, and plummeting biodiversity, nations and businesses need to transition towards greener, resilient, and climate-neutral economies and societies. A Just Transition means greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind. (ILO)
B Corps take action in accordance with science to combat climate change and its impacts.
Climate Action, to some extent, is already included in the current B Corp standards. Companies today can indicate if they measure their GHG emissions (on Scope 1, 2, and 3) and if they set any (science-based) reduction target. Nevertheless, the existing standards neither specify any criteria for these actions nor mandate companies to take action, which is changing now.
For instance, the proposed new standards require that companies follow the GHG Protocol when they measure their emissions, which must include Scope 1, 2, and 3 emissions. Companies are also expected to improve the completeness and accuracy of their measurement over time.
When setting a science-based target the emphasis is on deep emissions reductions and ensuring companies set interim targets, as well as driving immediate action. This marks a clear shift away from the current standards, where the priority of actions was not clearly indicated, and purchasing offsets were incentivized as much as companies' own GHG reductions.
In addition, the following areas are also integrated into the proposed new standards:
Climate transition plan (so that commitments result in action)
Just transition (so that the company considers those who may be impacted by the company’s climate transition plan) - for larger companies only
Climate advocacy (to facilitate that climate targets can actually be achieved) - for larger companies only
Conducting a scenario analysis (to understand the cascading impacts of the climate crisis on the company’s business, its stakeholders, and society) - for larger companies only
While there are requirements that apply to all companies (measuring GHG emissions, setting a science-based target, implementing a climate transition plan), there are requirements that are geared towards larger companies to ensure credibility and scale impact. These include:
Third-party verified GHG emissions inventory
Just transition integration in the climate transition plan
Conducting a scenario analysis
Publicly disclosing progress on the climate transition plan annually
Start with understanding your GHG impact and identifying which areas your company needs to work on to reduce your GHG emissions. This will be key when setting a science-based target.
When developing your climate transition plan, make sure to involve all key functions and also consider if your company’s current business model can actually help you to achieve your target.
It is also key to emphasize that due to the urgency of the issue, the challenge to reduce emissions in complex value chains, and the lack of infrastructure in some places, collaboration and collective action will be key.
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