Media briefing: 17 April 2024

SBTi offsetting U-turn: the legal issues

The Science Based Targets Initiative (SBTi) board of trustees announced last week that it would be consulting on a formal set of draft rules allowing companies to use carbon credits to ‘offset’ against scope 3 emission reduction targets.

ClientEarth has warned that allowing offsetting – a major departure from the standard body’s previous position – risks creating legal problems, both for companies relying on the standard and for SBTi itself.

Johnny White, ClientEarth lawyer, said: “In the wake of recent Court decisions confirming that ‘offsetting’ claims are misleading and prohibited under consumer protection laws, advising companies to make offsetting claims is legally risky. If you consider the growing likelihood of lawsuits claiming damages for misleading offsetting advertising or reporting, then it also starts to look potentially expensive.

“Standard setting bodies are exposed to these legal risks. If a company relying on SBTi’s position was to find that their offsetting claims result in legal liability, then they may seek redress from SBTi – just like when disappointed clients sue their advisers in other contexts.”

ClientEarth believes allowing offsetting would be out of step with incoming EU rules explicitly banning advertising claims based on offsetting and would go against corporate reporting laws in the bloc, which prohibit companies from counting carbon credits towards emissions reduction targets.

White added: “Legitimising the concept of offsetting for Scope 3 emissions punishes the market leaders who – instead of presenting credits as compensation for emissions they need to reduce – are talking of contributing to climate finance and nature restoration projects.”

ENDS

Notes to editors:

  • There are several Court judgments in the EU confirming that claims based on carbon offsetting are unlawful, most recently in the Dutch Court judgment against the KLM airline.

  • The Court found that measures such as paying towards alternative aviation fuels or tree planting projects “only marginally reduce the negative environmental aspects and give the wrong impression that flying with KLM is sustainable”. It commented that “there is no direct link between the customer's tangible contribution and the impact of CO2 emissions from its flight.”

  • Others relevant decisions can be found against TotalEnergies in Germany, Arla in Sweden, and Austria Airlines in Austria.

  • The EU Directive ‘Empowering consumers for the green transition’ (2024/825/EU) will prohibit any offsetting claims regarding consumer products. (See Recital (12))

  • The EU sustainability corporate reporting requirements for larger companies state that companies “shall (e) not disclose carbon credits as an offset for its GHG emissions [and] (f) not disclose carbon credits as a means to reach the GHG emissions reduction targets”.

About ClientEarth

ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.