(Bloomberg) -- The statement that appeared on the Science Based Targets initiative’s website last month was so out of keeping with the climate group’s position that its own communications team thought it had been hacked.

SBTi, whose blessing confers important credibility on corporate net zero plans, appeared to have reversed its stance on a controversial issue. The April 9 press release from its board said companies could use carbon credits to offset so-called Scope 3 emissions from their supply chains, an approach some scientists have warned could jeopardize the fight against global warming.

Staff members assumed it was a hoax and temporarily took the document down. When it turned out it was true, they called on the board and chief executive officer to resign. It seemed to many like the move had come out of the blue.

Yet, interviews with current and former employees, as well as other people familiar with the decision, reveal how the seeds of the policy change were sown over the past year. According to them, things started to shift when SBTi went from being a collaboration of three non-governmental organizations and the United Nations to an independent entity governed by a board of trustees that included several people who want to grow the offsets market.

The change was prompted by SBTi’s growing prominence. The group, founded in 2015, employs about 130 people and is funded by philanthropic money, yet it has become the primary arbiter of whether companies are doing the right thing for the planet. It has validated the climate plans of more than 5,000 companies, from Apple Inc. to Volkswagen AG, and is relied on by investors and policymakers to judge corporate green targets.

SBTi’s position has long been that companies should prioritize reducing emissions across their whole supply chain, and only use credits to offset the tiny amount that is impossible to cut. While some experts have lauded that rigorous approach, many corporate figures, and even some climate activists, have berated SBTi for being inflexible and acting as an impediment to helping critical funds reach developing countries.

“This a systemic debate,” said Paul Simpson, a former board member at SBTi who’s now a partner at sustainability consultancy ERM. “It’s bigger than SBTi, but SBTi has become the lightning rod.”

The ‘SBTi Problem’

That the new board put out a statement over the heads of staff, in violation of SBTi’s rules and procedures, has bolstered an internal view that the trustees are unaccountable, detached from SBTi’s work and pushing their own commercial agendas.

Of the nine-person board, only Manuel Pulgar-Vidal, a former minister of the environment for Peru who now oversees WWF’s work on climate and energy, voted against publishing the April 9 statement. (A representative for the UN doesn’t have voting rights). Pulgar-Vidal declined to comment.

“The SBTi will not shy away from the hard questions, but we will not be overrun by them either,” Luiz Amaral, SBTi’s CEO, said in an emailed statement. “SBTi governance is designed to have different perspectives represented and such diversity is welcomed.”

SBTi’s guidance is supposed to align with what the latest science says is needed to avoid the worst impacts of global warming. But as the Paris Agreement goals slip further out of reach, the group has come under increasing pressure to be more lenient and pragmatic, with some of its employees facing fierce online critiques and even physical intimidation.

At a London gathering of the biggest supporters of offsets in March, several prominent figures singled out SBTi’s guidelines. Rachel Kyte, co-chair of the Voluntary Carbon Markets Integrity Initiative, whose ambition is to grow the offsets market, spoke about an “SBTi problem,” which she said needed to be resolved urgently, according to people who attended the event.

Kyte declined to comment on the London meeting, citing an agreement that speakers wouldn’t be quoted unless their comments were approved. Still, she said that initiatives like SBTi were never meant to be a permanent solution.

“We’ve set a lot of things up as NGO structures with the hope that governments would get their act together and start regulating,” she said. “And of course, many, many years on, these sorts of temporary structures have now become quite important in the landscape.”

Rushed Report

SBTi’s board is staffed by one person from each of its four founding entities: CDP, the United Nations Global Compact, World Resources Institute and WWF. There’s also a representative from the We Mean Business coalition, which describes itself as a founding partner of SBTi and works closely with companies to cut emissions, and four independent trustees.

The most public cheerleader of offsets is María Mendiluce from We Mean Business. In an op-ed she co-authored for Reuters last month, she wrote that the board’s plan to loosen rules around offsets would put it “on the right side of climate history.” The article also said SBTi will by July publish a draft analysis of how different tools, including carbon credits, can be “used responsibly, with the right guardrails and limits.”

That wasn’t true, according to SBTi staff members, who characterized it as an exaggeration of what they'd agreed to produce as part of a September “call for evidence” that, amongst other things, sought opinions on the effectiveness of offsets. The claim was so egregious, in their opinion, that they discussed requesting a retraction or correction of the piece.

Mendiluce didn’t respond to questions about how she described the forthcoming report. “Climate change is accelerating and we do not have the luxury of time to ignore any option that will speed up progress,” she said. “We need new tools to reduce emissions now.”

There were already suspicions internally that the review, which also covered renewable-energy credits and sustainable-aviation fuel certificates, was merely a pretext to justify loosening SBTi’s offsets guidance. An early suggestion from higher-ups that the project be done in collaboration with VCMI had already raised alarms.

What was more concerning, though, was pressure from Amaral to hurry the publication of the report. The call for evidence concluded in November, after which Amaral requested the results be made ready for early December to coincide with the COP28 climate summit.

That deadline was missed, with staff telling Amaral his expectations were unrealistic. They had received more than 800 submissions from NGOs and corporations, spanning more than 15,000 pages, including white papers and case studies. Amaral told the team to narrow their focus to responses that related to carbon credits and to return to the other tools at a later date.

“I have repeatedly applied pressure on delivering to ambitious timelines,” Amaral said in response to questions. “This is urgent work.”

Still, the board hadn’t seen all the comments, nor the technical team’s assessment of them, when it put out its April 9 statement. What they had been presented was far from a ringing endorsement of offsets — preliminary survey results found half of the empirical data SBTi received showed carbon credits were ineffective.

Ulrich Volz, professor of economics and director of the Centre for Sustainable Finance at SOAS University of London, said the SBTi incident highlights the risk that “certain philanthropies and financial institutions wield outsized influence in shaping the agendas of some think tanks, university research centers and other climate-focused bodies.”

SBTi’s two core funders are Bezos Earth Fund, which supports growing the offsets market, and the IKEA Foundation. Bloomberg Philanthropies, the philanthropic organization of Michael Bloomberg, founder and majority owner of Bloomberg LP, is a project-specific funder of SBTi.

A spokesperson for the IKEA foundation said it supports SBTi as an “independent institution.” Bezos Earth Fund did not respond to a request for comment.

BloombergNEF estimates the offsets market can grow from about $2 billion today to more than $1 trillion by 2050 if SBTi eases its rules. “There is a lot of money to be made in voluntary carbon markets, and there are powerful commercial interests to shape these markets,” Volz said.

Deep Regrets

SBTi has begun offering employees mental health support as discontent mounts.

At an all-team offsite in Amsterdam in September, senior leaders faced questions about the process for selecting board members and for finding and reporting conflicts of interest. Some employees also were uncomfortable with comments Amaral made last year about visiting one of Jeff Bezos’ houses.

Amaral has said he “deeply regrets” how the April 9 statement fed “concern and distress” and that SBTi will provide more details in July.

In the meantime, SBTi's work continues. The entity is still validating company emissions targets, it announced a “major revision” to its corporate net-zero standard last month and it's working on guidance around setting targets for Scope 3 emissions.

Calls for a compromise continue, especially after offsets advocates scored a major win this week. Top US officials, including Treasury Secretary Janet Yellen, recommended that companies be able to use the credits to offset a portion of their Scope 3 emissions.

“This is a tempest in a teapot, but I’m concerned it could spill over the teacup and undermine effective corporate climate action,” said Nat Keohane, president at the Center for Climate and Energy Solutions, which serves as the secretariat of former US climate envoy John Kerry’s offsets initiative, the Energy Transition Accelerator.

The best way to “contain the tea” might be for SBTi to do as its board suggested in April, Keohane said. It needs to “look at the evidence with an open mind and find a pathway forward that says there’s room for some flexibility on Scope 3.”

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