As organizations face mounting pressure to put forward credible net zero plans with achievable targets, oil and gas companies are facing a setback when it comes to having their emissions targets validated.
Since 2015, the Science-Based Targets initiative (SBTi) has helped companies set credible greenhouse gas emission targets based on the latest climate science and goals such as the Paris Agreement. The SBTi validates companies’ emissions targets. As of March 2022, more than 2,600 global companies were working with the SBTi, and the SBTi had approved the emission reduction targets of more than 1,200 companies.
But oil and gas companies seeking to have their targets validated may be disappointed to hear that the SBTi has once again delayed its oil and gas sector target-setting methodology. The SBTi also updated its fossil fuel policy, stating that it will “no longer accept commitments or validate targets from fossil fuel companies” while it takes “a cautious and deliberate approach” to completing its oil and gas sector methodology.
New Methodology to Be Developed
This is not the first time the SBTi has delayed the release of its oil and gas target-setting methodology. Previous work on a draft methodology for the sector stalled in 2020 due to a lack of internal confidence and agreement at the SBTi.
As a result, the SBTi has decided to seek independent external input on its next draft. The SBTi provided no clear timeline for developing the oil and gas methodology, leaving oil and gas companies in a continued position of uncertainty about the credibility of their net-zero targets and plans.
No Time for Delay
Amid the urgent need for decarbonization in the oil and gas sector, oil and gas companies should still be pursuing emissions reduction programs and net zero plans as part of broader ESG strategies. According to the Canada West Foundation, only 20% of small oil and gas producers have public ESG reports or metrics. Developing an ESG strategy with metrics and targets takes time — the key is to start! ESG disclosures, including emissions methodologies, are expected to become increasingly standardized and legally mandated in the near future.
What Can Oil and Gas Companies Do Now?
Despite another delay from the SBTi, oil and gas companies cannot afford to put off developing their net zero plans. Investors and other stakeholders expect companies in the oil and gas sector to have clear decarbonization plans with meaningful, achievable targets. The MLT Aikins ESG practice group has extensive experience advising clients in the oil and gas sector on developing robust ESG strategies. Contact us to learn how we can help.
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