This article first appeared in The Edge Malaysia Weekly on March 18, 2024 - March 24, 2024

Two years ago, Sime Darby Plantation Bhd (SDP) pledged to achieve net zero carbon emissions by 2050. By now, one would have heard similar pledges from many corporates. But how can one know whether this is enough to halt climate change, and whether it can be achieved?

As scrutiny on claims of greenwashing has increased, so has the call for companies to have their climate targets validated. One of the popular ways of doing so is with the Science Based Targets initiative (SBTi), which provides defined pathways for companies to reduce their greenhouse gas (GHG) emissions, in line with what climate science deems necessary to limit global warming to not more than 1.5° C above pre-industrial levels.

Last December, SDP became the first palm oil company to have its net zero targets approved by the SBTi, according to the company. ESG caught up with SDP chief sustainability officer Rashyid Redza Anwarudin to find out how the company did it. The following are excerpts from the interview.

ESG: Why did SDP go for the SBTi?

Rashyid: We started our carbon emissions reduction journey in 2012. When we started, our baseline was more than 10 years ago and we started by just looking at operational emissions, which is Scope 1 and Scope 2. When SBTi came out, we saw there was quite a lot of interest in it and it gave us an opportunity to review the work we have done.

It gave us a third-party view that the targets we set are ambitious and in line with global efforts. The validation effort also looked at the completeness of our baseline to make sure that the approach we are taking is holistic, looking at our entire value chain.

What was the process like?

It was essentially an extension of the work we have been doing for more than 10 years. After companies declare their targets, there are 24 months to submit their targets for validation. We took a different approach. We made the commitment only once we had developed our roadmap and pathways. What companies typically do is they set the commitment, then start developing the pathways and modelling.

Internally, as a company, we needed to make sure that any sort of commitment we made, we had a chance of meeting it. On the outside, we needed a level of comfort that we’re not just making a commitment for its own sake. We needed to make sure we had a credible plan in place to meet that commitment.

So, we spent close to two years looking at the SBTi requirements. It started with looking at our baseline [2020], and we had to look at Scope 1, 2 and 3 emissions to measure our total emissions footprint. After that, we looked at the interventions we needed to do and the emissions reduction pathways that were available to us, and then [we did] modelling to see whether we could meet the immediate and long-term targets if we were to implement these interventions.

How long did you have to wait for the validation?

We submitted it in November 2022 and received the approval in November 2023.

One of the key challenges that we had when we started developing the roadmap, targets and pathways was the Forest, Land and Agriculture (FLAG) guidelines were still in development. Because we are an agriculture company, we had to do submissions for industrial emissions and FLAG emissions. There are separate targets for industrial and FLAG emissions.

When we submitted [our targets] in November 2022, the FLAG guidelines had been finalised probably only a month before. So, we had to redo our modelling and pathways.

Going through the validation process was quite challenging because the FLAG guidelines had just been released and we were one of the first few companies globally to go through the entire validation process for FLAG, and we were the first palm oil company to do SBTi and get it validated as well.

What is your advice for Malaysian companies?

The key thing is to make sure the baseline you have is complete. They are very particular on your completeness of inventory and baseline. That basically means Scope 1, 2 and 3 emissions. A lot of discussions we had with SBTi was on clarity around our Scope 3 emissions.

Will you be penalised if you fail? People have been criticising SBTi for not removing companies that fail to comply.

One of the key things SBTi has done is it is implementing improvements to governance processes, procedures and compliance, and that is driven by what you mentioned: the criticism against them in ensuring compliance with SBTi’s standards and requirements. Ever since it has made those changes, we have seen a lot of companies that have not met the 24-month deadline being dropped from the SBTi.

What is your strategy to reach net zero?

The three key strategies we have target the most material emission sources. No 1 is the acceleration of our Renewables Programme. Methane emissions from our mills roughly account for 8% of our total emissions. But if you look at Scope 1 and 2 industrial emissions, it’s the majority (74% of energy and industrial emissions).

That’s why we have a large programme on methane capture. We already have 16 biogas plants up and running, and we have three under construction. The plan is for 45 biogas plants mills [to be] capturing [methane] by 2030.

The second strategy is looking at land use because it also accounts for a large portion of emissions. We already have a commitment to no deforestation and, moving forward, there will still be land-use change emissions because of replanting and emissions from our peat plantations. The strategy for this is to look at removals.

Removals are a combination of a couple of key things. One is removals due to sequestration from our existing palm trees. The key intervention we’re looking at is for areas that are unplantable, for example, riparian buffer zone areas or areas that are too steep or hilly. There is an opportunity for us to reforest these areas and increase the number of removals.

Over the years, we have had third parties do a carbon stock assessment on how much carbon has been sequestered from the atmosphere and give us more accurate data for removals. We are also exploring other technologies that can help us calculate that more efficiently.

How do we make sure there’s permanence in these areas? One of the things the team does is go to the ground and ensure every tree we plant is well and we can go online to see things such as the survival rate of trees and interventions that are needed.

The third strategy is basically around suppliers. Scope 3 emissions account for more than half of all emissions. The way we approach this is we divide it into feedstock and non-feedstock suppliers. For suppliers of crude palm oil, fresh fruit bundles and smallholders, there is an ongoing supplier engagement programme.

The major source of emissions is deforestation, so the work around eliminating deforestation in our supply chain is key. We are also looking at palm estates and mills. There is an opportunity for us to replicate what we do in our operations in the supply chain as well.

We are also looking at fertilisers. There is work done by our research and development team to adopt precision agriculture, with more targeted and precise application of fertiliser.

Where we are looking at now, with work we just started probably last year, is working with our non-feedstock suppliers. [That means] fertiliser, chemicals, transport, logistics and shipping [suppliers].

We’re working with our procurement team to identify the key categories of purchase that most emissions come from. Who are the key suppliers? We are developing a programme to engage with these suppliers to start with capacity building and awareness raising.

Your targets look quite ambitious. Are you confident of reaching them? Will you use offsets?

If you look at our strategy, POME (palm oil mill effluent), land use, fertiliser feedstock and purchased goods emissions cover roughly 74% of all emissions. We have quite a good view of what needs to be done to meet those [targets by 2030]. Post-2030, it’s not as clear as the immediate term, but we are quite optimistic that in the future, there will be new technologies or solutions available that may accelerate some of the interventions that we do.

In regards to offsets, at this point, we are not looking at it because our focus now is to implement interventions that result in actual emissions reduction in our operations. SBTi is also not very keen on the use of offsets, with the exception of residual emissions at the end of 2050.

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