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January 16, 2024

Companies using renewable energy certificates could risk greenwashing, says non-profit

H&M Group acknowledges its ‘dependency on standalone renewable energy certificates within our strategy … as they add flexibility on top of our long-term investments in PPAs’ (Photo: Fredrik Sandberg/TT News Agency/AFP via Getty Images)
H&M Group acknowledges its ‘dependency on standalone renewable energy certificates within our strategy … as they add flexibility on top of our long-term investments in PPAs’ (Photo: Fredrik Sandberg/TT News Agency/AFP via Getty Images)

Long-term power purchase agreements and ‘hourly matching’, not renewable energy certificates, should be the focus of companies’ efforts

Major brands relying on standalone renewable energy certificates to back up claims they use solar or wind energy to power operations may be greenwashing their commitments, according to a report from German non-profit the NewClimate Institute.

RECs demonstrate that a company has funded a certain amount of renewable energy production – but this energy is not necessarily produced in the same region, or even the same country, as the company’s operations. RECs are, therefore, an “offset” used by firms to account for the non-renewable energy they take from the local grid, and do little to contribute to overall renewable capacity in manufacturing areas or to reduce carbon-intensive energy use, the NewClimate Institute report says.

“In many cases, there is no or a very weak physical link between the grid where the RECs were generated, and the grid where the renewable electricity is claimed,” it says.

Procuring renewable energy through power purchase agreements, long-term contracts between energy suppliers and customers, are much more likely to have “a legitimate impact [on overall renewable capacity]”, the report adds. 

Eight of the 10 companies assessed by the NewClimate Institute use RECs towards meeting their renewable energy targets, including: fashion retailer H&M Group; Inditex, which owns high-street fashion chain Zara; Canadian-American retailer Lululemon; and South Korean electronics company Samsung.

An Inditex spokesperson tells Sustainable Views that the company has increased its use of PPAs and that “more than 90 per cent” of the RECs used in 2022 saw the renewable energy “produced in the countries where we consumed it”.

Meanwhile, a spokesperson for H&M comments: “Finding renewable and sustainable energy sources to substitute fossil fuels such as coal and natural gas is increasingly important for the garment sector, especially in production countries that still rely heavily on fossil fuels.

“We acknowledge that there remains a dependency on standalone renewable energy certificates within our strategy to some degree, as they add flexibility on top of our long-term investments in PPAs,” they tell Sustainable Views.

A spokesperson from Samsung Electronics tells Sustainable Views that the company is expanding PPA use “in the regions where the renewable energy market is well developed”, and that it will continue to use “all available means of procuring renewable energy”, including RECs.

The NewClimate Institute report also takes issue with the model currently used by some companies of matching consumption with “low-carbon energy” – including nuclear or fossil generation with carbon capture – rather than 100 per cent renewable energy.

It prefers “hourly matching” to ensure energy consumption is equal to the amount of renewable energy generation added to the same grid on an hourly basis, and commends Google and Microsoft for developing a 24/7 matching method.

A Google spokesperson says the company has set a goal to operate all of its “data centres and office campuses on 24/7, carbon-free energy on every grid where we operate by 2030”, but clarifies that the energy will be “carbon-free” rather than wholly from “renewable” energy sources.

Existing industry standards and initiatives, including the Greenhouse Gas Protocol and the Science-Based Targets initiative, “provide limited incentives and potentially even barriers for companies to strive for higher-quality renewable electricity strategies”, say the authors of the report.

They add that such initiatives are not fully up to date with industry best practices, such as hourly matching, and do not differentiate between companies that invest significant resources in impactful renewable energy strategies and those, such as RECs, that use “the easiest available cover-ups”.

The report is available to read here.

This article was updated on January 16 to include comments from Google and Samsung Electronics.

A service from the Financial Times