Around 20 employees have been let go by Pachama, a carbon markets company that has won business from Salesforce, Boston Consulting Group and others by providing tools that can identify and monitor high-quality nature-based credits. Pachama’s cuts are the latest in a voluntary carbon market that has been roiled by wider economic uncertainty and anti-ESG sentiment.

Pachama was founded in 2018 by Diego Saez Gil, an entrepreneur with a background in the travel industry. The company debuted as carbon credit buyers were becoming increasingly concerned about the quality of forest credits. The remedy it offered: due diligence tools based on remote sensing and artificial intelligence. By late 2023, Pachama had raised $88 million from big-name funds, including Breakthrough Energy Ventures and Amazon’s Climate Pledge Fund, as well as celebrity investors such as Serena Williams and Ellen DeGeneres.

The company had recently expanded into project development, but the departures, announced late last week, are part of what Saez Gil described as “a strategic shift back to Pachama’s original vision: building a technology platform powered by geospatial AI to help make confident investment decisions into nature-based climate solutions and sustainable land management.” Pachama’s headcount is around 35 after the layoffs, Saez Gill said.

That reduction in force is the latest in a series of setbacks for young carbon market companies. Heirloom, a direct air capture (DAC) project developer that has contracts with Microsoft and others, has laid off staff and cancelled a project since last November’s elections. Doubts about future federal funding for DAC are believed to be the cause. Last month, Climeworks, another DAC company, cited similar reasons for cutting just over 100 positions from a staff of around 480.

Roiled markets

Turbulence at the federal level hit these companies hard because the voluntary carbon market, a core part of all of their business models, is also going through an upheaval: Controversy over the integrity of some classes of carbon credits has spooked buyers. The total value of credits traded in 2024 was around $530 million, a quarter of the market size just three years earlier, according to data released last week by Ecosystem Marketplace, an information source for environmental markets.

“The current uncertain and volatile financial, economic and geopolitical climate, added to the anti-ESG agenda in the U.S., is indeed having an effect on corporate sustainability budgets,” Saez Gil told Trellis. “The impact is especially acute in the voluntary carbon market, which was already in a moment of correction.”

There are signs, however, that the market is doing a better job of rewarding higher-quality credits — a move that many observers see as critical to its long-term success. The Ecosystem Marketplace report, for example, notes higher demand for credits that have won approval from the Integrity Council for the Voluntary Carbon Market, an increasingly influential standards-setter. A shift away from cheaper, lower-integrity credits toward more expensive but reliable options, including high-quality forest projects and DAC, is a positive sign for all three of the companies hit by the recent layoffs.

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Few of the nearly 8,000 companies with validated science-based net zero targets make headlines for reaching that milestone. But for Shein, which has come to symbolize the excesses of cheap, trend-driven fashion, the news drew widespread criticism from sustainability experts.

“If Shein were sincere, perhaps we wouldn’t see emissions grow quite so astronomically recently,” said Maxine Bédat, director of the New Standard Institute, a New York City think tank.

Still, when the Science-Based Targets initiative (SBTi) validated its 2050 climate targets May 23, Shein was among the minority of major fashion brands that made the list. Is it possible that what might be the world’s most-polluting clothing brand is turning a corner?

Not according to the San Francisco watchdog group Stand.earth, which on June 3 gave the company an “F” on its annual Fossil-Free Fashion Scorecard.

“If Shein were a country, it would be the 100th-biggest emitter in the world,” the report said, generating almost as much pollution as Lebanon, “having increased Scope 3 emissions by over 170 percent in just two years.” Shein flunked in a variety of categories, including commitments and transparency, renewable energy transition, advocacy and clean shipping. Its highest mark was a D-minus for materials and circularity.

Although that report was compiled before Shein’s SBTi validation, its core complaints remain largely unaddressed by the company.

Skepticism over the clothier’s net zero quest led Ken Pucker, an industry veteran and teacher at Dartmouth and Tufts, to question on LinkedIn whether sustainability commitments themselves are credible. “I am dubious,” he said. Among the reasons for his skepticism:

• In 2023, Shein’s emissions rose by 45 percent from a year earlier, according to the company’s 2023 sustainability and social impact report.
• Even with a small emissions jump, the company would have to shave roughly one-third of its Scope 3 emissions in the next half decade to satisfy its new targets, Pucker noted.
• Since its launch in 2008 in Nanjing, Shein has not yet produced a sustained drop in emissions.

Shein’s growth

The brand has rocketed to popularity with an on-demand, direct-to-consumer business model that flew some 900,000 packages a day to individuals in the U.S. last year.

“If you’re looking from a production side, there are many things that Shein does that, in fact, the sustainability sector has been peddling as a great idea for a very long time,” said Veronica Bates Kassalty, a fashion consultant and former World Bank economist in London. For example, brands have been trying to figure out how to sustain and profit from making limited, small runs of fashions rather than overproducing.

“The only people who managed to crack it: Shein,” she said. “And that’s what enabled them to catapult themselves into the stratosphere, because they’re constantly producing something new all the time, and it’s no great risk to them.”

The United States’ de minimis exemption has enabled the company to jet goods to the country, duty-free, in packages worth $800 or less. Until the White House closed that loophole May 2, the policy had helped Shein snowball among fashion influencers flaunting cheap and trendy wardrobe hauls. 

That, and the Trump administration’s seesawing tariffs on imports, have slowed Shein’s roll. The company boosted spending per customer by 35 percent but lost 30 percent of customers from April to mid-May, compared with the same period last year, according to Bain & Company. Amid this challenging environment, Shein’s target for an initial public offering moved again recently from London to Hong Kong. It had originally set its sights on New York.

What’s the plan?

Shein’s net zero targets appear to be standard, either at or slightly above the SBTi baseline. Roadget Business of Singapore, Shein’s parent company, seeks to reduce absolute emissions across Scopes 1, 2 and 3 by 90 percent by 2050. Its goals for 2030 include a 42 percent reduction in Scope 1 and 2 emissions and a 30 percent drop in Scope 3. (Scope 3, including the indirect supply chain and transportation emissions, comprised 99 percent of the company’s emissions in 2023.)

Yet it’s important to note that when the SBTi legitimizes any corporate net zero targets, it’s only a first step; there’s no enforcement for what happens next, according to Bédat, author of “Unraveled: The Life and Death of a Garment.”

“There is a real misunderstanding of what an approved target means, and this ends up being used as greenwashing,” she said. “The target approval is not an approval of the quality of the plan for reduction, it simply means that the target is in line with the requirements.”

But sharing a credible climate transition plan would help, according to Bédat. “Elements of credibility include: how are they incentivizing suppliers, how [many] resources are they putting [toward] incentivizing suppliers, how much are they spending on lobbying for or against policies that align with their targets and how their growth targets align with their transition plan.”

For now, however, Shein’s plan does not reflect that. And that, said Bédat, “indicates a weak plan.”

The limitations of standards

The raised eyebrows over the ultra-fast apparel company’s true intentions come as the SBTi itself is attracting criticism for proposed flexibility to Scope 3 requirements. The body’s validation for Shein comes under SBTi’s current standards, released in March 2024. With the next version under public consultation, Shein will have to update its targets by 2030 to satisfy the new requirements.

The SBTi has also recognized the need for a specific standard for apparel companies to address the unique challenges of the increasingly polluting sector, which by some counts makes up 10 percent of global greenhouse gas emissions.

The Greenhouse Gas Protocol, which influences the SBTi, was set up within the contemporary context of linear, “take, make, waste” economies, according to Miranda Schnitger, climate lead for the Ellen MacArthur Foundation. Therefore, these and other standards fail to provide measurements or incentives for circular practices, such as keeping durable materials and products in use for years or decades. Schnitger hopes to help change that.

Shein has an extensive “design for a circular future” plan, and the company makes numerous other efforts that the industry considers to be sustainable. For example, it has invested $10 million toward communities affected by textile waste. In 2023 the company used some 20,000 meters of deadstock in its designs. It has also collaborated with the Textile Exchange on organic cotton and special packaging and is investing in large-scale polyester recycling.

However, that’s not enough to offset the high-production, low-price business model of clothes designed for disposability, according to Kassalty. In addition, three quarters of its products are made of petroleum-derived polyester, a nightmare for emissions and human health. Durable garments of natural fibers create lower environmental impacts yet don’t fit Shein’s business model, according to Kassalty.

“Everyone’s been focusing on the production side, and nobody’s been looking at the way these companies sell,” she said. “And what really differentiates a sustainable company from an unsustainable company is the way that you sell.”

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Key pillars of the climate strategies of five major food system companies have been criticized in a deep analysis by two leading European non-profits.

The five companies — Danone, JBS, Mars, Nestlé and PepsiCo — were studied by the NewClimate Institute and Carbon Market Watch. Researchers at the organizations, which presented their findings this week as part of their annual Corporate Climate Responsibility Monitor (CCRM), said that the companies’ approach to carbon removal, deforestation, animal protein and other issues “are unlikely to lead to structural, deep emission reductions in the sector.”

The results are notable because while JBS is often attacked for its failure to tackle deforestation in its beef supply chain, the other four companies are often cited as sustainability leaders. All have had their near-term and net zero emissions targets validated by the Science Based Targets initiative, for example, and have made substantial investments in regenerative agriculture.

Livestock targets

That’s welcome but not enough, said the CCRM team, because the measures do too little to address the sector-wide transformations that are required to decarbonize food and agriculture. This includes tackling emissions from livestock, which the team said account for 15 percent of global anthropogenic emissions and 80 percent of methane emissions from agriculture. 

Danone has committed to reducing methane emissions from its milk supply by 30 percent by 2030, but it is the only one among the five to have done so. The report authors note that the other companies discuss the importance of plant-based protein but have not set relevant targets.

“If there are targets that are combined with these commitments to key transitions then I have confidence in the targets,” said one of those authors, Sybrig Smit, a climate policy analyst at the NewClimate Institute. “Otherwise, I think there’s very little to build on.”

Confusing removals and reductions

The role of carbon removals in the companies’ strategies also came in for criticism. The report cites the example of Nestlé, which estimates the carbon dioxide removed by agroforestry, regenerative agriculture and other land-use programs it funds, and subtracts the total from its Scope 3 inventory. The company’s ambition to achieve 13 million metric tons of removals by 2030 is a critical part of its goal of halving emissions by the same date. 

That creates a “misleading sense of progress towards emission reductions,” wrote Smit and her co-authors, and confuses CO2 emissions, which remain in the atmosphere for hundreds to thousands of years, with land-based carbon stocks, which can be quickly released by fires or changes in agricultural practice. The CCRM team called on the SBTi to address the issue by requiring companies to set separate goals for emissions reductions and removals.

A Nestlé spokesperson said that the report did not reflect its “progress and commitment” towards net zero and that the company disagreed with the report’s conclusions. “In 2024, 91 percent of the decline in our greenhouse gas emissions was due to reductions and 9 percent from high quality carbon removals within our value chain,” she noted, adding that the food and agriculture sector would not be able to reach net zero using reductions alone. Removal projects can also bring other benefits, the spokesperson said, such as increasing biodiversity and restoring degraded land.

The other companies cited in the report did not return a request for comment.

Deforestation certificates

On deforestation, the report highlights encouraging progress, including PepsiCo’s goal of achieving deforestation-free sourcing this year, which the company breaks down into measures for each relevant commodity, and a similar target set by Nestlé. 

However, the authors said this work is undermined by a reliance on “environmental attribute certificates,” which enable companies to fund and claim credit for the emissions reductions associated with avoiding deforestation. 

This approach allows companies to invest in avoiding deforestation even if they cannot trace every step in a supply chain but doesn’t guarantee that the ingredients they purchase actually come from deforestation-free farms. “Deforestation-free” claims that rely on these certifications are then open to question because the investment boosts producers that have not recently converted forest to farmland — but doesn’t necessarily prevent clearances elsewhere.

JBS received the lowest score on deforestation, with the authors writing that the company “only implements minor measures to reduce legal deforestation.”

Longer-term progress

Despite the shortcomings highlighted in the report, Smit noted that there have been clear signs of progress in the four years that she and colleagues have been conducting the analysis.

“When we started there was a lot of uncertainty around net zero targets across the board,” she said. Smit recalled an example of a company that claimed to have reached net zero — with 65 percent of its emissions eliminated through offsets. “Those practices have kind of disappeared,” she added. “I find that quite encouraging.”

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Jigar Shah is concerned about an impending rise in energy costs, but he’s still optimistic about the prospect of America’s clean energy future.

That’s one of the main takeaways from a wide ranging interview with the former director of the Biden Department of Energy (DOE) Loan Programs Office (LPO). Shah, who is now a part-time fellow for the World Resources Institute and consultant for PowerHouse Ventures, spoke with Trellis about the future of U.S. energy.

U.S. energy production

The House passed its version of the reconciliation budget bill on May 22, repealing many clean energy credits created in the 2022 Inflation Reduction Act (IRA) including the clean electricity investment tax credit and advanced manufacturing production credit. Also noteworthy: The legislation tightened the deadline to take advantage of many IRA manufacturing credits — 60 days after the bill’s passage.

And though nuclear energy is exempt from the 60-day rule, the nuclear power production credit expires earlier than planned in 2031.

These credits directly contribute to the affordable development of clean energy production, including solar, wind and battery storage subsidies. Not surprisingly, these proposed cuts, combined with federal agencies slashing funding for decarbonization and clean energy projects, have Shah worried that the U.S. will be unable to meet the necessary minimum energy load by 2030.

“The vast majority of electricity planners think that we need 150 gigawatts of new energy capacity by 2030 to meet all of our economic development goals,” said Shah, “The American Gas Association (AGA) has said very clearly that they do not believe that we can build more than 50 gigawatts of new natural gas in this country by 2030.”

Shah referenced the AGA to emphasize that even the fossil fuel industry is concerned about America’s ability to meet its future capacity needs, especially in light of the growing demands of artificial intelligence (AI). The Lawrence Berkeley National Laboratory projected that by 2028, more than half of all electricity use in data centers will directly support AI use.

To meet this demand, most experts believe, energy production will have to include solar and wind.

Undermining clean energy bipartisanship

The LPO, which provides low-cost funding, was designed to stimulate private sector investment in clean energy projects. But the House reconciliation bill cut all unused credit subsidy funding currently available to the office. This doesn’t just affect Trump administration bugaboos like windmills and solar, but also geothermal and nuclear energy production, which are the rare examples of bipartisan net-zero energy production.

“You’re not going to build nuclear between now and 2030,” Shah said. “Or even new geothermal.” Rather, he believes, existing clean energy technology will have to fill the gaps. “It’ll just be more expensive,” he said.

Moreover, with the LPO hobbled the clean energy industry is set up for a devastating domino effect because the reconciliation bill also cuts all manufacturing and production credits that would help buffer the impact of rescinded funds. 

But Shah doesn’t see this future as inevitable. He is calling for a congressional compromise, one that would allow for at least $100 million in credit subsidies to remain within LPO. Although a fraction of the original $5 billion allocated to the office in the IRA, such a safety net would prevent entire programs, like the DOE’s Advanced Technology Vehicles Manufacturing Loan Program, from shuttering. Just as important, Shah said, it would uphold the LPO’s loan authority, allowing it to maintain deals with utilities and other companies. 

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The Two Steps Forward podcast is available on Spotify, Apple Podcasts, Amazon Music and other platforms — and, of course, via Trellis. Episodes publish every other Tuesday.

Financial services is high on the list of the most fascinating and challenging sectors for sustainability. Ellen Jackowski, Chief Sustainability Officer at Mastercard, is one of the sector’s leaders. In just a few years at the financial services giant, she’s helped pioneer approaches to using payment systems to inspire, inform and enable change at a mass scale.

Jackowski talks about her company’s role in effecting systemic change in this interview for the Two Steps Forward podcast with me and my co-host, sustainability “solutionist” Solitaire Townsend. Jackowski shares several examples of how the company innovates solutions for its customers and banking partners. Also in this episode, we discuss the state of greenwashing and greenhushing, including how much of it is a distraction from more ambitious sustainability work that companies need to do.

Mastercard’s footprint

Mastercard’s financial footprint is vast. Along with Visa, the two credit card networks control approximately 90 percent of all payment processing outside of China. Mastercard itself can be used at 150 million places around the world, with thousands of banking partners and more than 3.5 billion cards in circulation.

“Our carbon footprint is relatively small for the size of the company that we are,” Jackowski told us. She explained that Mastercard’s sustainability efforts are focused on reducing that footprint but equally on “creating tools and partnerships to influence consumption trends and support a regenerative economy.”

Frictionless choices

It’s important to make the sustainable choice frictionless, Jackowski said. An example of that is working with transit systems around the world — in New York, Singapore and London — to enable riders to tap a credit card on a bus or at a turnstile rather than having to purchase a card, ticket or token. That makes the sustainable choice — transit riding — easier.

“We’re spending a lot of time thinking about which technologies, which sectors, are ready to lean into these new behaviors and new models, where it’s win-win-win for everybody.” In this case, that’s transit riders, transit companies and credit card companies.

Another example is a calculator that allows consumers to see, in their billing statements, the estimated carbon footprint of their purchases alongside the financial cost. Jackowski acknowledged that to maximize the calculator’s impact, Mastercard needs to “work with our merchants to provide that data at the point of transaction or prior,” not after you’ve purchased something. “The role we can play is to provide better information, more insightful information, to inform those choices.”

Strategic, systemic thinking

Jackowski emphasized that such initiatives require collaboration across industries and sectors.

“This can’t be Mastercard sitting in our own little box thinking about the evolution of our business model, moving into more circular business models,” she said. “This takes all sorts of partners and thinkers and stakeholders and actors.”

Still, Mastercard can be an influential connector between merchants and consumers, creating tools to influence behavior and foster a circular economy. She and her team work to address questions such as: “How can Mastercard inspire both merchants on our network and cardholders to want to offer and to also want to purchase more sustainable products and services? How can we inform? How do we provide deeper information?”

She said: “We’re focused on the long game while staying responsive to new data, pressures and trends.”

The Two Steps Forward podcast is available on Spotify, Apple Podcasts, Amazon Music and other platforms — and, of course, via Trellis. Episodes publish every other Tuesday.

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