Initiatives to curb climate change are more urgently needed than ever before. When the Paris Agreement was adopted in 2015, trying to stem rising temperatures to a global increase of 1.5°C seemed like an attainable goal.
But time is running out and everyone is feeling the effects of carbon emissions inertia. So much so, in fact, that at COP 27, an agreement was reached to create a “Loss and Damage” fund for vulnerable nations.
Vital as these measures are, however, they are reactionary. Instead governments and businesses need to take action now to meet carbon emission commitments. According to the Science Based Targets Initiative (SBTi), to reach Net Zero by 2050, companies need decisive and data-driven strategies that reach to every corner of their operation.
In this article, we explain how the SBTi can help you set those meaningful targets – and how doing so can benefit your business by future-proofing growth.
what are Net Zero pledges?
The scientific community agrees that it’s already too late to stop global warming entirely. The goal now is to mitigate temperature increases by reducing emissions. Net Zero pledges aim to achieve this by reducing green house gas (GHG) emissions within a defined timeframe such that global temperature increases will not exceed 1.5°C.
Although it may never be entirely feasible to cut GHG emissions to absolute zero, Net Zero pledges ensure goals are set to remove more carbon than is emitted. In order to cap temperature increases at 1.5°C, emissions would need to peak by 2030, and Net Zero has to be achieved by 2050.
To date, more than 140 countries, including the biggest polluters – China, the United States, India and the European Union – have set a net-zero target. Private sector pledges are another vital part of the jigsaw, according to the SBTi, which is committed to helping businesses set, and achieve, meaningful Net Zero pledges.
Increasingly, companies are putting an ESG strategy in place, and while this is a step in the right direction, the SBTi believes many of these strategies are not as effective as they could be. This is because they are not properly aligned with the science of sustainability.
what is the SBTi?
The Science Based Targets initiative (SBTi) is a partnership between the United Nations Global Compact, World Resources Institute (WRI), World Wildlife Fund (WWF), and CDP. It publishes the Corporate Net Zero Standard, which is a framework to help companies set net zero targets in line with climate science and validates targets set by participating companies.
In order to make sure emission reduction activities will be successful, the SBTi provides:
- Best practices for implementing technology and changes to business activities
- Technical assistance and expert resources
- Independent assessment and quantitative validation on targets and progress
The SBTi has guidance and resources for all companies looking to make a Net Zero pledge, as well as sector-specific guidance for businesses in industries such as aviation, cement, oil and gas, and transport.
what will it take to reach Net Zero?
Until real action is taken, corporate pledges are just words on a page. The SBTi therefore expects companies to commit to the following steps:
Near-term targets: Rapid, deep cuts to direct and indirect value-chain emissions are required. Companies must set near-term science-based targets to roughly halve emission before 2030.
Long-term targets: Companies must set long-term science-based targets to cut all possible - usually more than 90% - of emissions before 2050.
Neutralize residual emissions: After a company has cut emissions by more than 90%, it must use permanent carbon removal and storage to counterbalance the final 10% or more of residual emissions that cannot be eliminated.
Beyond Value Chain Mitigation (BVCM): Businesses should invest now in actions to reduce and remove emissions outside of their value chains.
how to set science based targets
The SBTi has a 5-step process companies following the SBTi Net Zero standard can follow in order to document and register their Science Based Targets.
1.Commit
Register your commitment with the SBTi. This should be done at the parent company level. There are separate requirements for financial institutions and for large versus small- or medium-sized businesses. Once the initial registration is complete, your commitment letter will be posted on the SBTi website.
2.Develop Targets
Once the commitment letter has been signed, you have 24 months to set your science based targets. This will require a comprehensive emissions inventory at the Scopes 1, 2, and 3 levels.
Targets will be set for the near- and long-term. As discussed above, it’s not enough to assume ongoing linear decreases from near-term targets will be enough to meet 2050 Net Zero targets.
While all companies will need to assess their Scopes 1, 2, and 3 emissions, only those who can attribute at least 40% of their releases to Scope 3 emissions will need to set Scope 3 targets, unless they are involved in the sale and distribution of natural gas or other fossil fuels, in which case Scope 3 targets are mandatory.
Because all targets are to be set using approved methodologies and models set by the SBTi, it’s important that your ESG team stay current in the most up to date SBTi standards.
3.Submit
Once targets have been set, they need to be submitted to SBTi for validation. There are standard near-term target forms to be completed and submitted based on your business sector and company size.
The SBTi recommends the submission should include:
- Facts. Provide accurate descriptions of company operations and business areas. The goal is to provide context, not to market products and services.
- Details. Emissions estimates need to be contextualized. In addition to calculations, you will need to provide a written description of each emissions category.
- Justification. Estimates need to include justification for the methodologies used such as an assessment of data quality, or rationale for the secondary methods used when primary information isn’t available.
- Defined exclusions. Companies are allowed to exclude 5% of Scope 1 and 2 emissions and 10% of Scope 3 emissions if they can’t be quantified and their reduction won’t add value to the exercise.
- Allowance for growth. Businesses must accurately estimate projected growth and show how emissions and targets are affected by this growth.
- Financed emissions. Any company that wholly or partly owns another company but does not have direct control over it would include the emissions from this company as financed emissions.
- Proper Scope 3 target coverage. Where Scope 3 targets are required, at least 67% of Scope 3 emissions must be covered by near-term targets, and 90% must be covered by Net Zero targets.
4.Communicate
All companies with SBTi-validated targets are published on the SBTi website. You should also communicate these targets to stakeholders, including leadership, investors, suppliers, and vendors.
According to the SBTi, it’s important to focus on the urgency of the situation. Change in the value chain can be slow and the time to reach near-term targets is limited. You will therefore need to explain the importance of deep cuts to reduce carbon emissions since reaching your targets will take collaboration and accountability from all stakeholders.
5.Disclose
Setting SBTi targets is only the first step. Once targets are set and communicated, next comes the ongoing work of updating emissions data and providing reports annually on changes and progress toward achieving carbon emissions targets.
This includes getting updated data from the supply chain and financed companies, but can also involve onboarding new organizations as suppliers change, new companies are acquired, or as operations change.
Keeping on top of reporting can be labor intensive, so using software such as the AMCS Sustainability Platform can be beneficial. Not only does it ensure your organization is using the most up-to-date methodologies to calculate targets, it also makes data entry and consolidation simpler, using a cloud based tool that can be accessed by suppliers and others around the world.
what are the benefits of setting science based targets?
Setting science based targets allows you to focus on what really matters. By measuring performance against these targets, you can see whether or not your organization is on track to meet your goals. It can also help you to:
- Future-proof growth
- Prepare for future regulations
- Boost investor confidence
- Drive innovation and competitiveness
- Demonstrate concrete sustainability commitments
start taking real action
Reversing climate change is going to require real action. The days of making unfounded claims to sustainability are done. Today—and going forward—stakeholders, investors, and the community will expect to see real quantifiable efforts to reduce carbon emissions.
But even big efforts start with first steps. Companies looking to establish a science based target initiative within their organization need to begin by doing a complete emissions inventory for Scopes 1, 2, and 3 of their business, subsidiaries, and value chain.
If you’re not sure where to start, or if you have started but are now realizing this is a bigger undertaking than you expected, it’s time to enlist a partner who can support your data collection efforts, and provide you with verifiable high-quality data that can be used as the basis of your science based targets.
AMCS helps automate and manage your entire sustainability program, including carbon accounting. It uses CDP-compliant methodologies that can be used to quantify baseline emissions and track your progress toward near-term and Net Zero targets.
The time for real action is now, and the first step is contacting an AMCS expert.