Future-Proof Your Business with Science-Based Targets
/
(Stats as of May 19, 2021. Source: sciencebasedtargets.org)
In 2018, the Intergovernmental Panel on Climate Change warned that global warming must not exceed 1.5°C to avoid the catastrophic impacts of climate change. In response, more than 1421 companies from around the world with a combined market capitalization of over $15.4trillion USD have made commitments to set science-based targets (SBTs) and achieving net-zero emissions tied to the 2030 deadline set by the Paris Climate Accord. These companies are from many different sectors, including, but not limited to Aluminum, Forest, Land and Agriculture (FLAG), Power, Transport, Oil and Gas, Chemicals, Financial Institutions, Apparel and Footwear, and Information and Communication Technology (ICT).
Whether you are new to the sustainability scene or a seasoned expert, chances are you have heard of “science-based targets” and may have developed one. Developing an SBT requires building internal support for an SBT, understanding of the three components involved in selecting an appropriate methodology, clarity on what the best method is, and consideration of your scope 1, 2 and 3 emissions.
What are Science-Based Targets?
Science-based targets (SBTs) provide a clearly defined pathway for companies to reduce greenhouse gas (GHG) emissions. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.
The recently published report by the IEA, “Net Zero by 2050” is the world’s first comprehensive study of what is needed in order to effectively limit the rise in global temperatures to 1.5°C. The report provides a roadmap setting out more than 400 milestones for what needs to be done, and when, to decarbonize the global economy in just three decades.
Aligning Carbon Reduction with Business Growth
Setting an SBT starts with making the case internally. Science-based targets are arguably becoming the new normal, with incentives for companies including:
Brand reputation
Investor confidence
Resilience against regulation
Increased innovation
Bottom line savings
Gaining a competitive edge
3 Components for Setting Science-Based Targets
Generally, science-based target-setting methods have three components:
Carbon budget (defining the overall amount of greenhouse gases that can be emitted to limit warming to 1.5°C and well-below 2°C)
An emissions scenario (defining the magnitude and timing of emissions reductions)
An allocation approach (defining how the carbon budget is allocated to individual companies)
These components are considered differently under the three science-based target setting methods and scenarios as defined by SBTi and described below.
Approaches to Setting SBTs
Absolute Emissions Contraction
Through the Absolute Emissions Contraction method, all companies reduce their absolute emissions at the same rate, irrespective of initial emissions performance.
Company Input:
Base year
Target year
Base year emissions, disaggregated by scope
Method Output:
Overall reduction in the amount of absolute GHGs emitted to the atmosphere by the target year, relative to the base year
Examples:
Cisco commits to reduce absolute scope 1 and 2 GHG emissions by 60% by FY2022 from a FY2007 base-year.
Global food and beverage company, Nestlé, commits to reducing absolute scope 1 and 2 GHG emissions by 12% between 2014 and 2020.
Sectoral Decarbonization Approach (SDA)
The SDA method divides the global carbon budget by sector, and then emission reductions are allocated to individual companies based on their sector’s budget.
Company Input:
Base year
Target year
Base year emissions, disaggregated by scope
Activity level in the base year (e.g., building floor area, distance traveled, etc.)
Projected change in activity by target year
Method Output:
A reduction in emissions relative to a specific production output of the company (e.g., tonne CO2e per MWh)
Examples:
Italian multinational manufacturer and distributor of electricity and gas, Enel, commits to reducing CO2 emissions 25% per kWh by 2020, from a 2007 base year.
European real estate operator, Covivio, commits to reducing scope 1 and 2 GHG emissions 35% per sqm by 2030 from a 2017 base-year.
Greenhouse Gas Emissions per Value Added (GEVA)
The GEVA method sets economic intensity targets using the contraction of economic intensity. Targets set using the GEVA method are formulated by an intensity reduction of tCO2e/$ value added.
Company Input:
Base year
Target year
Base year emissions, disaggregated by scope
Value added in the base year
Projected change in value added by target year
Method Output:
A reduction in emissions relative to financial performance of the company (e.g., tonne CO2e per value added).
Example:
Manufacturer of outdoor power products, Husqvarna Group AB, commits to reducing scope 1 and scope 2 emissions 30% per unit of value added by 2020 from a 2015 base-year.
Other Approaches
A company can choose to use the target format output by a method and/or translate it to other formats (e.g., use production data to convert an absolute target into an intensity target). Companies can choose to use an economic or physical metric most representative of their company’s profile to formulate targets.
Example: Global brewer, AB InBev, commits to reducing emissions across the value chain (scopes 1, 2 and 3) by 25% per beverage by 2025, from a 2017 base year.
There is currently no universally preferred method as some work better for certain companies or sectors than others. SBT target-setting methods are complex and should be considered in the context of your operations and value chains.
Understand Your Scope Emissions
Selecting the best methodology requires identification of company emissions and consideration of the three scopes of emissions defined by the GHG Protocol Corporate Standard.
Scope 1 and 2 Emissions:
Scope 1 and 2 emissions are ‘owned’ by your company. Scope 1 emissions constitute direct emissions from within the organization, such as natural gas and fleet vehicle usage. Scope 2 emissions relate to indirect emissions from the production of energy eventually used by the organization, such as electricity purchased. As scope 1 and 2 emissions can be directly controlled, setting appropriate targets and committing to them is relatively straightforward.
Scope 3 Emissions:
Scope 3 emissions refer to a company’s emissions within their supply chain. Of companies who have set science-based targets, over 90% of them address scope 3 reductions. These scope 3 reductions can be met via absolute reductions or from a large portion of the company’s suppliers setting their own targets.
5 Steps For Setting Science-Based Targets:
Commit
Submit a commitment letter that, once received, recognizes the company as ‘committed’ to aligning emissions reduction targets to 1.5°C. The company is then added to the SBT website and partner CDP and We Mean Business sites. Companies then have 24 months to complete the remaining steps.
Develop a Target
To ensure their rigor and credibility, SBTs must meet a range of criteria. SBTi offers a range of resources and support across all sectors.
Submit
Following the successful development of SBTs, companies must submit them where they will be reviewed and validated against the SBT criteria. Once approved, the SBT will announce the company as part of those ‘companies taking action’. The company must then make public its commitment within 6 months by announcing its targets and informing stakeholders.
Communicate
Announce publicly.
Disclose
Tracking and reporting on target over time, include disclosure through CDP, annual reports, sustainability reports, and the company website.
Align with CDP Disclosures
Companies with approved SBTs can publicly report their emissions inventory and targets to CDP to fulfill the annual reporting criteria for approved SBTs. If a company does so, it should report all approved SBTs in its CDP disclosure to fulfill the reporting criteria. To fully ensure companies receive leadership points for reported SBTs, all identifying target details should match the SBTs approved by the SBTi:
scope(s) and category(ies) covered
base year
target year
target value
target type (absolute, intensity, renewable electricity, supplier engagement).
This level of transparency and forward-thinking facilitates long-term planning and demonstrates preparedness for policy and legislative changes.
SBTs – Quick Start Guide
Below is a list of Dos and Don’ts to help get you started:
Dos and Don'ts to Get Started with SBTs |
|
|---|---|
Do |
Don't |
|
✓ Understand SBTs and why they are valuable
✓ Understand components of SBTs ✓ Choose the right method ✓ Understand your scope emissions ✓ Align with CDP Disclosures |
x Assume SBT are the same as traditional approaches to setting GHG emission target
x Default to the target that is easiest to meet x Set targets to reduce emissions by a specified mass of GHGs (for example, “to reduce emissions by 5 million tonnes by 2030”) x Set targets that benchmark performance against sector average values x Include offsets and avoided emissions |
If you are considering setting or need help setting SBT, please reach out to us. KERAMIDA provides Sustainability Reporting consulting services for clients in every sector. Contact us or call us today at (800) 508-8034 to speak with one of our sustainability consultants.
Blog Author
Becky Twohey, Ph.D.
Senior Sustainability Analyst
KERAMIDA Inc.
Contact Becky at btwohey@keramida.com.
