How to set Science Based Targets
Targets may be one of the most used words in conversations about decarbonisation, second only to commitment.
2021 saw a wave of commitments and pledges from companies to reduce their carbon footprint, many to net-zero. However, committing to such a challenge is one thing. Taking action to achieve it is quite another.
What is a science-based target?
Targets provide a public barometer on a company’s climate action. Currently, no carbon targets are more public or binding than those set with the Science Based Target Initiative (SBTi).
Science-based targets (SBTs) are based on a global carbon budget allocation that keeps temperature rise below 2ºC. But as of July 2022, the expectation is for companies to go one step further and keep temperature rise below 1.5ºC.
Typically taking between six months and two years to set and verify, SBTs are rigorously scrutinised by the SBTi. The data used to develop and report on them is examined in detail, and the accuracy of assumptions made to achieve the proposed target is modelled and tested.
Why do companies set Science-based targets?
Companies have been setting sustainability targets for decades, but these were often somewhat arbitrary and rarely ambitious enough to significantly impact the fight against climate change.
With under 3,000 companies having committed or set SBTs, they are part of an exclusive corporate club ratifying their decarbonisation scientifically.
These companies have been encouraged to do so for a myriad of reasons:
From investors, customers and employees to take measurable climate action. Public disclosure platforms such as the CDP give additional scores to companies with SBTs.
SBTs can help identify hotspots in supply chains that may be vulnerable to internalised carbon costs or supply chain disruptions from climate change.
Preempting regulation and legislation-
There aren’t many countries with mandatory SBTs, yet, increasing environmental reporting expectations are being launched, and companies are keen to get ahead of the curve.
Increasing customer interest in ethical and environmentally conscientious purchasing. According to SBT, 79% of corporate executives surveyed found a strengthened brand reputation to be one of the most significant business benefits for their company from committing to the Science Based Targets initiative.
There are opportunities for cost savings, through energy savings and increased efficiencies. 29% of companies surveyed by the SBTi reported bottom-line savings due to operational efficiencies and fossil fuel reductions.
Many companies bid to outdo their peers in the ‘sustainability leadership’ race – SBTs are a core requirement to be seen as a leader in the sector.
The climate crisis itself-
Mitigating climate change may sound obvious, but it shouldn’t be undervalued as a driver. Many companies recognise the inherent risk of impact to their own business if global warming exceeds manageable levels.
What are the different types of SBTs?
There are SBTs for Financial Sector, private sector and currently a public consultation for the Forest, Land and Agriculture (FLAG) standard. For this, we are focussing on the private sector.
There are two methods of target calculation for scope 1& 2 emissions Either:
- Absolute-based approach- This method requires companies to reduce absolute GHG emissions by a given percentage. This approach applies to any organisation within any sector.
- Sector-based approach- Appropriate for some industrial sectors, the SDA divides a global carbon budget based on the projected level of sectoral economic activity and potential for emissions reductions. The resulting target is an intensity target defined relative to a specific business metric.
For Scope 3, there are four methods of setting:
- Absolute-based Approach– applies to Scope 3 too.
- Physical Intensity Approach- Applicable companies who make tangible products such as manufacturers. This approach sets an emissions reduction target based on output carbon efficiency (e.g. per tonne of sold product).
- Economic Based Approach- Applicable for all but only really encouraged for high growth companies, such as Big Tech providers. Companies get an emissions reduction target per unit of value-added (e.g. gross profit).
- Supplier Approach- Exploring rapid network effects isn’t for companies with extensive and convoluted supply chains. This target must be achieved within five years, while suppliers must set targets aligned with the latest SBTi criteria.
Level of Climate Ambition
In guidance released in 2021, the SBTi adjusted its recommendations for SBT setting, with the minimum ambition of its near-term targets transitioning to 1.5°C for scope 1 and 2 targets, With well below 2°C reserved for scope 3 targets.
They also introduced the net-zero science-based target. It’s important to note that companies who have set Net Zero SBTs can offset emissions that they can’t reduce in the interim before achieving Net Zero.
However, a company is only considered to have reached net-zero when it has completed its long-term science-based target (which will not include offsets – as these don’t count towards reduction).
How do you set an SBT?
Five steps defined by the SBTi
- Commit- Publicly commit via submitting a standard commitment letter to SBTi, which is then shared on the SBTi website. Companies then have 24 months to develop their target.
- Develop Target- to meet the Net Zero Criteria. Companies can use the methods above to set their near-term (5-10 years) below 1.5°C targets for scope 1 and 2 alongside their well-below 2°C Scope 3 decarbonisation scenarios. Companies must also set long-term science-based targets that align to 1.5°C for a year no later than 2050. These targets cover a minimum of 95% of scope 1 & 2 emissions and 90% of scope 3 emissions.
- Submit- The company submits their SBT to the SBTi to begin validation. SBTi will check to identify if the SBT has met all appropriate criteria. What they are looking for:
- Ambitious enough target, correct timeframe for near and far-term targets, and sufficient coverage.
- Ensure confidence that the GHG baseline is appropriate (e.g. it does not include offsets or avoided emissions and captures the entire material value chain.
- Communicate- Companies must publicly announce their targets themselves within six months of approval (SBTi publish on their site within one month).
- Disclose- companies must report on their GHG footprint and progress towards target(s) annually.
How to monitor and achieve the commitments?
Companies must undertake an analysis of their footprints at least annually. Typically, more frequent updates are recommended for the company to stay on course or pivot when needed.
That’s why one of our first tips is to consider your carbon accounting software and ask yourself 5 questions:
- Does it accurately and efficiently account for scope 1, 2 and 3 emissions?
- Can I review our emissions continuously?
- Is the calculation of GHG emissions SBTi aligned? And easily reportable to the SBTi and CDP?
- Can multiple teams within the company use this tool to deliver company-wide change?
- Does the software help me easily communicate progress and problems to stakeholders?
If your carbon management software can’t do all get in touch with Emitwise and we’ll scientifically align your climate action.