The Science Based Targets - the route to help meet the Paris Agreement

Erich Molz

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6 minutes

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Knowledge

Science-based targets (SBTs) are reduction targets for corporate greenhouse gas emissions which are in alignment with the goals of the Paris Agreement. The Science Based Targets Initiative (SBTi) has developed the de facto standard methodology for modeling and calculating corporate SBTs.

April 28, 2022
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Ricardo Arce
  • Science-based targets (SBTs) are reduction targets for corporate greenhouse gas emissions which are in alignment with the goals of the Paris Agreement.
  • The Science Based Targets Initiative (SBTi) has developed the de facto standard methodology for modeling and calculating corporate SBTs.
  • Companies can of course choose emission reduction goals as they see fit – but SBTs have become the gold standard for corporate emission reduction goals.
  • Currently, the SBTi tightens the criteria for SBTs and aims to push companies to go beyond the goals of the Paris Agreement and set “net zero” goals.
  • This document helps to quickly get to the heart of the matter, to understand what SBTs are, why and how to set SBTs and what the near future holds.

What is the Science Based Targets Initiative?

The Science Based Targets Initiative (SBTi) is a partnership between CDP (formerly Carbon Disclosure Project), the United Nations Global Compact (UNGC), the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). The SBTi aims to increase business ambition and action in the fight against climate change. Launched only in May 2015, it has already become the de facto standard in providing guidance on setting so-called science-based targets (SBTs).

What are science-based targets?

The SBTi offers companies a methodology for setting “science-based” greenhouse gas emission reduction targets, based on the GHG Protocol. Science-based in this context means that the targets set are in line with what the latest climate science says is necessary, to meet the goal of the Paris Agreement of limiting global warming to “well below 2°C, preferably 1.5°C” compared to pre-industrial levels: halving global greenhouse gas emissions by 2030 and reducing them to net zero by 2050.

The total amount of emissions we as humankind are still allowed to emit in keeping with this goal is called “carbon budget”. Essentially, the SBTi allocates proportions of the carbon budget to different economic sectors and by extension to individual companies. Hence instead of asking what emission reductions are possible (for a company or sector), the SBTi takes a top-down approach and asks what reductions are in fact required. On this basis, the SBTi defines and promotes best practices in setting SBTs, provides resources and guidance to break down barriers to adoption, and independently assesses and approves the targets companies submit.

Why should I set science-based targets?

Over 1,000 companies worldwide have set SBTs according to the SBTi methodology, many of which are big corporates and financial institutions who are also most exposed to public scrutiny. Around 1,000 more have made commitments to set SBTs soon, too. Interestingly, the largest growth in these figures has happened during the COVID-19 pandemic.

According to the SBTi, companies with SBTs were able to reduce emissions by 25% between 2015-2020, compared with an increase of 3.4% in global emissions from energy and industrial processes. In other words, between 2015 and 2020 companies with SBTs reduced their direct (Scope 1 and 2) emissions at a linear annual rate of 6.4%, which exceeded the rate required by the SBTi’s criteria to meet 1.5°C scenarios (4.2%).

In doing so, companies with SBTs are likely to spur innovation, save money, tap into new business potentials, build resilience against regulation, boost investor confidence, inspire their employees, and show credible sustainability commitments to increasingly conscious consumers.

How do I set science-based targets?

Companies of all sizes and from all sectors as well as financial institutions can set SBTs and join the SBTi. In general, setting SBTs follows a seven-step process:

The most crucial and arguably the most arduous step is the modeling of SBTs. Companies need to conduct a full greenhouse gas emissions inventory in accordance with the GHG Protocol’s Corporate Standard, Scope 2 Guidance, and Corporate Value Chain (Scope 3) Accounting and Reporting Standard. They then need to find out what their share of the global carbon budget is and calculate how much they in particular have to reduce.

Only SMEs, defined as non-subsidiary, independent companies with fewer than 500 employees, have somewhat lighter requirements than large corporates and financial institutions: They can bypass the initial step of committing to set a science-based target and the regular target validation process, and instead immediately set a science-based target for their Scope 1 and 2 emissions by choosing from one of several predefined target options.

What are the minimum requirements for science-based targets?

The SBTi has published criteria and recommendations that companies must meet in order for the SBTi to verify company targets as "science-based". Here is an overview of the latest SBTi criteria (Version 5) that will apply from July 15, 2022:

  • Boundary/Coverage: All company-wide Scope 1 and 2 GHG emissions must be covered (to at least 95%).
  • Scope 3: A Scope 3 screening is required to establish whether Scope 3 emissions cover more than 40% of total emissions. If Scope 3 emissions are indeed more than 40%, a Scope 3 target is required and should cover at least 67% of total Scope 3 emissions.
  • Level of ambition: For Scope 1 and 2, at a minimum consistent with the level of decarbonization required to keep the global mean temperature increase to 1.5°C. For Scope 3, well below 2°C.
  • Timeframe: The targets must relate 5-10 years into the future, from the date the target is submitted to the SBTi for official validation. Long-term targets beyond that are recommended.
  • Progress to date: Forward-looking ambition is measured from the year with the most recent completed GHG inventory. Successfully implemented reduction measures in the past cannot be submitted as targets.
  • Reporting: A GHG emissions inventory has to be disclosed annually.
  • Absolute vs. intensity: Intensity targets are only eligible when they lead to absolute emission reductions in line with climate scenarios for keeping warming to 1.5°C or when they are based on an approved sector pathway or method approved by the SBTi. (The SBTi defines sector-specific decarbonization approaches (SDA) for this purpose.)
  • Renewable electricity targets: Targets to source renewable electricity at a rate that is consistent with 1.5°C°C scenarios are an acceptable alternative to scope 2 emission reduction targets (80% by 2025; 100% by 2030).

Note that offsetting is not permitted to achieve SBTs. However, while avoiding the term offsetting, the SBTi does encourage companies to finance climate mitigation projects beyond a company’s value chain for the sake of global climate action.

How is the implementation of a science-based targets checked?

After making a public commitment, calculating their corporate carbon footprint and modeling targets according to the criteria above, companies hand in their targets for assessment and validation by the SBTi. The SBTi lists all companies with commitments and targets on their website. A summary of the validated targets is also published. Companies report annually and publicly on the progress they have made towards their SBTs. Every 5 years at the latest, the targets of all SBTi companies are routinely re-examined.

As climate science constantly improves, the SBT methodology is improved accordingly every couple of years and the SBTi reserves the right to change the carbon budget and other key figures, to review targets in light of scientific knowledge and to withdraw approvals if they no longer reflect the current scientific consensus.

Current developments

As noted above, the SBTi will tighten its SBT criteria on July 15, 2022. Companies seeking to make use of the current Version 4 criteria can still do so by making a commitment no later than July 14. For instance, this would mean a level of ambition of “only” well below 2°C for Scope 1 and 2 and “only” of 2°C for Scope 3. Note, however, that such move could be interpreted as insincere.

In October 2021, the SBTi has also launched a Net Zero Standard for companies seeking to go beyond the existing Paris-aligned SBT methodology. It is likely that the SBTi’s conceptions will become mainstream in a matter of years. A Net Zero standard for financial institutions is currently being developed as well, with publication scheduled for the first quarter of 2023.

The SBTs are here to stay. As the de facto standard for corporate climate goals, companies can expect increasing stakeholder pressure to increase their climate ambitions, to measure and track their greenhouse gas emissions, and to set and pursue SBTs. The earlier you act, the better for your company – and for the climate!

Salacia Solutions is your partner when it comes to setting SBTs. We are a Software-as-a-Service provider that simplifies environmental impact tracking and reporting for businesses and investors. Visit www.salaciasolutions.com to find out how we can help you report in a transparent, traceable and consistent manner that is fully in line with the SBTi requirements, with legislation such as the CSRD, SFDR, and the EU Taxonomy, as well as with underlying methodologies such as the GHG Protocol.

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