Science Based Targets (SBTs) are measurable, actionable, and time-bound targets based on the best science available. They enable actors to align with planetary boundaries and the goals of the Paris Climate Agreement. This standard is considered one of the strictest in the world due to the high requirements a company must meet to reduce emissions on a large scale.
Background of the Science Based Targets
Four environmental organizations – CDP, WWF, UN Global Compact, and the World Resources Institute – launched the Science Based Targets Initiative (SBTi). Through this collaboration, the first global science-based standard for companies to set net-zero targets has been developed.
Instead of considering potential company savings, the SBT approach bases the quantity of emissions that a company must cut on the remaining emissions budget until 2100.
The methodological approach of calculating the carbon budget is as follows:
- Estimation of the global GHG budget (quantity of emissions that can be released until a certain temperature threshold is exceeded) – for 1.5°C target from 2018 to 2050 990 gigatons of CO2 equivalents.
- Model GHG budget over time using emissions scenarios.
- Breaking down the GHG budget to the private sector and individual companies using either the Absolute Concentration Approach (emissions reduction linear by 4.2% annually) or the Sectoral Decarbonization Approach (reducing emissions intensity to the same level by a cut-off date).
990 gigatons of CO2 equivalents may look like a lot at first glance. However, this is not the case. Because according to the Mercator Research Institute for Climate Change (MCC), we emit 1,337 tons of CO2 emissions into the atmosphere every second. Depending on the MCC’s calculations, we have just under 6 years left until the emissions budget for the 1.5C target is fully exhausted.
We are already experiencing what happens after that in a less threatening form today: extreme weather events, crop failures, species extinction, glacier melt – you name it.
Who is the target group for the Science Based Targets?
The target group consists of companies with more than 500 employees that want to achieve the net zero target by 2050 at the latest. SMEs can also set SBTs, but different processes and guidelines apply to them. The SBTi website publishes all companies that have committed to SBT or already have validated SBT.
If a company wants to set SBT, the following 5 steps are necessary:
- Commit: Complete and submit Commitment Letter stating intent to establish SBTs.
- Develop: Develop emissions reduction target that meets SBTi eligibility criteria.
- Submit: Submit target to SBTi for full validation.
- Communicate: Announce the target and inform stakeholders.
- Disclose: Report annually on company-wide emissions and track target achievement.
The targets should be set by the company itself. Their primary objective is on cutting emissions. However, secondary targets can also deal with suppliers. You can find examples of target formulations in the section “Targets”.
When companies commit to setting SBTs, they have two years to have them validated. Validated targets must be published on the SBTi website no later than 6 months after validation.
What are the goals?
In order to work with the SBT, the corporate carbon footprint (CCF), i.e. the total emissions of the company, must be known. To calculate this, the SBTi refers to the GHG Protocol.
A company can set short-term and / or long-term targets.
Short-term targets cover a target horizon of 5-10 years. Targets must be reviewed for timeliness at least every 5 years. They serve as milestones on the path to achieving the long-term goals. It is important to set short-term goals as well to avoid exceeding the global emissions budget.
Long-term targets show companies how much emissions they need to reduce in the supply chain to reach net zero by 2050 at the latest. Using the long-term targets, at least 90% of companies’ total emissions will be reduced.
Companies must neutralize the remaining emissions. The term “neutralization” describes methods by which carbon can be removed from the atmosphere and permanently stored. Without this process, a company cannot claim to have achieved the net zero goal!
SBTs can look like this, for example:
XY commits to achieving net-zero GHG emissions across the value chain by 2040, starting from a base year of 2020.
In terms of near-term targets, XY commits to reducing Scope 1 and Scope 2 emissions by 50% by 2030, from a 2019 baseline. In addition, XY commits to 60% of all supplier:ins (by spend) also having established science-based targets by 2025.
The five steps of target setting
Goal setting can be broken down into 5 steps:
- Assess (Elicit): What are the organization’s greatest impacts on the environment?
- Prioritize (Prioritize): What areas should be focused on? Where should more action be taken? These are the priority targets
- Measure: Measure baseline data on the priority goals and set additional goals.
- Act: Reduce current impacts and transform systems
- Track (Measure): Measure and publicly report progress against targets
Companies must also conduct Scope 3 screening for all relevant Scope 3 categories to determine their significance. An ambitious and measurable Scope 3 target with a clear timeframe is required if Scope 3 emissions cover a significant portion (greater than 40%) of the company’s total emissions.
What approaches are used to formulate science based targets?
The exact target formulation can be done according to one of two methods: the absolute concentration approach or the sector-based decarbonization approach (SDA). Depending on the approach, companies then present absolute or intensity-based targets. 4 out of 5 companies with validated targets use the absolute contraction approach. Choosing the SDA makes sense if the company operates in a sector listed by SBTi.
This type of target builds on the principle of emissions contraction. This means that the emission output of all companies is reduced by a constant reduction rate at all times – regardless of the different emission intensities in the base year. The minimum reduction rate under SBT is 2.5% per year on a linear basis. Most companies in critical sectors must set absolute targets.
In short, absolute targets set an annual linear emissions reduction of at least 2.5% for the company.
Example for a target formulation: XY commits to reduce CO2 emissions from Scope 1 and Scope 2 by 12% from 2023 to 2028.
Intensity-based targets according to the SDA
The SDA describes sector-specific paths to decarbonization and is based on the principle of convergence. This means that the emissions intensity of all companies in a sector should converge continuously and then converge in a target year. However, this is only applicable to sectors that have consistent physical activity indicators (e.g., kWh).
Example for a target formulation: XY commits to reduce CO2 emissions by 25% per kWh of electricity from 2023 to 2026.
However, it is not enough to just set ambitious targets. To ensure that they can be met, SBT should also be incorporated into the corporate strategy. This will ensure that all future business areas contribute to the achievement of the targets.
Currently, there is no control mechanism in place when targets are missed.
Are you wondering how your company can get to net zero targets? Measures, of course, depend heavily on the company and the sector in which it operates. Some general areas with high reduction potential within a company include energy, value chain and product design.
Measures for achieving short-term targets may include, for example:
- Building automation systems
- Update business travel policies to promote low-carbon transportation options such as rail, public transit, teleconferencing and videoconferencing
- Meat-free cafeteria with use of organic products.
Measures to achieve long-term goals may include:
- Decarbonization of office buildings
- Decarbonization of vehicle fleet, promotion of sustainable employee mobility (e.g., e-car sharing, promotion of carpooling by providing e-cars to travel together to the company site)
- Defining key energy-saving tasks that reduce greenhouse gas emissions of factories and depots
- Testing and implementing solutions to reduce, reuse or recycle single-use plastics used in daily operations
- Replace new plastic packaging with recycled materials and test the use of compostable and fiber-based materials.
Advantages for companies
The SBTs are considered one of the strictest sustainability standards currently available. Based on current scientific evidence, they represent a credible and transparent standard for achieving the Paris climate targets. In addition, the targets are externally validated by reputable organizations and published on the SBTi website. SBT-validated targets are thus a good way to strengthen brand image and trust in one’s own company. They also represent a competitive advantage, as they allow companies to position themselves as sustainability driven.
The high requirements, which currently go beyond legal regulations, also mean that organizations are perfectly equipped for future legal requirements and are seen as pioneers in terms of sustainability.
In addition, cost reductions are made feasible through higher efficiency.
With the help of SBT, companies can take an important step towards making economic activity compatible with sustainability. However, the success of SBTi will only result if as many large companies as possible commit to these goals. If your company needs support regarding SBT, don’t hesitate to contact us.
Sofie Kranewitter, July 2023