Establishing science-based targets has become widespread among companies in response to the growing pressure to become net-zero by 2050. The pressing climate change objectives are pushing companies to design sustainable roadmaps to reduce their carbon footprint and put a break on global warming.
The Science-Based Targets Initiative (SBTi) is an initiative that partners with CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF) to invite organizations to set decarbonization goals that align with the 1.5°C pathway recommended by the Intergovernmental Panel on Climate Change (IPCC).
Science-based targets are one of the current initiatives where companies can make a commitment to reduce their carbon footprint and engage their value chain.
Why are science-based targets gaining relevance?
The initiative is now positioned as a reliable commitment that companies make to decarbonize their operations and it has become the source where different stakeholders go to learn more about the environmental maturity of companies. This is reflected in the continuous growth of members committing to and setting near-term, long-term, or net-zero targets.
Given that more and more companies from different industries are joining the initiative, tailored methodologies are being developed. Among the available materials are sector-specific guidelines for industries such as aviation, buildings and financial institutions, and net-zero standards. Coming soon, the initiative will launch the Forest, Land, and Agriculture (FLAG) Science Based Target Setting Guidance and Science Based Targets for Nature, which will lead the conversation to setting better and more precise targets that address the reality of climate change.
Climate change is happening now and reaching near-term targets and net-zero targets are the closest paths to tackle it. The public availability of the initiative is also a great option for companies to benchmark themselves against their industry and start to collaborate to find solutions for a common decarbonization challenge. Being a green company also means attracting more clients, investors, and talent that are core to developing your business.
A quick guide to science-based targets
Most companies have dissimilar targets, years to reach their commitments, and base years. For the uninitiated, it might be too confusing to understand at first, but the step-by-step approach outlined below can help.
The SBTi understands that companies might have different resources and sizes, and therefore has target methodologies for small and medium-sized enterprises (SMEs), and for other companies that do not fall under this category. For the purposes of this article, we are focusing on the companies that do not belong to SMEs. For additional information view the Science-Based Target Setting Manual.
The journey will start with a commitment letter where entities pledge to submit a target within 24 months. This means that from the moment the letter is signed and sent, companies have two years to work on the necessary carbon calculations and modellings to successfully submit their targets.
Targets are available to be set for the three classifications of emissions (Scope 1, Scope 2, and Scope 3), and there are rules and methodologies to follow for each.
For Scopes 1 and 2, companies must set a target ambition that covers at least 95% of the carbon footprint and follows a decarbonization trajectory ambitious enough to limit global warming to 1.5°C above pre-industrial levels. This means that companies would need to decarbonize their operations by 42% in a range of ten years. The timeframe can be set from five to ten years.
Scope 3 is treated separately and follows a different methodology given its complexity. First, companies must set a target on Scope 3 if it represents more than 40% of their total carbon footprint. Scope 3 can be challenging to calculate, therefore targets might cover at least 67% of the total Scope 3 carbon emissions of the company. In addition, companies can set an ambition of 1.5C or well-below 2°C, which means that companies can have the option to decarbonize at a 42% rate or at a 25% rate in a period of ten years. In general, the target for Scope 3 is less ambitious than the one for Scopes 1 and 2, but the challenge might be similar.
Not all companies might find that an “Absolute Target” is suitable for their Scope 3, therefore, they can also set a “Physical Intensity Target,” or an “Economic Intensity Target.” A “Physical Intensity Target” will look at reduction of emissions per unit of production, while an “Economic Intensity Target” states a reduction in emissions per unit of value added. Methodologies and considerations for the modelling of these targets can be found on the Science-Based Targets website.
In addition to the above targets, companies can set “Supplier Engagement Targets,” “Renewable Electricity Targets,” or any other additional target that the subscribed company thinks is relevant to their strategy. The SBTi provides guidelines and tools to model the different scenarios and has a useful section with frequent questions and answers for readers.
Once you have simulated and chosen the targets that best adapt to your company operations, it is time to send the submission form to the SBTi. Currently, the initiative review process is made up of five question rounds.
If you are interested in setting science-based targets, check out our list of recommendations and steps that will help you ace that submission form:
- Answer all of the questions. This sounds obvious but it is easy to miss some questions or not fully answer. Sometimes a simple “yes” or “no” is not enough, and you need to provide an explanation.
- Do you have shares in another company that is not part of your boundary and you didn’t count it into Scope 1 and 2? If your answer is yes, don’t forget to list that company in investments.
- When counting fleet or transportation (upstream or downstream), don’t forget to use the Well-to-Wheel calculation – this includes both the direct use emissions from fuel combustion (Tank-to-Wheel) but also upstream emissions related to fuel production and distribution (Well-to-Tank).
- When you need to provide a value, don’t leave it open. An empty space is not equal to zero and zero is not equal to N/A. Be precise. This will save you some time and accelerate the process as SBTi will not need to chase you for clearer responses.
- Make sure your publicly available information does not contradict your submission information. If it does, be sure to explain why the information is different. For example, perhaps you calculated your baseline without refrigerant in your report but you added them for SBTi or you have some other exclusions. Or perhaps you simply have a better, more precise methodology now.
- Emission reduction ideas can be collected from your efficiency team, plant manager, and other relevant stakeholders. It might be worth having an internal team responsible for this task since you need a team that reviews the target every year. Check with your peers and competitors for best practices as they may be facing the same challenges.
Once the review process is over, the initiative will communicate their final decision on the target approval and the next steps for submitters.
Science-based targets are here to empower you to make the right calculations and model your path in the best way. The process will involve many questions, mainly to understand and test your logic and methodology. Be ready, have your answers prepared, and answer honestly. If you miscalculated something it can be easily corrected and it is in your best interest to set the correct base year and trajectory.
Once your target is validated, you will be on your way to becoming a sustainable company attracting more clients, investors, and talent that are core to developing your business.
This article was written by Rebeca C. Mendoza and Nenad Obradovic at Schneider Electric.
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