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How to Set Science-Based Targets for Your Business
Climate change is a global challenge that requires urgent and ambitious action from all sectors of society. Businesses have a vital role to play in reducing greenhouse gas (GHG) emissions and aligning their strategies with the goals of the Paris Agreement. But how can businesses set credible and meaningful emission reduction targets that are consistent with the latest climate science?
One way to do that is to follow the Science Based Targets initiative (SBTi), a partnership between World Wildlife Fund (WWF), World Resources Institute (WRI), Carbon Disclosure Project (CDP), and the UN Global Compact. As the world’s preeminent framework for corporate GHG reduction target setting, the SBTi not only aligns with the latest climate science, but also provides resources, guidance, and validation for businesses and financial institutions to set science-based targets (SBTs) that are consistent with the 1.5°C or well-below 2°C pathways. SBTs are emission reduction targets that reflect the level and pace of reductions needed to limit global warming and avoid the worst impacts of climate change.
This blog summarizes the key steps and best practices for setting SBTs. SCS Consulting also encourages readers to consider watching the replay of our webinar, “Managing Your SBTi Engagement: From Setting a Target to Demonstrating Progress,” which we hosted in September 2023. This webinar covered the core aspects of the SBTi system, including sectors and pathways, target development and validation, emission reduction strategies and reporting, and the latest updates on the SBTi criteria and guidance.
A summary of the key steps leading to successful SBTs
Step 1: Commit to setting SBTs
The first step to setting SBTs involves a commitment to doing so — and this is formalized by submitting a commitment letter to the SBTi. Once a company submits the letter, the company will be listed as committed on the SBTi website and will have 24 months to submit its targets to the SBTi for validation. The commitment letter is a simple and standardized document that can be downloaded from the SBTi website.
Before committing to setting SBTs, however, organizations should undertake some initial research and preparation to ensure an effective commitment process. Some of the recommended pre-commitment steps are:
- Establish organizational buy-in and support from senior leadership and key stakeholders within the company.
- Conduct a detailed GHG inventory that covers all relevant emission sources and scopes, following the GHG Protocol.
- Determine if the company qualifies for any specific sector pathways or eligibility criteria, such as the SME pathway for small and medium enterprises, or the SDA pathway for sectors with sectoral decarbonization approaches.
- Assess the potential emission reduction opportunities and challenges across the company's value chain and operations.
Step 2: Develop SBTs
The second step is to develop SBTs that meet the SBTi criteria and requirements. The SBTi provides technical resources and tools to help companies develop their targets. Below we outline the main aspects of science-based target development.
Choosing a base year and a target year. The base year is the year from which the emission reductions are measured, and this can be as early as 2015. The target year is the year by which the emission reductions are achieved. This year must be between 5 and 10 years from the date of submission.
Choosing a target ambition level. The target ambition level reflects the degree of alignment with the 1.5°C or well-below 2°C pathways. For scope 1 and 2 emissions, the SBTi requires a minimum ambition level of 1.5°C, which translates to a minimum absolute reduction of 42% by 2030 from the base year. For scope 3 emissions, the SBTi allows a minimum ambition level of well-below 2°C, which translates to a minimum absolute reduction of 25% by 2030 from the base year. In addition to absolute scope 3 reduction, SBTi does also allow for intensity reduction targets and supplier engagement targets, which are described in greater detail below. Building on these baselines, the SBTi encourages companies to adopt a 1.5°C ambition level for scope 3 emissions as well as it is more consistent with the net-zero target and the latest climate science.
Choosing a target boundary and scope. The target boundary and scope define which emission sources and categories are included in the target. For scope 1 and 2 emissions, the SBTi requires that at least 95% of the emissions are included in the target. For scope 3 emissions, the SBTi requires that at least 67% of the emissions are included in the target, and that the target covers the most relevant and impactful categories within the company's value chain.
Choosing a target method and calculation. The target method and calculation determine how the emission reductions are measured and expressed. For scope 1 and 2 emissions, the SBTi requires an absolute contraction method, which means that the emissions are reduced in absolute terms, regardless of the company's growth or activity. For scope 3 emissions, the SBTi allows different methods, such as absolute contraction, intensity reduction, or supplier or customer engagement. The intensity reduction method means that the emissions are reduced relative to a physical or economic unit of activity, such as revenue or output. The supplier or customer engagement method means that the company commits to engaging a certain percentage of its suppliers or customers to set their own SBTs within a given timeframe.
Step 3: Submit and validate SBTs
For step three, organizations will submit and validate their SBTs with the SBTi. The submission process involves filling out an online application form and providing supporting documentation, such as the GHG inventory, the target calculation, and the emission reduction plan.
The validation process involves a review and assessment of the submitted targets by the SBTi technical team and an independent third-party verifier. The validation process can take up to 12 to 18 months, depending on the availability of the validation slots and the quality of the application. The SBTi requires that companies book their validation slot in advance and ensure that their application is complete and accurate.
When completed, the validation process will result in three possible outcomes: approval, conditional approval, or rejection. Approval means that the targets meet all the SBTi criteria and requirements and are officially validated by the SBTi. Conditional approval means that the targets meet most of the SBTi criteria and requirements but need some minor revisions or clarifications before being approved. Rejection means that the targets do not meet the SBTi criteria and requirements and need major revisions or a new submission.
Step 4: Implement and report SBTs
The fourth and final step, organizations will implement and report their SBTs. This involves taking action to achieve the emission reductions according to the target plan and disclosing the progress and performance annually to the SBTi and other stakeholders. The SBTi requires that companies report their GHG inventory, target description, target progress, and their emission reduction actions every year, using a public platform such as CDP or their own sustainability report.
The SBTi also requires that companies recalculate their targets at least every five years, or whenever their target boundary, company structure, base year inventory, or assumptions and projections undergo significant changes. The recalculation process involves updating the target calculation and submitting a new application to the SBTi for validation.
Other Benefits of Setting SBTs
Setting SBTs is a powerful way for businesses to demonstrate their leadership and commitment to tackling climate change and contributing to the global transition to a low-carbon economy. SBTs can also bring multiple benefits to businesses, such as enhancing their reputation, reducing their costs and risks, increasing their innovation and competitiveness, and engaging their stakeholders and customers.
Setting SBTs, however, is not a simple or straightforward process. It requires a thorough understanding of the SBTi criteria and guidance, a detailed GHG inventory and target calculation, a clear emission reduction strategy and plan, and consistent and transparent reporting and disclosure. It also requires a strong organizational buy-in and support, a collaborative and cross-functional approach, and a proactive and adaptive mindset.
At SCS Consulting, we have the expertise and experience to help businesses set and achieve SBTs. We can assist with the entire SBT process — from initial GHG accounting to implementation and reporting. We can also provide customized solutions and support for specific sectors, pathways, and challenges. If your organization is interested in setting SBTs to advance your climate commitments and sustainability performance, or if you have any questions about how to get started, we are here to help. Learn more on our website and be sure to sign up for our future webinars.
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For more information about setting science-based targets, please contact:
Shari Carder
Sales Coordinator
SCS Consulting
Neil Mendenhall
Managing Director, ESG Strategy & Sales
SCS Consulting
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Author
Eric Olson | Senior Technical ManagerSCS Global Services