The Road To Carbon Neutrality – The Science-Based Targets Initiative

In this installment, we focus on the Science Based Targets Initiative, a new global partnership to help companies curb the effects of climate change.

What is The Science-Based Targets Initiative?

Several key organizations have partnered to create a groundbreaking new methodology for setting greenhouse gas (GHG) reduction targets that are consistent with climate goals. In 2015, based on the Paris Climate Agreement and the commitment to a 1.5 degree Celsius global warming pathway, CDP, the United Nations Global Compact, the World Resources Institute (WRI), and the Word Wide Fund for Nature (WWF) launched the Science Based Targets initiative (SBTi). SBTi addresses climate action in the private sector by enabling companies to set science-based emissions reduction targets.  In practice, SBTi is a tool to show companies how much and how quickly they need to reduce GHG emissions to help curb the effects of climate change and lead the transition to a net-zero economy.

To-date, more than 2,000 companies around the world are working with SBTi, and many more are aligning with their guidance. Corporate commitments to carbon neutrality are rapidly increasing and have come to be expected from stakeholders and shareholders. SBTi is an opportunity for organizational leaders to make significant progress toward emissions reduction practices, goals and targets.

So, what makes a target “science-based?” According to SBTi, “Targets are considered ‘science-based’ if they are in line with what the latest climate science indicates is necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2 degrees C above pre-industrial levels and pursuing efforts to limit warming to 1.5 degrees C.”

How are Targets Set?

Once an organization begins working with SBTi, setting a science-based target is a five-step process.

1.    Commit – Establish intent through submission of a formal letter
2.    Develop – Create emissions reduction target in line with SBTi criteria
3.    Submit – Present target for SBTi validation
4.    Communicate – Announce target and inform stakeholders
5.    Disclose – Report emissions and track target progress annually

When working through target-setting, there are two methods to consider. The Absolute Contraction Approach, used by four out of five companies working with SBTi, involves setting absolute targets that uses contraction of absolute emissions. With this approach, all companies reduce their absolute emissions at the same rate, regardless of initial emissions performance (i.e., reduce annual GHG emissions 35% by 2025, from 2018 levels), as an interim milestone, acknowledging that greater reductions towards carbon neutrality is the ultimate target.

A second option, the Sectoral Decarbonization Approach (SDA), is a method for setting emissions intensity targets within each business sector (e.g. power generation, cement manufacturing, passenger-freight transportation) that are relative to a specific metric, such as production output (e.g., tons of CO2e per ton of product produced, square feet of building space or mile-travelled). The key to setting intensity goals is strategically considering operational drivers for your organization and linking the carbon reduction goals to those key business drivers. SDA allows for the setting of strategic interim carbon intensity goals that are in-line with each sector, paving the road to carbon neutrality.

What is ESA’s Involvement with the Science Based Targets Initiative?

SBTi is on the forefront of climate action planning, providing clearly-defined pathways for companies to reduce their GHG emissions and work towards carbon neutrality. In October 2021, SBTi released new guidance for setting carbon neutral targets, known as the SBTi Corporate Net-Zero Standard Criteria.

Keeping up with continually changing guidance and findings, ESA has not only conducted in-depth research into SBTi and its associated tools, but we have gone through the process of calculating and implementing our own company-wide target for emissions reductions. This experience makes us a valuable partner to companies looking to develop their own validated SBTi targets and track progress towards their emissions goals. Our expertise in this area includes, assisting clients in determining the best approach for target-setting to allow for company growth while meeting sustainability goals; providing guidance in reporting GHG emissions and identifying data gaps in reporting; and helping clients set interim targets to stay on track in meeting overall SBTs and progressing towards carbon neutrality.

In upcoming posts to The Road to Carbon Neutrality we will explore the effective and appropriate use of RECs and carbon offsets to achieve carbon neutrality, as well as ESG investing, among other topics.