Time to Commit: Set Science-Based Emissions Reduction and Lead the Way in Combatting Climate Change

Recent global events such as the COP26 UN Climate Change Conference have made it crystal clear that the time for talking about climate change solutions has passed, and the time for action is right now. Climate change has been one of the biggest topics in ESG for some time and investors are pushing the agenda, demanding that companies start measuring and reducing their greenhouse gas (GHG) emissions, and sooner than later. The Net Zero Asset Managers Initiative is up to 220 signatories and $57 trillion in assets under management. And major investors, including BlackRock, are issuing new mandates that specifically call for short- and medium-term targets to reduce emissions in line with the Paris climate accord.

Science-based targets are becoming increasingly common and are the most recognized and legitimate way for companies to set emissions targets.

Many organizations have already responded to the pressure by committing to lofty carbon reduction goals. Some have gone as far as setting net-zero targets. This represents real progress. However, companies that wish to follow suit must remember that emissions reduction efforts must be more than lip service. Setting carbon reduction goals in a credible and achievable way requires setting targets in alignment with the Science Based Targets initiative (SBTi).

Formed in 2014, SBTi represents collaboration between major environmental groups including the World Resources Institute, the World Wide Fund for Nature, CDP, and the UN Global Compact. The organization works to add structure to corporate carbon emissions targets by aligning with the latest climate science from The Intergovernmental Panel on Climate Change (IPCC). The intent of science-based targets is to meet the goals of the Paris Agreement and limit global warming to 1.5°C.

And the targets work. In January, SBTi said companies with approved targets reduced emissions by 25% since 2015, ahead of the pace needed to align with the Paris Agreement. According to The Wall Street Journal, SBTi has already approved targets of 1,006 companies and has 1,116 companies in the pipeline.

A new SBTi standard makes the path forward even more defined.

SBTi recently released a new global standard for corporate net-zero target setting. Created in partnership with an Expert Advisory Board consisting of members from various institutions including Barclays, Goldman Sachs, BMO Global Asset Management, Deutsche Bank, and Credit Suisse, the goal of the new standard is to clearly define net zero and to lay out a path for companies to achieve net zero by 2050.

Keys to the new standard include:

  • Short- and long-term targets. The standard is split into short- and long-term targets to ensure companies are acting immediately and consistently. This structure is meant to allow companies to make concrete commitments while avoiding greenwashing. The targets cover a company’s entire value chain, including scope 1, 2, and 3 emissions.
Short-Term TargetsLong-Term Targets
By 2030 or earlierBy 2050 or earlier
Scopes 1 & 2Scopes 1, 2, & 3
Reduce emissions by 50% compared to a base yearAchieve net zero emissions, reduce emissions by 90% compared to a base year
  • Specific emissions reduction requirements and methods for each industry. Based on industry, most companies will use one of two methods to set a target:
    • The Absolute Contraction Approach implements a linear annual reduction target consistent with reducing global emissions to net zero by 2050.
    • The Sectoral Decarbonization Approach sets a sector-specific target that accounts for characteristics of the industry in which a company operates, such as base year emissions and sector activity growth.

A company’s industry and chosen approach will determine the quantity and speed of emissions reductions required by the standard. A company’s industry also determines how emissions cuts will be implemented, specifically targeting their most relevant and material sources of emissions.

  • Review and reporting. Once an approach is chosen and a target is selected by a company, the commitment will be reviewed by the Science Based Targets Initiative to determine if it aligns with the Paris Agreement and limiting global warming to 1.5°C above pre-industrial levels. If the target is approved, the company will implement its emissions reduction plan and report progress to stakeholders. The new standard requires emissions reduction progress to be reported annually.

Under the new standard, commitments are both ambitious and timely.

In practice, implementation of the standard might look like one of the following commitments:

  • Boston Consulting Group commits to reduce scope 1 and 2 GHG emissions 92% per FTE by 2025 from a 2018 base year. Boston Consulting Group commits to reduce scope 3 GHG emissions from business travel 48.5% per FTE by 2025 from a 2018 base year.
  • Compass Group PLC commits to reduce absolute scope 1 and 2 GHG emissions by 46.2% by 2030 from a 2019 base year. Compass Group PLC also commits to reduce absolute scope 3 GHG emissions from purchased goods and services by 28% within the same timeframe.
  • The Clorox Company commits to reduce absolute scope 1 and 2 GHG emissions 50% by 2030 from a 2020 base year. The Clorox Company also commits to reduce absolute scope 3 GHG emissions from purchased goods and services and use of sold products 25% over the same timeframe.

Credible emissions reduction targets are a must for every company.

To help make science-based emissions reduction targets widely accessible, SBTi charges $9,500 for approving and reviewing targets. When you commit to net-zero under science-based targets, you get a clear path to decarbonization with the ability to measure your performance and understand progress. You’ll be less vulnerable to greenwashing claims and much more capable of demonstrating the real emissions reduction results investors want to see. At the same time, you will limit risk, diminish expenses, and improve brand reputation. Commit now, and start down a proven path that will spell success for your company, your investors, and our planet.