Environmental, Social & Governance Briefs

Science Based Targets – What Is It All About?

May 21, 2018

Science Based Targets (SBTs) for greenhouse gas (GHG) reduction are increasingly being discussed, however what they entail in detail is often not well understood.

In contrast to a simple incremental approach, targets are considered ‘science-based’, if they aim at carbon reduction in accordance with the internationally agreed global climate change targets- based on scenarios by the Intergovernmental Panel on Climate Change (IPCC) or the International Energy Agency (IEA). Currently 411 companies have started on the SBT approach and 105 companies have approved targets (sciencebasedtargets.org).

As described in a report by The Conference Board, one of the seven pillars of sustainability leadership is having sustainability goals that are strategic, ambitious, and long term. Setting SBTs could create such an ambitious goal.

In this blog, we want to give a very brief overview of the approach and its application.

The Science Based Target Initiative (SBTi) was created as a collaboration between CDP, WRI (World Resources Institute), WWF (World Wildlife Fund for Nature) and the UNGC (United Nations Global Compact).

To facilitate the process of setting SBTs, a manual (downloadable at http://sciencebasedtargets.org/resources/ ) was produced that explains the process and requirements.

Within the SBT process different types of emissions are identified and classified following the Green House Gas Protocol scope definitions (http://www.ghgprotocol.org/).

Any interested company needs to complete the following 4 steps with the SBT Initiative:

1. Complete a commitment letter
2. Develop a target
3. Submit target for validation
4. Announce target

SBTs should cover at least 95% of the company-wide scope 1 and 2 emissions.  If a company has significant scope 3 emissions (over 40% of total scope) it should set a scope 3 target.  Scope 3 targets generally need not be science-based, but should be ambitious, measurable, and clearly demonstrate how a company is addressing the main sources of GHG emissions within its value chain in line with current best practices.  Each company needs to select a base year and a target year. The base year should preferably be the most recent year that has verifiable data and is representative of the company's GHG emissions. An average of several years is also an option.  A target year between 5 and 15 years is considered ideal as it allows for early implementation and encourages long-term investment.  Longer term targets (such as “in 2050”) should also be considered. Offsets should not be counted toward attaining an SBT.

As expected setting Scope 3 targets has proven extremely challenging for organisations.  In a SBT webinar (September 2017) setting scope 3 targets – screening and setting boundaries - was quoted as being the most challenging aspect of the SBT process.

The following three stage method is necessary to set targets that the SBTi can approve:

 

All methods presented within the SBT manual need to undergo these 3 stages and can be considered science based as they are founded on the Carbon Budget and an Emission Scenario both of which are results of extensive scientific research. 

Once a science-based Emission Scenario has been selected the company setting SBT targets needs to allocate itself a share of those emissions.  There are different approaches to allocate emissions:

The target can be either absolute or relative to either physical measure (e.g. tons produced) or value added categorised as intensity targets. SBTi recognises both absolute and intensity targets have advantages and disadvantages. Absolute targets are independent of company growth and therefore directly linked to the overall target, intensity targets enable cross company comparisons. It is therefore recommended to set absolute targets and measure performance against derived intensity targets. Also, a sector-based approach is possible, where each sector depending on its growth and mitigation scenarios has different pathways to the sector specific carbon budget.

 

The methods vary in the Emissions Scenarios and Allocation Approaches selected.  SBTi encourages any company undergoing the process to select an Emission Scenario and an Approach that encourages change quickly as this is the best way to ensure the 2° target is met and a carbon debt for future generations can be avoided.

SBT methodology is complex and leaves a lot of room for judgement decisions. Despite the name it is not a scientific method. Starting however with science-based scenarios to set GHG targets can create an ambition towards a relevant contribution. So far about 1% of the global GHG emissions have now been committed to ambitious corporate reduction targets which comply to the methods described above, with more companies embarking on this new way of target setting.

 If you have not yet entered the path of SBT, it is worth to consider the pros and cons:

• Pros:    the targets will be independently approved; positive effect on stakeholders, NGOs and investors; the internal discussion about the right targets becomes a lot easier.
• Cons:  The method is complex, and companies have encountered numerous problems identifying the correct data, especially for scope 3; it requires considerable time and resources.