Wednesday, August 17, 2022
The SBTi standard has already had a significant impact on corporate plans, as more than 2000 mainly large companies and financial institutions are working with SBTi to reduce their emissions in line with climate science. The SBTi is constantly evolving by developing its guidance.
For instance, in March 2022, the SBTi updated its fossil fuel policy to no longer accept commitments from these companies. After wide stakeholder consultations, the SBTi published its Net-Zero Standard in October 2021.
What is the SBTi Net-Zero Standard?
The standard is defined as:
Focus on rapid, deep emission cuts covering a company’s entire value chain emissions, including those produced by their own processes (scope 1), purchased electricity and heat (scope 2), and generated by suppliers and end-users (scope 3). In order to reach net zero, companies will need to reduce their value chain emissions by 90-95%.
Set near- and long-term emission reduction targets by taking action already today. Having regular milestones in emission reduction on the way to net zero by 2050 will help keep companies on track.
No net zero claims until long-term targets are met. Companies need to first reduce 90-95% of their value chain emissions and neutralise the residual emissions with carbon removals and only then make the net zero claim.
Go beyond the value chain by making investments outside a company’s science-based targets to help mitigate climate change elsewhere and keep the temperature rise below 1.5C. In practice, this could translate into purchasing carbon credits on the voluntary market. The SBTi strongly emphasizes that these beyond value chain climate actions should be in addition to deep emission cuts, not instead of them.
Net zero must be reached by 2050 at the latest
According to the Science Based Targets criteria, net zero must be reached by 2050 at the latest, although electricity generation will have to reach net zero by 2040. Companies also need to establish a base year to track emissions performance consistently and meaningfully over the target period. The SBTi highlights the following considerations as important for selecting a base year:
Scope 1, 2, and 3 emissions data should be accurate and verifiable.
Base year emissions should be representative of a company’s typical GHG profile
The base year should be chosen such that targets have sufficient forward-looking ambition.
The base year must be no earlier than 2015.
Setting a net zero target that is decades in the future runs the risk that the target remains a one-time declaration or campaign promise that won’t lead to any practical action in the near future. This would obviously undermine the urgency of mitigating the climate crisis. Thus setting intermediate targets are essential for the net zero target to have a direct impact on emissions.
Science Based Targets requires that corporations aiming at reaching net zero emissions by 2050 at the latest, must also commit to short term measures that reduce emissions by 50% by 2030. The same baseline year should be used for the net zero target year and for the short term target.
What emissions should be included in the net zero target?
According to the Science Based Targets initiative, the net zero target should cover not only just CO2 emissions, but all six greenhouse gases covered by the Kyoto Protocol: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), and sulphur hexafluoride (SF6). Additionally nitrogen trifluoride (NF3) emissions should also be included.
It is also very important to define which emissions fall within the target. In the case of corporate emissions, scope 1, 2 and 3 emissions under the so-called GHG protocol are typically referred to. Scope 1 covers direct emissions from company-owned or controlled sources, Scope 2 indirect emissions from the generation of purchased energy, and Scope 3 all other indirect emissions from the company’s value chain.
Scope 3 is further subdivided into so-called upstream and downstream emissions, depending on whether the emissions are related to the companies' own purchases or are only generated during the use or decommissioning phase of the products. How emissions are distributed at different stages of the value chain depends largely on the industry.
A company's own acquisition and investment decisions and other choices directly affect its scope 1 and 2 emissions and scope 3's upstream emissions. Through product development, it also has the opportunity to influence the downstream emissions of scope 3. When net zero targets are typically set quite far away, even decades away, emissions throughout the value chain can be considered to be under the control of the company.
Scope 3 emissions must be included in the Science Based Targets net zero claim. However, full coverage of all scope 3 emissions is not required even in the Science Based Targets criteria, where the long-term net reduction target should cover 90% of scope 3 emissions.
It is important to note that the SBTi emphasizes that no net zero claim can be made until emission reductions reach a certain level. In the case of SBTi that means reaching “deep decarbonization of 90-95% before 2050”. When that point is achieved, companies need to reach net zero by “neutralizing” the remaining unabatable emissions through carbon removal.
Even though the net zero claim cannot be made until companies have reached deep decarbonization, companies can and should take responsibility for their current emissions. In most cases, this means offsetting those emissions that cannot be avoided. Offsetting must be done with carbon projects that have a true climate impact.
Read more: Our comprehensive white paper helps to understand terms such as carbon neutrality, climate neutrality, and net zero. It also gives guidance on how to make credible and transparent net zero or carbon neutrality claims.