The latest Intergovernmental Panel on Climate Change (IPCC) report stressed the need for rapid decarbonisation of all sectors of economy in the near- and long-term. This can only be achieved through active participation of private sector in climate action. In this blog, we will discuss how companies can set climate targets and what the benefits of corporate decarbonization goals for business are.

Science-based targets, established in 2015, enable private sector to set their climate goals aligned with the latest climate science to limit the global warming to 1.5-degree or well-below 2-degree. With currently over 2,200 companies committed - covering over 38 trillion USD in market capitalization, the Science Based Targets initiative (SBTi) has become a corporate standard for climate ambition.

Besides having climate ambitions in line with science, further benefits of setting a science-based target and joining the SBTi for businesses include:

  • Keeping up with current and future climate regulations
  • Enhanced brand reputation through demonstration of climate action leadership
  • Boosted investor confidence by reducing uncertainties
  • Increased competitiveness and profitability
  • Savings due to more efficient operation
  • Increased push for innovation to achieve annual targets

With SBTi, companies can commit to near-term (until 2030) and long-term (achieving net-zero by 2050) emission reduction goals, covering all three scopes (including both direct emissions from operations and emissions arising from value chain) of their business operations. By setting a science-based target, companies also commit to publicly disclosing their carbon footprint and reporting progress towards their target. It should be noted that offsets from buying carbon credits or avoided emissions cannot be taken as progress towards the near-term target. For the long-term net-zero target, carbon credits can be included to offset residual emissions from company’s activities.

There are two approaches for setting targets:

  • Absolute contraction approach (ACA) ensures that the emission reduction pace chosen by company is aligned with global annual emission reduction rate needed to keep warming to 1.5-degree pathway.
  • Sectoral Decarbonization Approach (SDA) allows use of carbon intensity indicators for most of the carbon-intensive sectors such as aviation, cement production, buildings, power generation. Use of sectoral approach allows to account for different paces of decarbonisation across different sectors. International Energy Agency’s 2 degree-scenario is used to determine carbon budgets for each sector, and then this budget is translated into intensity target (e.g. kg of CO2-equivalent per kWh generated, kg CO2e per km of transport)

Besides such huge and carbon-intensive private sectors, SBTi offers simplified target-setting procedures for small and medium enterprises (SMEs). To be classified as SME under SBTi, the number full and part-time employees should not exceed 500, and business operations should not relate to oil and gas sector.

Currently, absolute decarbonisation pathway is used to set targets for SMEs’ Scope 1 and 2 emissions, while for Scope 3, there is no strict requirement for the near-term goal. However, SMEs setting targets for Scope 1 and 2 must also commit to measuring and reducing Scope 3 emissions.

The process to join SBTi starts with baseline quantification of emissions, after which, a commitment letter is signed along with the company’s emissions profile in the baseline year. The standard commitment letter and other sector-specific requirements can be found here.

We at AvantGarde can help you to measure your corporate emissions profile and set up science-based targets for decarbonization in line with global goals of Paris Accord.