Five Key Takeaways on the SBTi Net-Zero Standard

The IPCC’s Special Report on Global Warming of 1.5°C, released in 2018, signaled that we must limit global warming to 1.5°C above pre-industrial levels and reach net-zero emissions by midcentury to avoid the worst effects of climate change.

Following publication of the IPCC report, more organizations announced commitments to reach “net-zero.” A lack of standard, however, made it difficult to decipher which approaches were credible and acted with appropriate urgency.

In October 2021, the Science Based Target Initiative (SBTi) released the first global standard for net-zero target-setting, called the Net-Zero Standard.

This much-needed guidance brings clarity and will drive credible, ambitious climate action by corporations. While the full Standard can be viewed here, below are five key takeaways:

1. Setting a net-zero target is an opportunity to demonstrate leadership by establishing one of the most ambitious climate goals.

The Net-Zero Standard requires deep decarbonization across the value chain and is designed to guide organizations and industries in what is needed to contribute to a habitable planet. Compared to carbon neutrality, which can be achieved solely through purchasing carbon offsets and does not have a clear standard, net-zero requires developing emission reduction roadmaps and executing transformative changes throughout the value chain in line with the Standard’s requirements.

The Net-Zero Standard opens opportunities for organizations to step up to the challenge and distinguish themselves as climate leaders.

2. Organizations must set both near-term and long-term science-based targets (SBTs) that align with 1.5°C pathways.

Near-term SBTs, previously known just as SBTs, are 5–10-year emissions reduction targets. These targets ensure that organizations are staying in line with 1.5°C pathways, which require emission reductions now, not just in the far-off future.

Long-term SBTs require reducing emissions to residual levels by 2050 or sooner.  While “residual levels” are defined differently by industry, for most it means reducing emissions by at least 90% by 2050 over 2020 levels.

Scope 3 emissions, or those that occur upstream and downstream in the value chain from an organization’s own operations, must be included in near-term targets if they account for >40% of total emissions and must be incorporated into all long-term targets. While this will be challenging for many, collaboration across the value chain is vital if we are to limit warming to 1.5°C.

3. Carbon removals may be used to counterbalance any remaining residual emissions and reach net-zero.

Once long-term SBTs are met, carbon must be removed from the atmosphere to neutralize any residual emissions, i.e., the remaining <10% that cannot be abated.

The standard limits this counterbalancing step to the use of carbon removal offsets only, excluding carbon avoidance offsets. Carbon removals remove existing carbon from the atmosphere through actions like planting forests and direct air capture, whereas avoidance offsets reduce or avoid future emissions through actions like protecting forests from deforestation.

4. An organization can only claim to be net-zero once it has reached its long-term SBT and neutralized the residual emissions.

Organizations may reach a balance of carbon emissions and removals earlier on in their journey, but they cannot claim to be net-zero until they’ve reduced emissions to the level required. They can only claim to be net-zero once they’ve met their long-term SBT and neutralized the residual emissions with carbon removals.

5. During the transition to net-zero, organizations are encouraged to mitigate emissions beyond their value chain with carbon offsets.

The standard has made it clear: decarbonization is the foremost priority.

However, there is still a critical need to protect carbon sinks like forests and oceans from further degradation and invest in the development of carbon removal solutions if we are to reach a global net-zero by 2050.

Therefore, SBTi still encourages organizations to take the lead and invest in carbon offset projects and technologies while transitioning to net-zero to help mitigate emissions outside their value chain.

The Net-Zero Standard provides a uniform understanding of net-zero in a corporate context and gives stakeholders increased confidence that an organization’s climate targets are aligned with the goals of the Paris Agreement.

Edison Energy’s Sustainability team is here to help in establishing and achieving your sustainability goals.