The movement toward science-based targets addresses one of the most important questions companies have to answer as they consider climate change and greenhouse gas (GHG) reduction goals: When setting a GHG reduction target, how does an organization decide what the right number should be?
As I noted in a previous Edison Energy post, corporate sustainability goals need to be aggressive, yet credible and achievable. The concept of science-based targets (SBTs) is helping companies define goals that not only meet all of these requirements, but also are at the head of the leadership pack.
GHG Goal-Setting Evolution
One of the earliest programs to help companies set GHG reduction targets was the U.S. Environmental Protection Agency’s Climate Leaders program, begun in 2002. To participate, companies agreed to set “aggressive” targets relative to a benchmark business-as-usual baseline.
While EPA helped determine the baseline scenarios, the definition of “aggressive” was often in the eye of the beholder and the approved target a matter of negotiation between the company and the EPA. This subjectivity is inherent to GHG goal setting when there is no specific objective other than to “reduce emissions” — what seems significant to one may not be to another.
Since the sunset of Climate Leaders in 2011, the Climate Leadership Awards (CLA) — a program of C2ES and The Climate Registry, formerly in partnership with EPA — has recognized companies for setting and achieving GHG targets. CLA’s criteria expects companies to set a target that achieves at least a 1.8 percent absolute GHG reduction per year over the course of the goal.
I was part of the team that created the CLA, and we chose that number based in part on an analysis of the ambition of all the goals reported to CDP in the previous year, and in part based on the United Nations Intergovernmental Panel on Climate Change’s (IPCC) research. The IPCC has found that to have a “likely” (>66% chance) of keeping average global temperature rise under two degrees Celsius (3.6 degrees Fahrenheit), it will require as much as a 72 percent reduction in global emissions between 2010 and 2050 (or 1.8 percent per year).
While the CLA target was pegged to the science of climate change, it wasn’t quite a science-based target.
The Science Based Targets Initiative (SBTI) was created in 2014 to more precisely align companies’ GHG goals with the global carbon budget. The concept was simple: Corporate targets would be considered “science-based” if they were in line with the level of emissions reductions necessary to keep global temperature increase below 2°C (3.6°F) compared to pre-industrial temperatures — the level above which the most severe impacts of climate change are modeled to occur. The 2°C goal is also enshrined in the Paris Agreement, and gives companies a credible benchmark for setting their reduction ambitions.
While attending Climate Week in New York City in September, I participated in a “deep dive” session on SBTs hosted by the World Resources Institute and other members of the SBTI (I am a member of the SBT Technical Advisory Group). That discussion crystallized for attendees the importance of providing methodology and hard numbers to sustainability goals and actions.
There are many reasons for adopting a SBT strategy, not least of which are improving profitability and competitiveness. But making a SBT commitment isn’t easy.
As Kevin Rabinovitch, the Global Sustainability Director at Mars said at the session, “SBTs tend to be stretch targets. Stretch targets alone are great, but they are also annoying because they are by definition more than you know how to do. With a regular stretch target, it’s usually arbitrary how you got to the number. SBTs give a reason — a non-arbitrary stretch that can help with commitment. Having the SBT out there as a marker allows you to plant the flag and work your way toward it.” (I would also note that Mars and several other companies were working toward science-based goals long before the SBTI began).
When setting a target with the SBTI, there are three general approaches to consider:
- Sector-based approach: This divides the carbon budget by sector and then allocates it to companies in that sector.
- Absolute-based approach: This assigns to companies the same percentage of absolute emission reductions as is required globally — i.e., 49 percent by 2050 from 2010 levels.
- Economic-based approach: The carbon budget is equated to global GDP and a company’s share is determined by its gross profit.
There are at least six existing methodologies that companies can use, which are described on the SBTI website and in the SBTI target-setting manual. Selecting a method needs to consider factors such as company size and growth, and there is no one size fits all strategy.
Science-Based Targets Gaining Momentum
SBTs represent the most aggressive form of GHG goal setting, yet they are gaining traction as a defining way to show leadership in addressing climate change. The uptake amongst corporations has surprised even the founders of the Initiative, which had set an initial goal in 2015 of signing on 250 companies by 2020.
As of December 2017, more than 325 companies in 35 countries are now committed, with two-thirds of participants coming from Europe and the United States. These aren’t just small companies either — they have combined revenue of over $6 trillion and total emissions equivalent to Germany. Participants include General Mills, HP Enterprise, H&M, Novartis, Procter & Gamble, VF Corporation, Wal-Mart.
To find out more about the Science Based Target Initiative, go to their website, or contact me to discuss how Edison Energy’s Sustainability and Renewable Energy Advisory services can help you be a climate leader.
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