Companies following SBTs are more successful in reducing emissions

An evaluation of the 2020 SBTi Annual Progress Report by Katrin Huth and Lukas Zenz

In 2015, governments from around the world adopted the Paris Agreement, marking a joint commitment to limiting global temperature rise to well below 2 °C, with efforts to limit warming to 1.5 °C. In addition, the scientific community sees this commitment as inevitable requirement to prevent the worst impacts of climate change. Consequently, the Science Based Targets initiative (SBTi) was founded in that very same year. Its aim is to mobilize the private sector to set greenhouse gas emissions reduction targets in line with climate science as well as providing the necessary tools companies need to set targets.

Five years down the road, global emissions continue to increase. Despite the COVID pandemic and its resulting impact on the global economy, this did not significantly change that trajectory, revealing that we are not yet on track to reach net zero and to avoid the dangerous and irreversible impacts of climate change.

However, there is hope on the horizon, with Science Based Targets being a promising way to guide companies to bring down emissions. And there is proof for it: According to the 2020 SBTi Annual Progress Report the adoption of Science Based Targets as guidelines for companies to set concrete emissions goals and to respectively adjust their business activities continues to accelerate. As of early 2021 over 1,100 companies have committed to the SBTi and over 570 companies have set and validated targets. More than 390 of these companies are setting their commitments in line with a 1.5 °C reduction pathway. 

Overall, the amount of Scope 1 and Scope 2 emissions covered by SBTs has thus increased fivefold since 2015, from 231 million to now 1.2 billion tonnes. This sum corresponds to about 3.6 % of global greenhouse gas emissions from energy and industry, or the annual emissions of 308 coal-fired power plants. SBTi companies are leading the zero-carbon transition and their efforts are verifiable in achieved emission reductions. The report concludes that “…the typical SBTi company has reduced its scope 1 and 2 emissions at a linear rate of 6.4 % a year since setting their targets, more than the 4.2 % annual reduction the SBTi requires for targets aligned with 1.5 °C.” This shows that setting ambitious emission reduction targets is an important instrument to manage corporate carbon emissions, contributing to the overall goal of systematically reducing negative environmental impacts and achieving climate neutrality.

Challenges to be considered

The way to setting a Science Based Target might however seem challenging for some companies:

First, companies need to have sufficient transparency on their actual carbon emissions. Calculating a company’s carbon footprint, including also value chain emissions from purchased goods and services, logistics or the use phase of a product, can be quite challenging as it is often a time-consuming, data-intensive way of finding the correct and relevant information. For most companies, achieving initial transparency and accuracy of their carbon emissions is the most demanding element in setting a science-based target.

Second, an analysis of current and future reduction potentials is needed to drive necessary measures in a company´s business. Here, a company must consider and bring in the relevant functions in the organization to identify feasible changes i.a. in processes, energy consumption or logistics set up, all the way down to adapting the design and composition of products and/or services that contribute to an ambitious reduction of emissions.

Finally, the SBTi has defined criteria and requirements, guiding companies in their target setting. To have the target validated and publicly communicated by the SBTi, companies must strictly follow the requirements, i.e. on the scope of target, the reduction pathway or base and target year. Understanding and applying these requirements proves complex for companies doing it on their own. The SBTi is continually adapting the methodologies to simplify the process and consider public opinion on the requirements.

ClimatePartner supports companies on their SBT path

The science behind Science Based Targets will only work out if a majority of companies throughout the world commits to these dedicated emission reduction targets. We at ClimatePartner want to encourage companies to do so and actively provide support. We develop dedicated solutions that help our customers to go down the SBTi path. To introduce the concept of SBTi and to educate companies about its steps, we also conduct online events such as the ClimatePartner Deep Dive on Science Based Targets.

Setting a science-based emission reduction target is an investment in both the long-term outlook of a company, for our society and the environment. The 2020 SBTi Progress Report highlights that this effort pays off: “Target-setting companies have successfully reduced their emissions by 25 % since 2015, a difference of 302 million tons of CO₂ equivalent, the same as the annual emissions from 78 coal-fired power plants”.

A more detailed introduction on the core principles behind the SBT and how companies can take most advantage of it, will be discussed in future articles of our Climate Action Insights series.