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Since the Science Based Targets Initiative (SBTi) was established in 2015, it has set the standard for motivating companies to reduce emissions in line with climate science, with the goal of limiting global temperature rise to 1.5˚  Celsius. Setting SBTs can involve identifying both near and long-term targets, the latter of which SBTi recently released new guidance for in October of 2021. It can be difficult to delineate the various requirements for Scope 1, 2, and 3 emissions reductions on both of these timescales, a challenge which SR Inc is well equipped to support.

At the end of 2021, well over 2,000 companies across 70 countries and 15 industries, representing a third of global market capitalization, had either committed to setting a SBT or had their target approved per SBTi standards.  As of October 2022, that number had climbed to nearly 4,000. Graphic Source: SR Inc. Advisory Services 2022. 

Near Term Targets

Setting an SBT includes, at a minimum, having a near-term Scope 1 & 2 target, which must cover at least 95% of a company’s emissions inventory in its scope. Therefore, if either Scope 1 or Scope 2 emissions represent less than 5% of overall Scope 1 & 2 combined emissions, they can be excluded from the target (which, for example, can be the case for some software companies with small office presences).  Similarly, if there are small sites without good data protocols or without efficient means to reduce emissions, they can be excluded if they are less than 5% of Scope 1 & 2.

SBTi also requires that Scope 3 emissions be included in near-term targets if Scope 3 emissions make up 40% or more of a reporting company’s total emissions (Scopes 1, 2, and 3).  Any company setting an SBT must therefore conduct an emissions screen to understand if its emissions pass this threshold.  If a Scope 3 near-term target is needed, it must cover at least 67% of Scope 3 emissions.  

Achieving Net Zero

Companies hoping to achieve Net Zero emissions have new guidelines as of October 2021 from SBTi.  Companies will be required to set both a near-term (5-10 years) and a long-term (ending in 2050 at the latest) target to achieve Net Zero.  Long-term Net Zero targets are not required to set SBTs, but most SR Inc Member-Clients are now committing to set them or are transitioning their previous Net Zero targets to align with SBTi.

Like near-term SBTs, the boundary for long-term Scope 1 & 2 targets must cover at least 95% of a company’s emissions inventory.  Unlike near-term targets, all long-term Scope 1­ & 2 targets must include at least a 90% reduction in overall emissions and must happen by 2050 at the latest.  And unlike near-term Scope 3 targets, all companies setting a long-term Net Zero target must include a long-term Scope 3 target, regardless of size.  Companies must include at least 90% of their Scope 3 emissions inventory in the target, and supplier engagement targets are not allowed.

The Process

The SBTi requires the target validation process to occur within 24 months of signing the SBTi Commitment Letter.  As shown in the SBTi diagram below, there are five steps to the validation process that are expected to take 30-60 business days:

Graphic Source: SBTi

The costs for SBTi validation services are $14,500 for both near-term and Net Zero targets, or $9,500 for either near-term or Net Zero targets alone.  This includes a second submission review if the first submission is not accepted, and costs are lower for companies with existing targets that are looking to update their targets or increase their ambition.  SBTi recently created an online booking system to schedule the target validation process, but some Member-Clients have experienced a several months lead time to book validation, so SR Inc recommends booking as early as possible after signing the SBTi Commitment Letter.

Takeaway

Adopting new goals requires buy-in from senior leadership, and significant planning from companies’ internal and external sustainability teams.  SR Inc is working through these stages with multiple Member-Clients and welcomes the opportunity to assist others in developing roadmaps and budgets for this strategic multi-department initiative. For more details on strategies to approach to Scope 1, 2, and 3 emissions reductions, timeline management guidance, and sample Member-Client emission footprints and SBTs, Member-Clients should review SR Inc’s September 2022 Science-Based Targets Member Briefing in our Digital Library.