The Science Based Targets initiative’s Corporate Net-Zero Standard
20th October 2023
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Under the 2015 Paris Agreement, 196 Parties committed to limiting global warming to well below 2°C and ideally to 1.5°C above pre-industrial levels to reduce the worst impacts of climate change. This means a net-zero, or climate-neutral world, by mid-century. To date over 70 countries including Australia have set a net-zero target.
Current pledges and government action plans are not robust enough to ensure these planet-critical temperature goals are met, and the private sector has a significant role to play in helping governments achieve their net-zero goals. Corporates need to set detailed decarbonisation and emissions reduction targets to effectively reduce their carbon footprint throughout their business and at every point in the supply chain.
Science-based targets are often referred to as the gold standard of net-zero target setting and the Science Based Targets initiative’s Corporate Net-Zero Standard has been developed specifically to give large organisations clarity on the pathway to net-zero.
In this guide, we look at decarbonisation, net-zero, unpack science-based targets and the Science Based Targets initiative’s Corporate Net-Zero Standard, plus why and how you should set one.
What is Decarbonisation?
Decarbonisation refers to reducing carbon dioxide emissions that occur as a result of human activity. The ultimate goal is a decarbonisation pathway or trajectory that eliminates carbon emissions altogether in line with a net-zero target and the Paris Agreement.
Decarbonisation pathways are generally aligned to a below 1.5, or 2 degrees warming scenario. These pathways or trajectories are mapped with short and long term decarbonisation targets, to ensure incremental decline is achieved.
It is becoming more and more commonplace for businesses to put in place emissions reduction strategies to decarbonise. Many begin with going carbon neutral to standards such as Climate Active, which allow the offsetting of emissions that currently cannot be reduced. The more ambitious are setting net-zero targets aligned with science to decarbonise. Currently over 3700 companies globally have committed to a science-based net-zero target.
What is Net-Zero?
Simply put, “net zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests for example.”
Net-zero also implies a connection to the Paris Agreement, which outlines the goal to “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century” (Article 4). The general expectation is therefore that a corporate net-zero target supports the goals of the Paris Agreement and is therefore governed by its underlying principles, including the 1.5-degree ambition (Article 2).
For corporations, a net-zero pathway should be measured and aligned with a robust standard, for example the Greenhouse Gas Protocol suite of standards or a science-based target. It should aim for a reduction of emissions as low as possible, followed by the removal of, or compensation for, residual emissions that cannot be reduced to zero.
The Science Based Targets initiative
The Science Based Targets initiative (SBTi) is one of the leading bodies driving climate action in the private sector. It outlines the ways in which businesses can achieve decarbonisation and net-zero by setting science-based emissions reduction targets.
For a quick rundown on what science-based targets see our simple explainer Science-Based Targets. What are they and why set one?
What is the Science Based Targets initiative’s Net-Zero Standard?
The SBTi’s Net-Zero Standard (Corporate Net-Zero Standard) is the world’s first framework for corporate net-zero target setting in line with climate science.
The corporate net-zero standard was developed to give corporates and business leaders “confidence that their near-term and long-term targets are aligned with what is needed to contribute to a habitable planet, and it provides clarity on business climate action to a wide range of stakeholders.” SBTi.
It is a standardised and robust approach to developing net-zero targets that are consistent with limiting global temperature rise to 1.5°C.
The standard is aimed at larger companies, however, SMEs can also use it for guidance and to understand the fundamentals of a science-based target and the recommended pathway to net-zero.
Key requirements of the Corporate Net-Zero Standard
- The primary goal is fast, broad and deep decarbonisation: Significantly reducing emissions at pace is the most effective and scientifically-sound method of limiting global temperature rise. Most companies will require deep decarbonisation of 90-95% of their emissions. It’s important to highlight here that the Net-Zero Standard takes into account an organisations full value chain emissions, including Scope 1, 2 and 3 and that carbon removals are only permissible for the remaining 5-10% value chain emissions that can’t be abated.
- Setting both short and long term targets: Companies adopting the Net-Zero Standard must set targets for the short term and the long term. The first goal should be a focus on identifying and reducing emissions now, with the aim of halving emissions by 2030 and having as close to zero as possible emissions by 2050.
- Long term targets are key to achieving a net-zero science-based target: A company is not net-zero until it has achieved its short, mid and long-term goals.
- Go beyond the value chain: Another differentiator is that the SBTi encourages companies to go beyond their own internal targets and to also take initiatives externally to help mitigate climate change elsewhere in their networks and communities. These actions must go beyond their own targets.
The SBTi Net-Zero Standard defines Corporate Net-Zero as:
- Reducing scope 1, 2, and 3 emissions to zero or to a residual level that is consistent with reaching net-zero emissions at the global or sector level in eligible 1.5°C-aligned pathways
- Neutralising any residual emissions at the net-zero target year and any GHG emissions released into the atmosphere thereafter
Science-based target trajectory. Image: Science Based Targets initiative
How to Set a Science-Based Target for the Corporate Net-Zero Standard
Setting a science-based target involves 5 steps recommended by the SBTi and must include near-term and long-term targets:
- Select a base year: Establish a base year to track your emissions. This should include scope 1,2 and 3 emissions; be representative of a typical year; must be no earlier than 2015 and should be selected on the basis that the targets being set are ambitious.
- Calculate emissions: The company must develop a full greenhouse gas (GHG) inventory including scope 1, 2 and 3 and it must be aligned to the Greenhouse Gas Protocol standards and SBTi criteria.
- Set target boundaries: Both short and long term targets must be set. Short term SBTs must cover at least 95% of company-wide scope 1 and 2 emissions. Long-term SBTs must cover at least 95% of company-wide scope 1 and 2 emissions and 90% of scope 3 emissions
- Choose a target year: Short-term targets must be set from 5-10 years from the time this submission is made to the SBTi. Long-term targets must be to net-zero by 2050 or before.
- Calculate targets: The SBTi outlines specific methods to calculate targets that differ for short and long term targets. The short-term targets must have a minimum ambition of 1.5°C for scopes 1 and 2 and a minimum ambition of well-below 2°C for scope 3. Long-term targets must have a minimum ambition of 1.5°C across scopes 1,2 and 3.
For more detail, view the Standard.
What are Scope 1, 2 and 3 Emissions?
Understanding the nature and sources of emissions is critical when committing to a net-zero target.
Scope 1 – Scope 1 emissions refer to the emissions directly attributable to the organisation. For example, the company’s use of fleet vehicles and waste disposal.
Scope 2 – Scope 2 emissions are indirectly related to the production of energy used by the company. For example, the electricity purchased by the company.
Scope 3 – Scope 3 emissions are not owned or controlled by that facility’s business but are the company’s emissions within its supply chain, used by suppliers, customers and employees.
Working Towards Corporate Net-Zero
The evidence is clear, to avoid the worst effects of climate change both governments and corporations must take responsibility and rapid action to decarbonise.
Setting a net-zero target aligned with science is one of the best ways to do this.
The SBTi’s corporate net-zero standard provides a best-practice level of guidance and clarity for corporates on what is needed to build a robust and achievable pathway to net-zero.
If you’d like to learn more, or need help on your journey to set and implement the corporate net-zero standard for your organisation please reach out. We have extensive experience in developing and setting science-based targets, net-zero and broader sustainability strategies and emissions reduction plans.