The debate on an ambitious climate target (Science-Based Targets) has increased among internationally active companies since the UN climate summit in Paris (COP21). The Paris Agreement marks a turning point for climate policy.
Companies have a key role to play in achieving the COP21 goals. They have the opportunity to make an appropriate contribution to limiting climate change by submitting science-based climate targets. As pioneers, they send a strong signal to investors, customers and employees, among others.
Science-Based Targets: a solution for companies
SBT or Science-Based Targets are Greenhouse gas emissions reduction targets. They are calculated based on a scientific scenario to ensure that global warming does not exceed 2 °C compared to pre-industrial levels. By setting an SBT, companies thus ensure that their emission reduction efforts are in line with such a scenario. Various international CSR standards recognise such targets. Among other things, they contribute to a higher rating with CDP and EcoVadis, for example.
How to set a SBT
The basis for the creation of science-based targets is the calculation of a carbon footprint. Based on this, the company’s ambition level is set. Companies are encouraged to pursue a higher ambition level towards a 1.5°C target in the long term (a 2°C target is not allowed for Scopes 1 and 2 according to the latest SBTi requirements).
Three core components are necessary to establish an SBT: the GHG budget, the emissions scenario and the allocation approach.
|Greenhouse gas budget||Describes the amount of carbon dioxide emissions allowed over a certain period of time to limit global warming to 1.5 °C.|
|Emission scenario||These scenarios describe future emission targets, i.e. the amount of maximum emissions in the atmosphere in 2030. It includes a hypothetical pathway describing the necessary emission reductions to reach the set target. Economic performance projections as well as socio-economic and political circumstances are included.|
|Allocation approach||There are three different approaches to calculating science-based targets: Contraction, Compression, Convergence. They take into account the predictions of how the sector and the company will develop in the future and include such factors in the calculation depending on the approach chosen. All approaches have their strengths and weaknesses and may be more suitable for some companies than others.|
Criteria for setting a Science-Based Target
Two criteria are essential for setting an SBT.
Time frame: An SBT should cover a minimum of 5 years and a maximum of 15 years from the date the target is submitted to the SBTi for official validation.
Scope: A SBT should cover at least 95% of the company-wide Scope 1 and Scope 2 emissions. For significant Scope 3 emissions (more than 40% of total emissions), a Scope 3 target should also be set.
Methods for setting SBTs
Currently, there are three methods to set an SBT and each is applicable to multiple sectors. The three methods of determination are the sector-based approach, the absolute reduction approach and the economy-based approach. Companies are advised by the SBTi to use either the sector-based approach or the absolute reduction approach.
Once the targets are set, they can be made official. Companies are encouraged to participate in the Science-Based Targets Initiative (SBTi). The targets are validated through the SBTi process and then the company is listed with an ‘approved target’ with the SBTi.
Support – Calculating Science-Based Targets together with DFGE
If companies are unsure which approach is most suitable or which method is the most appropriate for determining a SBT, external assistance can be called upon. As the first official Science-Based Targets partner in the DACH region, DFGE already support numerous companies from DAX, MDAX to SMEs in the calculation, analysis and implementation of Science Based Targets.
An additional overview on SBTs and the underlying methodology can be found in our white paper: Download SBT Whitepaper – DFGE – Institute for Energy, Ecology and Economy