The recent report from the IPCC and SBTi highlights a need for greater commitment to science-based targets.

7 Oct

Business sectors respond to the IPCC report

Early August of this year, the first instalment of The Sixth IPCC Assessment Report was released, with the UN secretary-general calling it a “Code Red for humanity”. The IPCC report made it clear that only a transformational change would be enough to keep global warming to a 1.5°C increase by the end of the century, and that we right now are facing a 50% chance of surpassing this threshold within the next two decades.

Big emitting sectors, such as fossil fuel businesses have disappointingly mainly remained silent. The few within the sector who have voiced a response, such as The US National Mining Association, Canadian Association for Petroleum Producers, Enel SpA, and Drax Group Plc, have exposed a deep-seated division around how climate change should be dealt with and where the responsibility lays; with most calling on governments to take the lead on transitioning to a cleaner future. Likewise, the transport union RMT called on governments to wake-up and invest in publicly-owned transport networks that support green jobs across all forms of public transport. Both the Fintech community and investment sector responded to the IPCC by acknowledging their role and power in driving change [4,5]. The Fintech community further called for increased collaboration and widespread investment in natural capital and clean technology, whilst some asset managers highlighted the power of investors to push companies towards aligning with science-based targets, and the increasing commercial and regulatory reasons for companies to change.

SBTi call for companies to align with science-based targets

A month after the IPCC report release, the Science Based Target initiative (SBTi) released their Taking the Temperature report, which highlighted a positive trend in G20 companies (companies within the G20) setting climate targets with CDP. However, only 20% of G20 companies were found to set science-based targets. This means that 80% were not setting targets that align with the latest climate science and the action needed to keep global warming well below a 2°C increase of pre-industrial levels, whilst making the effort to limit warming by 1.5°C. Essentially, science-based targets translate the level of action required on a global scale down to a corporate level and provide a proven method to deliver emissions reductions at the pace and scale required.

As outlined by the SBTi, there are five steps that companies need to take to set a science-based target:

Commit – by submitting a letter to establish intent to set a science-based target.
Develop – by establishing an emissions reduction target in line with the SBTi criteria.
Submit – by presenting the target to the SBTi for official validation.
Communicate – by announcing the target set and informing your stakeholders.
Disclose – by reporting and tracking company-wide emissions and target progress annually.

In January of 2021, SBTi posted their annual progress report with an analysis of over 330 companies with validated targets (including Enel, Hilton, IKEA, Mastercard, and Tesco). The results showed a combined reduction of over 300 million tonnes of CO2 equivalent, which according to EPA, is equal to annual emissions from over 65 million passenger vehicles, 76 coal-fired power plants, or one years’ worth of carbon sequestration from 370 acres of forest. Combined, these companies reduced corporate emissions by an average of 25% over a five-year period. Science-based targets are therefore a vital component for governments and companies worldwide decarbonise the economy.

Why science-based targets are critical to Net Zero

The concept of net zero has moved from relative insignificance to centre stage since the IPCC Special Report on 1.5°C, with pledges of net zero by 2050 now covering close to 70% of the global economy [11]. However, a recent report by Carbon Intelligence [8] identified four limitations of the current net zero definition that have led to misinterpretation and misuse in corporate strategy setting. These are: a lack of clearly defined requirements that sets out a pathway for emissions reductions; no acknowledgement of the extent of emissions sources (or scopes) that companies must address; no acknowledgement of the level and speed required for emissions reductions; and a seemingly unlimited appetite for offsetting projects and carbon credits to achieve net zero, rather than prioritising reduction of emissions to mitigate the climate crisis and limit global warming to the level needed.

In comparison, science-based targets provide stricter requirements and guidelines but can also be more difficult to communicate to stakeholders. However, the research is clear: we need science-based targets [9]. Therefore, the solution might just lay in combining the two into an “Advanced Net Zero target”: a net zero target that aligns with a science-based trajectory without the use of offsetting or carbon credits to reach it. This way, companies can use the two approaches together as a standard in setting both near-term and long-term ambitious targets that ensure the most appropriate climate action, whilst also providing a clear emissions removal strategy, resulting in simpler communication with all stakeholders.

The SBTi is currently developing a new Net Zero Standard, which should provide greater clarity for companies looking to set a net zero strategy that is built on science-based targets. This is due to be launched ahead of the COP26 in November and will begin validating net zero targets from January 2022.

If you are looking to set a science-based net zero strategy for your business, Orbis Advisory can support you. With over 30 years of experience in sustainable consulting, we have taken businesses through the whole process of calculating their carbon emissions, reducing their emissions, and setting science-based targets. Please see the “services” section on our website to explore the full range of services, or send an email through to info@orbisadvisory.com for any inquiries.