The Science Based Target initiative (SBTi) released its net zero standard in November 2021 to help and advise all companies looking to join the fight against climate change and help keep global temperature rise in check. With more and more net zero pledges being made globally, this legislation is vital to keeping those commitments in check.
An increasing number of companies are making commitments to achieve net zero emissions targets – but without a clear idea of what it means in practice, and are thus falling behind on meeting their commitments.
This was the headline finding from South Pole’s recent net zero report – The Push and Pull of Net Zero: Drivers of Climate Action. Nearly half of all polled organisations (45%) have set net zero goals, but only 13% have both a net zero target and a science-based target (SBT).
Evidence such as this suggests companies are rushing to set net zero targets without understanding they also need to work out the steps to get there – which need to be in line with science. If companies don’t set science-based milestones showing exactly how they will reduce company emissions, year by year, then the concern is they might not seem very serious about their goal and set themselves up for accusations of greenwashing.
It is clear that much more needs to be done to improve the accountability, credibility, and ambition of climate action by companies.
This is why the Science-Based Targets initiative net zero standard introduction is important in order to provide clearer requirements of what a company needs to do to achieve net zero.
The launch comes at a critical point when a growing number of companies are eager to show off their climate credentials and commit to bold climate targets.
So what does the SBTi net zero standard mean for businesses?
The net zero standard provides a unified science-based understanding of net zero and helps give business leaders clarity and confidence that their near- and long-term targets are aligned with climate science to ensure a habitable planet for all.
Development of the net zero standard followed consultation with an independent Expert Advisory Group, made up of leading figures from academia, civil society, science, and business. More than 80 companies took part in a road test of the standard.
SBTi’s new corporate net zero standard focuses on six dimensions that are perceived as critical to limit global warming to 1.5°C by the end of the century:
Standardisation
One of the most important elements of the legislation is standardising corporate net zero targets, to create shared definitions and clear requirements for what a company must do to reach net zero. The standard clearly states that net zero claims should only be made once a company achieves its long-term SBT – in other words, once a business has fully decarbonised its operations and value chain, and removed its residual emissions with certified carbon removal credits.
Ambition
The net zero standard embeds this urgency for deep decarbonisation within its guidance by demanding businesses to set near-term SBTs alongside the overall long-term SBTs, both of which must be aligned with a 1.5°C pathway. Near-term SBTs require companies to set five to 10-year emission reduction targets in line with 1.5°C pathways, all while working towards their overall long-term science-based target to reduce emissions in line with science by no later than 2050.
The SBTi defines this overall net zero state as one where emissions have been abated by an average of 90% compared with the base year, with any residual emissions being neutralised through certified carbon removals credits.
Impact
The new standard demands that companies take action within their own operations and value chains. However, given the urgency of the climate crisis, it also encourages businesses to invest in reductions and avoidance beyond their value chains. Even under optimistic projections, there is still an enormous gap between where we are heading by 2030, and where we need to be to ensure a habitable planet. Companies should, therefore, also undertake ‘beyond value chain mitigation.’ This can be done by financing projects and activities that further avoid and remove emissions outside of their value chain.
Compensating for emissions by purchasing carbon credits allows a company to take climate action immediately, it funnels necessary funds to a project that is reducing emissions today, usually in a developing country where financing is hard to find, and it also puts a price on a company’s emissions.
Accountability
Companies with net zero targets must set plans to reduce their own emissions in the long term across all their direct and indirect emissions (scopes 1, 2 and 3) by on average 90%.
This will increase the accountability of corporate targets by pushing companies to set robust, near-term climate action plans that deliver science-based targets, and by having more transparent, or clearer milestones against which to measure annual emission reduction performance.
Transparency
The standard demands that companies publicly disclose their targets, reduction plans, and progress toward meeting targets. On top of this, they must separately disclose how they are financing mitigation actions beyond their value chain, clearly communicating how this contributes to global reduction efforts and is not counted towards their corporate reduction targets. This transparent disclosure is essential to hold companies accountable for making progress towards their net zero targets.
Credibility
For the first time, there is an independent standard that validates – and soon verifies – companies’ net zero strategies and actions according to best practice. The era of self-claiming net zero commitments without independent and third-party validation and verification is over.
An initial screening is conducted by SBTi to determine if all necessary information is provided and/or to assess if the target meets the basic criteria. A Validation team is then assigned to further validate the targets against the SBTi criteria. For each assessment, one comprehensive target validation report including recommendations to address non-compliances, if applicable, and a written decision letter will be received within 30 working days of the application.
The way forward
Not only does the corporate net zero standard clear the mist of what a credible corporate net zero target entails, but it also raises the ambition of what a transformative net zero target looks like. Without deep decarbonisation within the next ten years, there will be no net zero emissions. Both the SBTi standard and climate science are telling us that the time to act is now.
