Adopted by representatives of 195 countries at the 21st Conference of the Parties (COP21) in 2015 and signed in New York in 2016, the Paris Agreement set the universal goal of keeping the rate of global temperature rise this century less than 2°C above pre-industrial times. A key factor in achieving this goal is reducing and eliminating greenhouse gas (GHG) emissions. The Paris Agreement’s goal will require deliberate and strategic action on an international level, in addition to solid commitment from countries and corporations. Effective global strategies and plans to reduce GHG emissions will require a clear understanding of the quantities of GHG emissions to be reduced on an ‘organization-by-organization’ basis.
Twenty-five corporate and state-owned entities are responsible for almost 51 percent of global GHG emissions. Roughly 32 percent come from public investor-owned companies, and an estimated 9 percent are from private investor-owned companies. About 59 percent of the emissions are the product of state-owned entities. According to CDP’s Carbon Majors Report 2017, 71 percent of the world’s GHG emissions since 1988 are generated by just 100 firms.
CDP added that “[all] fossil fuel company operations and products worldwide have released more emissions in the last 28 years than in the 237 years previously.” From 1988 to 2015, the fossil fuel industry produced 833 gigatons of carbon dioxide equivalent (GtCO2e). In sharp contrast, the fossil fuel industry generated 820 GtCO2e between 1751 (the start of the Industrial Revolution) and 1988. CDP cautioned that if the trend from 1988 to 2015 were to continue, global average temperatures can escalate by 4°C by the end of the 21st century. This projected scenario may result in resource depletion and extreme weather events, both of which can be detrimental to profits and worker productivity.
Science-based targets (SBT) refer to “[targets] adopted by companies to reduce [GHG emissions that] are in line with the level of decarbonization required to keep global temperature increase below [2°C] compared to pre-industrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5).” As a major contributor to global warming, the business sector must work hard to help reduce global GHG emissions.
The Science-Based Targets Initiative (SBTi) aims to help organizations to mathematically identify quantities of GHG emissions for reduction in order to better align GHG emissions reduction initiatives with required reductions on a global scale.
What Are Are the Steps to Setting Science-Based Targets?
Companies can set up science-based targets through deliberate steps:
- Fill out, sign and submit the commitment letter provided by the Science Based Targets initiative – This step expresses a company’s interest to help address climate change by establishing science-based targets. If the enterprise has already created its own emissions reduction targets, this step confirms its desire to have the targets impartially certified using the Science Based Targets initiative’s criteria. Once the firm submits the commitment letter to the Science Based Targets initiative, it will be acknowledged as “Committed” on the Science Based Targets initiative, We Mean Business Coalition and CDP’s websites. The Science Based Targets initiative also provides a separate commitment letter for financial institutions.
- Develop a target – After an organization signs and submits the commitment letter, the next step is to develop a science-based target. A company has two years to carry out this step. The Science Based Targets initiative offers various tools, methods and resources that can help businesses develop science-based targets. Enterprises can select which will effectively help them establish science-based targets.
- Submit targets for validation – After an organization has developed its targets, the next step is to submit the Target Submission Form to the Science Based Targets initiative, who will then evaluate the targets using the SBTi Criteria and Recommendations. The Science Based Targets initiative will notify the firm whether its targets are approved or need to be revised.
- Announce the target – If an organization’s targets meet the SBTi criteria, both the organization and its targets will be featured in the Science Based Target initiative’s website and other communication materials. The business will also be permitted to use the Science Based Target initiative’s logo in its own website and communication materials.
An organization can then generate emissions reduction schemes/policies/initiatives that will be effective for meaningful implementation in order to achieve their SBT. Creating policies that support the adoption of science-based targets is a useful step in setting targets for reducing GHG emissions, which can be financially and operationally beneficial, while also improving organizational reputation.
Barriers to the Adoption of Science-Based Targets
Companies planning to adopt science-based targets need to be aware of the challenges that they may face so they can be better prepared to address them:
- Conflict between profit and sustainability – Some businesses believe that they have to choose between profit and sustainability. From their perspective, adopting sustainable corporate practices means sacrificing profits and, as a result, they are hesitant to embrace sustainable corporate practices such as science-based targets.
- Financial, technological and policy limitations – Some businesses, especially small ones, may find financial challenges investing in technology that will allow them to establish and adhere to science-based targets. Some countries may also have laws and regulations that are not conducive or do not incentivize firms to adopt science-based targets. For example, if a country has not established clear GHG reduction goals, companies and cities within that country are not politically incentivized to invest in GHG reduction projects or operations.
Additional benefits associated with precise GHG emission reduction strategies using science-based targets include more sustainable operations, improved bottom lines, improved corporate sustainability reporting performance and enhanced corporate reputations.
In addition to addressing global warning, science-based targets can benefit businesses in several ways:
- Spur innovation – Companies are increasingly creative in ensuring that their GHG emissions targets are in line with the Paris Agreement’s goal. This creativity can translate to the creation of new technologies and procedures which, if successful, will be heralded as sustainability breakthroughs, inspiring other enterprises to generate their own sustainability innovations.
- Boost competitiveness and cut costs – Setting science-based targets involves eliminating unsustainable operations, such as those that use fossil fuels or are at risk from physical climate change effects. More sustainable operations enable a business to outperform its competitors, and help firms lower their expenditures, including energy bills.
- Improve corporate reputation – Both investors and consumers pay close attention to the sustainability of businesses. Establishing science-based targets is an excellent way for businesses to attract new investors and customers, and strengthen relationships with existing partners. Companies that do not demonstrate the same level of measurable progress and transparency risk losing investors and customers to their counterparts who do.
- Comply with and participate in public policy – There is an increasing number of climate change-related policies, including carbon taxes and mandatory reporting. Setting science-based targets can make it easier for companies to comply with these policies. Further, setting science-based targets can establish a company as an industry leader, enabling it to participate in policymaking related to climate change. Sustainability indices such as CDP place high value on establishing science-based targets.
Science-Based Targets: Driving Action towards Meeting the Paris Agreement’s Goals
The Paris Agreement, its subsequent policies, and current country pledges require additional measures in order to achieve the 2°C goal of the Paris Agreement. Meaningfully reducing global GHG emissions requires deliberate and strategic action in addition to solid commitment by corporate and state-owned entities. Access to science-based targets and climate change disclosure is readily available and effective. The call to action is now.