Hitting the Mark on Science-Based Targets
A growing chorus of voices have joined the call for science-based climate action. The momentum is driven not only by sustainability experts and nonprofits, but by investors and insurers, too. Former AXA Chief Executive Henry de Castries led the insurance firm’s recent decision to divest from fossil fuels and champion the Paris climate accord. “We have no choice,” he said. “A 2℃ world may be insurable; a 4℃ world certainly would not be.” Responding to the call for action, some of the world’s largest companies are incorporating climate risk into their strategy, in the form of science-based targets.
“A 2℃ world may be insurable; a 4℃ world certainly would not be.”
Science-based targets provide a method for companies to align their greenhouse gas (GHG) emissions reduction goals with climate science. While they take shape in a number of different forms, overall they aim for a 2℃ global temperature increase or less, in accordance with the Paris climate agreement. Science-based targets can help organizations drive innovation, get ahead of regulations, bolster credibility with investors, and ensure long-term profitability.
Setting the Right Science-Based Targets
Before a business can embark on the journey of meeting these goals, it needs to determine which of several approaches is most appropriate for the organization. The Science-Based Target Initiative (SBTi) offers a few factors to consider:
Definition of Emissions
First, let’s clarify the difference between CO2 and CO2e. CO2e, or carbon dioxide equivalent, covers all GHG emissions, including carbon dioxide, nitrous oxide, and methane. For the purposes of science-based targets, CO2e is a more accurate metric.
Then there’s the question of emissions scope, between 1, 2, and 3. GHG Protocol defines the distinction:
- Scope 1: Direct emissions from owned or controlled sources
- Scope 2: Indirect emissions from generation of purchased energy
- Scope 3: All indirect emissions within the value chain, both upstream and downstream
Scope 3 can include emissions generated by customer use of the company’s products, or employee use of resources, such as airline business travel. Scope 3 emissions are harder to quantify, so SBTi only requires a company to set a Scope 3 target if Scope 3 emissions make up over 40 percent of total emissions.
Scope of Strategy
Next, a company needs to decide how broad of an impact it wants to measure. One could take a sector-based approach, wherein reduction requirements are based on the industry sector’s share of global emissions. Or, a company could take an absolute-based approach, meeting requirements globally set for all companies to meet across the board. Finally, there’s an economic-based approach, which determines a company’s share of carbon responsibility based on its gross profit as a percentage of global GDP.
Businesses can also choose whether to normalize their targets against company growth. On the one hand, absolute targets demonstrate a strong commitment to overall emissions reduction. On the other, intensity targets, such as emissions reduction per square foot, are often more attainable.
2018 Progress Report
Of the 600 organizations surveyed in Ceres’ recent report, 64 percent have committed to GHG emissions reduction. Yet, only 36 percent of that group has set “time-bound” quantitative targets. For companies looking for examples of science-based targets in their industry, pickings are slim. Of course, that’s not to say that there aren’t pioneers who have taken the first step.
Based on peer-reviewed climate modeling, Ford has developed “glide paths” that, if adopted by all major automakers, would meet the 2℃ limit over time. Ford then based its GHG reduction strategy for new vehicle lineups and facility operations on these models. The automaker accounts for about 10 percent of light-duty vehicle CO2 emissions worldwide.
Meanwhile, Landsec, the largest commercial property company in the UK, has worked closely with SBTi and the Carbon Trust to set even more ambitious science-based targets. The company aims to reduce GHG emissions by 40 percent per square meter by 2030, including Scope 1, Scope 2, and partial Scope 3 emissions.
“Targets are no longer numbers pulled from thin air; they are goals linked to a real issue.”
As a result of working with the Science-Based Target Initiative, Landsec has gained a new perspective on its sustainability strategy. The company now accounts for the impact of adding new buildings to its portfolio, designs buildings with decarbonization methods in mind, and emphasizes energy efficiency. As Tom Byrne, Landsec’s energy manager, said: “Ultimately, the science brings meaning, and grounds our ambition in reality: Targets are no longer numbers pulled from thin air; they are goals linked to a real issue.”
Byrne confidently agrees that science-based targets enhance the company’s reputation with investors. “Our target future-proofs us for investor requirements for the next 50 years. In the sustainability team, we are increasingly taking calls from investors who want to talk about what we’re doing.”
Hitting the Mark With the Right Data
At a bare minimum, the process of setting a science-based target requires a recent and complete inventory of all Scope 1 and 2 emissions. An economic-based approach will also require data on total profit, growth, or value added. But overall, the more data that a company can collect from the outset, the better prepared it will be.
The first time Landsec submitted its target to SBTi, it was rejected for failing to fully assess Scope 3 impact — in Landsec’s case, emissions produced from customer use of its buildings. One of the main lessons Byrne learned from the process was that it’s vital to have good data that you can trust to inform target-setting.
It’s vital to have good data that you can trust to inform target-setting.
Data was the deciding factor between missing and meeting SBTi requirements, and it was also the key to gaining buy-in from senior executives. “By being able to show how the science informs the target and links back to the global situation, it was much easier to get sign off from the top,” said Byrne.
Gathering all this data from disparate sources and formats around the world is a frustrating knot to untangle — we would know. But taking a thorough, science-based approach is the only way to move forward with the monumental responsibility we have ahead of us.
Looking for some help getting a hold of the data you need to meet your goals? Talk to an Urjanet data specialist today.
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About Amy Hou
Amy Hou is a Marketing Manager at Urjanet, overseeing content and communications. She enjoys writing about the latest industry updates in sustainability, energy efficiency, and data innovation.