The Science Based Targets initiative (SBTi) published its highly anticipated paper on net-zero target setting last Tuesday.
This paper kicks off the process to develop the first global standard for corporate net-zero targets, which is expected to launch by Autumn 2021.
My three key takeaways from these recommendations are:
- Get your own house in order before offsetting
- Don’t forget your supply chain and customers
- Make sure the offsetting strategy you employ is credible and looks at wider sustainability impacts
If you want to read the paper in detail, you can find it here.
Limiting warming to 1.5°C requires net-zero emissions by 2050 at the latest
At the end of 2018, the Intergovernmental Panel on Climate Change (IPCC) published its special report on the impacts of 1.5°C of global warming. The scientists who wrote the report were tasked with finding out the difference between 1.5°C and 2°C of global warming, and the results were harrowing. The report shows us the devastating impacts of 2°C of global warming, urging for businesses to aim for a maximum of 1.5°C and highlighting that reaching net-zero emissions globally by 2050 would keep us within this crucial limit. A comparison of these impacts can be seen in the infographic below.
A growing number of companies are committing to hitting net-zero
Since the paper was published, this net-zero emissions goal has been the key focus for the climate movement and has provoked a surge in net-zero commitments from both governments and companies around the world.
Analysis from the Energy and Climate Intelligence Unit (ECIU) in 2019 showed that around 40% of global GDP is covered by countries that are developing or have set legislation to implement targets to reach net-zero by at least 2050 if not earlier. As she left office, Theresa May’s parting gift was to make the UK the first major economy in the world to set a 2050 net-zero target. Since then a flurry of companies such as BrewDog, Microsoft and National Trust have followed suit by committing to net-zero. But what does this global goal mean at company level?
We need robust science-based criteria to ensure net-zero targets are effective
The IPCC defines net-zero as that point when “anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period”. The image below shows our current position on the left, in which we are experiencing climate change due to an imbalance of carbon emissions. On the right, emissions and removals are balanced, reaching a net zero state.
There have been inconsistent and often weak approaches to defining corporate strategies
However, when considering how to reach net-zero at a company level, there have been inconsistent and often weak approaches to defining corporate strategies. The SBTi have set out to resolve this by providing clarity on key concepts to help companies formulate a robust plan to achieve net-zero.
There are two elements that make up a net-zero emissions strategy: an emissions reductions pathway and emissions removals (i.e. offsets and insets) pathway. According to the SBTi’s paper, these pathways should be delivered in parallel, but the priority should be on reducing emissions.
Taking a closer look at the image below, there are a few key things to note. First, that the emissions reduction pathway should be aligned with 1.5°C of warming, and secondly, that the reductions pathway includes value chain emissions, i.e. Scope 1, 2 and 3 emissions.
The paper lays out ten recommendations that will help companies ensure the credibility of their net-zero strategies. The details of the recommendations can be seen below.
- Net-zero targets should cover all material sources of emissions within the value chain.
- Be transparent about the sources of emissions included and excluded, timeframes, amount of reductions and removals, and interim targets or milestones.
- Reduce emissions within the value-chain in alignment with pathways that limit warming to 1.5°C
- Company’s may supplement, but not substitute, reducing value chain emissions in line with science
- Reach net-zero emissions by no later than 2050.
- Earlier target years are encouraged, but should not come at the expense of reductions in emissions
- Long-term net-zero targets should be supported by interim science-based reduction targets
- This should drive action within timeframes that are aligned with corporate planning and investment cycles, and ensure consistency with Paris Agreement
- Reaching net-zero emissions requires neutralising a company’s residual emissions with an equivalent amount of carbon removals.
- An effective removal should store GHGs for long-enough to fully neutralize the impact of any GHGs that continue to be released into the atmosphere.
- While reaching a balance between emissions and removals is the goal to reach net-zero, companies should consider compensating for unabated emissions in the transition as a way to contribute to the global transition to net-zero.
- Prioritise reductions over removals.
Environmental and social safeguards
- Adhere to robust social and environmental principles, ensuring protection and/or restoration of naturally occurring ecosystems, robust social safeguards, and protection of biodiversity, etc.
- Compensation and neutralization measures should: (a) ensure additionality, (b) have measures to assure permanence of the mitigation outcomes, (c) address leakage and (d) avoid doublecounting.
Becoming a net-zero company is more than just balancing your emissions
In addition to these ten recommendations, the SBTi’s paper includes three guiding principles that set out what it means for a company to be “net-zero”.
Two of the guiding principles are very much in line with technical expectations from SBTi, however the third principle supplements these principles in a more intangible way and speaks to the recommendations from the Task Force for Climate-Related Financial Disclosures (TCFD).
Guiding Principle 3: The mitigation strategy followed by the company should inform long-term strategies and investments that mitigate exposure to climate-related transition risks, ensuring that the business model of the company will continue to be viable in a net-zero economy.
This principle stresses that it’s not just about balancing emissions but also thinking about the risks of transitioning to a low carbon economy and making sure your business is ready for this change. Making sure that your company’s business model fits into the net zero economy will minimise future risks to the overall economy and create value for your shareholders as well.
What are the next steps my company can take towards becoming net-zero?
When setting out on your net zero, there are three key steps that you need to follow:
- Calculate your full Scope 1, 2 and 3 footprint to ensure you understand the impacts of your own operations, suppliers and customers
- Set reduction targets in line with climate science
- Develop a removals (i.e. offsetting) strategy that aligns with your company values and wider sustainability goals.
We are helping our clients across multiple sectors such as National Trust, CMS Cameron McKenna and Pukka Herbs build credible net zero strategies. Through this work we help them reduce emissions in line with climate science and develop credible offsetting strategies. Carbon Intelligence is proud to have supported 1 in 3 UK approved science-based targets and have our own 1.5◦C approved SBT.