A Quick Guide to Setting Science-Based Targets with SBTi

The Science Based Targets initiative (SBTi) has gained significant traction as a key framework for aligning corporate climate action with the Paris Agreement. There are currently 9489 companies that submitted their science-based targets to the SBTi globally, while 531 of them have been removed due to non-compliance with the Commitment Compliance Policy passed transitory grace period or committed deadline to submit their targets that aligns with the SBTi requirements. There are 6086 companies that have their SBTs set aligned with SBTi today with 1667 targeted for net-zero[*]. However, several key discussions and challenges have emerged, raising questions on how companies should proceed in setting and implementing their science-based targets (SBTs).

While sustainability reporting frameworks like EU CSRD-ESRS do not specifically mandate SBTi, they refer to aligning disclosures with the Paris Agreement, which aligns with the SBTi’s goals. Companies adopting SBTi targets are more likely to meet emerging compliance requirements and market expectations related to climate disclosure.

The SBTi's Net-Zero Standard, released in 2021, has added a crucial layer to climate strategies by defining what constitutes credible net-zero targets. One key debate centre on the balance between emissions reductions and reliance on carbon offsets.

SBTi emphasises that companies must achieve deep decarbonisation before relying on offsets, but the role and legitimacy of offsets remain hotly debated. The conversation has grown more nuanced, with a growing focus on nature-based solutions like reforestation and carbon sequestration.

GC Insights: Companies should focus on reducing emissions across Scopes 1, 2, and 3 before considering offsets. When using offsets, companies should prioritise high-quality, verified solutions that adhere to SBTi’s stringent guidelines. Additionally, businesses should be transparent about their decarbonisation vs. offsetting mix to build trust with stakeholders.

Small and medium-sized enterprises (SMEs[*]) can make use of the simplified pathways offered by the SBTi and our streamlined processes to manage GHG inventory and science-based target setting. By using existing data management systems and focusing on key emissions hotspots, SMEs can make the target-setting process more manageable.

The SBTi Application Process:

The SBTi has proven to be an essential framework for corporate climate action, but it is not without its challenges. Companies should engage proactively with the initiative, focusing on data accuracy, sector-specific pathways, and transparent communications. By prioritising emissions reductions and preparing for evolving regulatory environments, businesses can position themselves as climate leaders while managing the complexities of setting science-based targets.

GC Insights:

·     Ensure your targets apply to your complete legal entity, not just parts of your business.

·     Have a comprehensive GHG inventory covering all relevant emissions (Scopes 1, 2, and, if applicable, Scope 3).

·     Use the most recent version of SBTi tools and consult sector-specific guidance.

·     Focus on reducing emissions first, using offsets only as a last resort.

·     Ensure you meet the reporting and validation timelines to maintain your commitment status​

·     Read our latest guide to CDP reporting 2024.

·     Take advantage of the following checklist for your SBT settings and contact GC Insights (info@gc-insights.com) for more practical guides to your sustainability strategies

A Checklist for Your SBT Settings:

[*] Companies wishing to set net-zero targets under the Corporate Net-Zero Standard have both near- and long-term targets validated by the SBTi.

[*] SME:   Companies are eligible for the streamlined SME route if all criteria points are met:

•                Have <10,000 tCO2e across scope 1 and location-based scope 2

•                Are not classified in the Financial Institutions (FIs) and Oil & Gas (O&G) Sectors

•                Are not required to set targets using sector-specific criteria (such as the Sectoral Decarbonization Approaches) developed by the SBTi (see the SBTi’s sector guidance documents for requirements)

•                Are not a subsidiary of a parent company whose combined businesses fall into the standard validation route

•                And three or more are true:

o                Employ <250 employees

o                Turnover of <€50 million

o                Total assets of <€25 million

•                Are not in a mandatory FLAG sector

https://sciencebasedtargets.org/small-and-medium-enterprise-sme-target-setting-process