Science-based climate action
Reaching Net Zero targets requires urgent climate action and science-based decarbonisation from companies in all sectors of the economy.
Science-based targets provide the foundation for companies to ensure their emission reduction strategies are in line with climate science.
A need for science-based climate action
Through the 2015 Paris Agreement, governments throughout the world committed to limiting global warming to well below 2°C above pre-industrial levels, with the ambition of limiting the rise of these temperatures to 1.5°C.
Reaching these goals would require reducing global greenhouse gas emissions by 50% by 2030, with the long-term goal of reaching Net Zero by 2050. This set a clear need for corporate decarbonisation strategies to be aligned with climate science.
To address this need, the Science Based Target initiative (SBTi) was created, setting a global standard for how companies should reduce their emissions and set net-zero targets to prevent the worst effects of climate change.
The SBTi provides technical assistance as well as resources to guide companies in setting emissions reduction targets aligned with the goals of the Paris Agreement. A team of experts then independently assesses and validates the targets.
Science-based targets provide a clear pathway to companies on how quickly and by how much they should reduce the emissions in their operations and supply chain. Reaching these targets would ensure they are future-proofed for a net-zero economy.
Setting science-based targets
The SBTi aims to reduce any barriers to setting science-based targets. They have developed a streamlined process for companies to follow:
Public commitment: Companies submit a letter of intent to the SBTi, giving them two years to submit their science-based target.
Target development & submission: Benefiting from resources such as the target setting tool, companies follow the SBTi standards and submit their targets for validation.
Communication and disclosure: Once approved by the SBTi, companies must announce their commitment to their stakeholders and share emissions figures to monitor progress annually.
With their ambition to set clear standards for climate action came the SBTi’s development of the Net-Zero Standard. This is the world’s first and only standard for companies setting Net Zero targets, stating that companies can only consider having reached Net Zero once they have:
Reduced the emissions from their operations and supply chains by 50% by 2030 and achieved 90% reductions by 2050.
Permanently removed from the atmosphere the remaining 10% of residual emissions which cannot be reduced. Companies can leverage technologies such as carbon capture and storage.
The business benefits of climate action
Setting science-based targets allows companies to align their decarbonisation strategy with climate science, but it also provides a host of business benefits to those taking climate action:
Investor confidence: Providers of capital, such as institutional investors, strive to minimize any risks caused by climate change to the companies they invest in. Having a science-based target can signal strong climate risk management to allocators of capital.
Regulatory resilience: With environmental regulations coming top-down from countries, companies setting science-based targets can future-proof their business to ensure they comply with environmental policies and laws.
Increased innovation: Reaching science-based targets requires companies to significantly change processes within their operations and supply chain. An example of that is Sony developing a lower-carbon plastic made from recycled content for their products.
Cost-saving opportunities: With a focus on cutting emissions across the business comes an opportunity to reduce financial costs as opportunities are found to reduce inefficient consumptions of materials, energy or services.
Brand reputation and recognition: Science-based targets send a signal to prospective customers that a company is serious about its climate ambitions. This can be rewarded in procurement processes by companies needing to reduce their own supply chain emissions.
The decarbonisation of Tesco
With over 6,000 stores across Europe and Asia, Tesco is one of the world’s largest retailers. Since committing to setting a science-based target in 2019, they have seen the following targets approved by the SBTi:
Near-term: Reducing scope 1 and 2 emissions as well as scope 3 emissions by 82.6% and 55%, respectively, by 2032.
Long-term: Reducing emissions from all three scopes by 90% by 2050 to reach net zero across their operations and supply chain.
Working with the SBTi has guided Tesco to revise its climate change strategy and to set more ambitious near-term targets. Electricity usage was a key focus point, given it represents 60% of emissions from Tesco’s operations.
To evaluate the feasibility of reaching its science-based targets, Tesco built a costed roadmap to source renewable energy. Having such visibility and financial forecasts gave leadership teams confidence and facilitated the allocation of capital to decarbonisation projects.
Tesco has invested £700 million in energy efficiency improvements since 2006 and £8 million for the onsite generation of renewable electricity throughout Asia in 2016. To source 100% of its electricity from renewable sources by 2030, they will also increasingly rely on Power Purchase Agreements.
Enabling a Net Zero future
Tesco’s example highlights how science-based targets can drive climate action and ensure a company’s stakeholders can understand and support its climate strategy. They are one of 4000 companies involved with the SBTi.
By the end of 2022, 2079 companies had seen their targets approved by the SBTi, while 2151 had committed to setting science-based targets. These companies represent over a third of the global economy by market capitalisation.
From an emissions point of view, scope 1 & 2 emissions of companies covered by science-based targets totalled 1.97 billion tonnes of CO2 by the end of 2022. These emissions are greater than Russia’s annual emissions, the world’s fourth most carbon-emitting country.
This is particularly encouraging, considering that between 2015 and 2020, companies with validated targets cut their emissions by 25%. During the same time period, emissions from the energy and industrial sectors increased by 3.4%, further highlighting the climate leadership of these companies.
Net Zero pledges from governments now cover 70% of the world’s economy. Having organisations such as the SBTi set standards for how companies can reach Net Zero will create waves of climate action, ensuring that decarbonisation targets and reductions are in line with climate science.
