Updates to Science Based Targets: SBTi v4.0 release
Stewart McKenzie, Senior Advisor, Enviro-Mark Solutions
In April 2019, the Science Based Targets initiative (SBTi) released new resources to align with the Intergovernmental Panel on Climate Change's Special Report on Global Warming of 1.5°C, which calls to limit warming to 1.5°C as opposed to the previous 2°C of warming, due to the severe risks and impacts associated with 2°C of warming.
“The IPCC Special Report was a wake-up call for the global economy. There is an urgent need to step up ambition in order to meet the goals of the Paris Agreement and avoid devastating global warming,” says Alexander Farsan, Global Lead for science-based targets at WWF.
“Companies have a vital role to play in realizing this goal. The latest science from the IPCC has shown the way forward. We urge companies to raise the bar and set the pace of change that we know is needed.”
Here’s a list of resources included in the latest v4.0 release:
- SBTi Criteria and Recommendations Version 4.0 – consists of the actual criteria a company must meet to get their target validated
- Paper on science-based target setting foundations – provides the rationale for the target ambition levels in the criteria document
- Science-based target setting tool - for companies to model targets against 1.5°C and well-below 2°C using the Absolute Contraction Method, and against well-below 2°C using the Sectoral Decarbonization Approach (SDA). It also allows modelling of scope 3 targets aligned with SBTi criteria.
- Target Validation Protocol – useful reference for understanding how target submissions are assessed.
- Science-Based Target Setting Manual – step-by-step guide for setting targets.
Enviro-Mark Solutions is the first CDP-accredited science-based targets partner in Australia and New Zealand. We can provide custom support to help your organisation set and achieve science-based emissions reduction targets. For more information, contact us here.
Here’s a summary of key updates in the latest SBTi documentation
New items of note since the v3.0 publication, are listed below.
- GHG Emissions Inventory and Science Based Target Boundary
- GHG Protocol Scope 2 Guidance should be followed for electricity emissions.
- Bioenergy accounting must now be included.
- Land-use change emissions are encouraged (Page 4; R2).
- Base year inventory must be 2016 at the earliest (Page 5; C5 and C6), and the most recent completed inventory must be earlier than 2 years from the submission date.
- Targets that combine Scopes 1,2, and 3 are now permitted (Page 6; C10), noting that the Scope 1 and 2 portion must be in line with the well below 2 degrees scenario (Scope 3 still has some special considerations in Page 8; C19).
- Scope 3
- Rule C19 (Page 8) has more clarity on expectations of Scope 3 targets – absolute, economic intensity, or physical intensity.
- Rule C19.1 (Page 8) explains that the supplier and customer engagement targets need to be met within 5 years from date of submission for validation.
- R9 confirms that the company’s suppliers should ideally have targets set in line with the SBTi rules and criteria, but it is not mandatory.
- Sector-specific guidance
- SBTi has some sector specific guidance (C20) and, if this is relevant to a company’s sector, it needs to be followed. There is currently guidance for the transport sector only, but the following sectors are also being developed: Apparel and Footwear, Financial Institutions, Oil and Gas, Aluminium, and Chemical and Petrochemical sectors.
- C21 confirms that companies need to publicly report their Emissions Inventory Report and progress against their target, on an annual basis.
- C22 confirms that targets must be reviewed at a minimum of every 5 years.
- Specific guidance on what triggers the need for a target recalculation is shown in R12.
- SBTi advise that the validation criteria will be reviewed and updated on an annual basis.
The Science Based Targets initiative have developed a new document, 5.1.2 Paper on science-based target setting foundations, which provides the rationale for the target ambition levels in the v4.0 criteria document. Useful reference items are noted below:
- Minimum absolute contraction rates are disclosed in Page 21 and 22. The minimum annual linear reduction rates aligned with 1.5˚C and WB-2˚C are 4.2% and 2.5%, respectively.
- The intended sectors for applicable Sectoral Decarbonisation Approach (SDA) are proposed (page 26):
- Power generation
- Iron and steel
- Pulp and paper
- Passenger and Freight transport
- Service and commercial buildings
- There are also explanatory notes on how the SDA achieves a reduction within the overall sector: “The method steepens intensity pathways of fast-growing companies to account for their increase in market share. If this is not accounted for, the sector average intensity will increase owing to the growth, resulting in an exceedance of the sector's carbon budget. The opposite happens to the intensity pathways of the companies that show a decreasing market share. Although this might seem unrealistic or unfair, it makes sense from a business perspective, because when a company's market share is decreasing, it will probably invest less in new, more efficient technologies, and vice versa.”
This is a new tool that incorporates calculations for both the SDA (for applicable sectors) and Absolute Contraction Method, plus Scope 3 target setting.
- For the Absolute contraction method, variables required in the input section are essentially just base year, target year, and Scope 1, 2, and 3 base year emissions.
- For the Scope 3 Economic Intensity option, an additional variable required is the base year $ value added figure.
- For the Scope 3 Physical Intensity option, additional variables required are the base year quantity of a custom physical unit (eg # of widgets), expected % annual growth rate OR a target year quantity of the custom physical unit (eg. # of widgets expected to be sold in the target year).
- For the SDA approach, if applicable, there is a projected output measure to select from: fixed market share, percentage growth rate, or target year output. Base year output figures are also required (e.g. MWh electricity generated).
The initiative has developed a new document to provide information about how submissions are assessed. Useful reference items are noted below:
- Table 1 on Page 6 (initial screening) confirms that:
- The SBTi does not validate targets of cities, local governments, public sector institutions, educational institutions or non-profit organizations.
- If Scope 3 emissions are ≥ 40% of total emissions, and no target is set for this scope, the submission does not pass the initial screening stage.
- Page 8 (desk review notes) confirms that:
- The company must respond to queries sent by the Lead Reviewer (LR) within 2 business days to receive the deliverables within 30 business days.
- If the information provided is deemed insufficient by the SBTi after at least two query attempts, the SBTi may consider the submission to be non-compliant.
- Table 2, Page 13 (minimum ambition thresholds), provides confirmation on the percentage targets for ‘Well below 2 degrees” and 1.5 Degrees for the Absolute Contraction Method and SDA. Note that the SBTi does not provide a 1.5˚C target for the SDA, as no appropriate scenario model with sectoral emissions and activity breakdowns has been identified.
- Table 3, Page 16 (temperature alignment ranges), provides confirmation on percentage reduction ranges correlated to the target the validation team classifies the submitting company to i.e. ‘Well below 2 degrees” or 1.5 Degrees.
- Page 18 elaborates on the process for upgrading an existing, validated target (for targets aligned to the previous 2 degrees goal). Companies wishing to validate their upgraded target(s) can follow a simplified process to achieve SBTi approval if they meet the following conditions:
- Base year and target year of the updated target remains unchanged;
- the assumptions used to model the original target continue to be valid (e.g., significance thresholds, boundary, growth projections, etc.)
- Page 20 onwards covers the detailed validation requirements for each criterion. This table can essentially be used as a pre-submission checklist and referred to when drafting up the submission form content.
- Page 39 covers sector specific requirements which apply to sectors including Power Generation, Equipment Manufacture and Automakers, Transport Services, Industrial (Iron, Steel, Cement, Aluminium, Pulp and Paper, Services/Commercial Buildings, Chemicals and Petrochemicals, Agriculture and Forestry, Residential Buildings.)
The SBTi are now providing stepwise guidance and recommendations for setting Science Based Targets through this valuable manual. It includes the business case, applying the available methods, getting internal buy-in, and communications.
- Page 6 and 7 reiterates the most important criteria that should be considered when developing a target.
- Page 20 provides details on the available methods and the input variables required.
- Page 26 confirms that companies operating in multiple sectors can essentially set two targets e.g. one for its aluminium operation and one for its power generation operation.
- Page 27 confirms that companies should use either the Sectoral Decarbonization Approach (SDA) or Absolute Contraction method (i.e. GEVA is the last option). It also confirms companies should choose the most ambitious target.
- Page 28 recommends that companies express targets in both absolute and intensity targets terms.
- Page 32 reiterates the guidance on base year:
- Verifiable data on scope 1, 2, and 3 emissions should exist for the base year. It is recommended that companies choose the most recent year for which data are available as the base year.
- The base year should be representative of a company’s typical GHG profile.
- The base year should be chosen such the target has sufficient forward-looking ambition. As stated in the manual “While companies deserve credit for past progress, the initiative’s objective is to promote action that hasn’t been accomplished and to push companies that have already achieved progress to go beyond current ambition. The SBTi uses the year the target is submitted to the initiative (or the most recent, completed GHG inventory) to assess forward-looking ambition”
- Page 32 has a useful note on why the SBTi has set 5 to 15 years as the target period as opposed to longer term (e.g. 2040, 2050) targets: “long-term targets alone do not match the decision horizons of many companies and might encourage later phase-outs of less efficient equipment”
- Page 41 shows the relative magnitude of Scope 1, 2 and 3 Emissions, by sector (i.e. can be used as a reference on what to expect for Scope 3 emissions in a sector we are working in)
- Page 47 confirms that for Scope 3 target setting, companies can choose to set multiple, category-specific targets or a single target covering all relevant scope 3 categories.
- Page 49 has an example of an approved Supplier or Customer Engagement Target from one of our own New Zealand companies, SKYCITY Entertainment Group.
- Page 50 confirms that companies may wish to set targets that are not explicitly framed as targets to reduce emissions, but rather as targets to improve some specific aspect of business or product performance. An example of this could be; switching to an electric vehicle fleet by 2025.