Over 80% of the world’s top companies now set targets to reduce their carbon emissions. This is a positive step in the right direction, but in reality most targets fall short of keeping global temperatures below a 2°C rise in order to avoid unavoidable global climate change.
In short, the setting of science-based targets aims to ensure we take global context into consideration to be able to stick below the 2°C temperature rise and therefore prevent the worst effects of global warming.
Why are science-based targets important for business?
Science-based targets benefit organisations as they add credibility to a business’s carbon strategy claims, and create a long term competitive advantage. Last year’s UN Global Compact- Accenture CEO study found that 43% of CEOs see science-based targets as the most important climate leadership behaviour for companies to adopt.
With the inclusion of science-based targets for the first time in this year’s CDP questionnaire, engaging with science-based targets is becoming more important than ever. Important business drivers to adopt science-based targets include:
Opportunity for innovation
Science-based target setting provides a context for long-term strategic thinking and investment.
Creation of new market opportunities
By positioning themselves as business leaders in their approach to mitigating climate impacts, organisations may well take advantage of new markets created by new technologies to help tackle climate change.
Improves resilience and helps identify risks and opportunities
Evaluating a business’s resilience, and ability to identify risk and opportunity, are vital parts of organisational reporting, management and strategy. Starting to set science-based targets now enables businesses to prepare themselves adequately for any future regulatory intervention or reputational risk. It also enables businesses to identify where key opportunities for leadership and innovation are.
As a growing spotlight is placed on the issue of climate change, investors, regulators and the public are more aware of the role businesses should play in setting targets for impact reduction. There are therefore reputational advantages of being seen as a sector leader in this area by adopting targets which have a clear scientific basis to them.
What is a science-based target?
In order to stay below a 2°C temperature increase compared with pre-industrial levels, a global carbon budget has been calculated by the Intergovernmental Panel on Climate Change (IPCC). This is the gigatonnes of carbon dioxide (GtCO2) the planet can emit before 2050 to stay in line with the no more than 2°C rise by 2100. A science-based target is one which is set in accordance with this level of required global decarbonisation.
There are a number of different ways companies can determine this target:
Target setting methodologies
(Taken from http://sciencebasedtargets.org/methods/)
- The Sectoral Decarbonisation Approach (SDA)
- The 3% Solution
- BT – Carbon Stabilisation Intensity target (CSI)
- CSO Context-Based Carbon Metric
- GEVA (Greenhouse Gas Emissions per unit of Value)
- Mars Method
When considering what target setting methodology to choose there are a number of different aspects which govern each one, these are :
Type of emissions scenario
This governs how the budget is set, what baseline year is assumed, and whether or not budgets differ for developed and non-developing countries. Common scenarios are set by the IPCC, or International Energy Agency (IEA). For example the IPCCs AR5 Representative Concentration Scenario (RCP) WG3 2.6 scenario is often used as a scenario for a below 2°C temperature increase.
It is worth remembering that different scenarios come with different associated carbon budget ranges attached to them, and that some scenarios consider CO2-induced warming only whereas others consider a fuller multi-gas scenario.
Type of budget setting (Disaggregation level)
Target setting methods will split the carbon budget into either a geographical budget or sector budget, or stick to a global carbon budget.
Type of emissions reduction pathway (Allocation mechanism)
In draft documents published by the Science Based Targets Initiative, these methods for allocation are distinguished as Convergence, Compression, and Contraction .
Convergence refers to sector specific aggregation where physical emissions intensity levels are measured against economic value.
Compression refers to physical or value based metrics which are not sector based and level of disaggregation occurs at a uniform rate.
Finally, Contraction refers to emissions reduction in absolute terms, i.e. in terms of tCO2e.
How do organisations go about selecting an appropriate methodology?
With 7 different methodologies to choose from, organisations should consider which method is most appropriate for their business. Companies should consider:
- Company attributes (Homogeneous commodity focussed, or Heterogeneous range of commodity products)
- Geographical location
- Projected growth
Where more than one method applies, companies should select the most ambitious target. Companies may want to use a mix of methodologies or adapt certain methods to fit with their attributes.
Although in its relative infancy, it’s expected that more and more organisations will begin to tackle setting science-based targets, evolving the wider understanding of both their methodologies and significance.