Net-Zero Standard

Setting a long-term framework for aligning corporate targets with 1.5-degree pathway 

written by Jessica Di Bartolomeo

The Corporate Net-Zero Standard, released in October 2021, aims to define how companies with 500 employees or more can set targets to align with global carbon budgets by 2050.

The guidance was published by the Science-Based Targets initiative (SBTi), a collaboration of the Carbon Disclosure Project (CDP), World Resources Institute (WRI), World Wildlife Fund (WWF), and UN Global Compact. The framework builds on previous Science-Based Targets (SBTs) for the near-term to develop criteria for long-term objectives. These aim to keep companies collectively within the 1.5-degree temperature increase limit set by the Intergovernmental Panel on Climate Change (IPCC).

Companies will be able to have their net-zero targets validated as of January 2022. Those with existing SBTs will have until July of the same year to align with the new near-term framework. Small and medium enterprises (SMEs) with less than 500 employees can refer to the FAQ for SMEs to have their net-zero targets validated through a fast route.

Building on existing SBT frameworks

Companies following the Net-Zero Standard must first develop a near-term target, which is coherent with the SBT framework already put forward by the organization. The same approaches for target selection are applicable here too: reduce absolute emissions from the base year by a minimum rate common to all sectors or reduce emissions intensity according to the relevant guidance, if available for your industry (see the power sector, for example).

As with existing SBTs, this target must include at a minimum 95% of scope 1 and 2 emissions in addition to 67% of scope 3 emissions if these amount to 40% of the total from all scopes. Some sectors have additional requirements, including scope 3, category 11 (use of sold products) targets for the fossil fuel industry and specific pathways for the Forest, Land-use and Agriculture (FLAG) sector.

The near-term period can cover between 5 and 10 years, in comparison to the 15-year maximum established when SBTs were first announced in 2015. Companies still have the option to replace scope 2 reduction targets with the objective of 80% renewable energy provision by 2025 and 100% by 2030.

While 2-degree-aligned targets were previously eligible, only reduction rates consistent with a 1.5-degree temperature limit are now accepted. The new criteria will apply to all SBT applicants by July 2022; however, companies with previously validated SBTs will not need to change their existing time frame.

Getting to net-zero

To achieve corporate net-zero, near-term targets are required. These must meet the following criteria:

• New time horizon of 5 to 10 years
• Ninety-five percent coverage of scope 1 and 2 emissions (no change)
• Sixty-seven percent coverage of scope 3 emissions, if scope 3 emissions represent over 40% of the inventory from all scopes (no change)
• An ambition of 1.5 degrees rather than 2 degrees, with any changes submitted by July 2022

The standard has new requirements for companies to establish a long-term target. All long-term targets must:

• Result in a 90% emission reduction of scopes 1, 2, and 3 from the base year by 2050 at the latest, rather than selecting a rate with which to reduce emissions.
• Include 95% coverage of scope 1 and 2 emissions, as with near-term targets.
• Include a 90% coverage of scope 3 emissions compared to the 67% coverage for near-term targets.

To contribute to societal net-zero, private companies following the standard must also invest in:

• Mitigation beyond the value chain in the near-term. This includes existing carbon sinks such as forests and future removal technologies such as direct air capture.

• Neutralizing residual emissions once the long-term target has been achieved. Neutralization is achieved by sequestering atmospheric carbon in stocks, such as geological storage and nature-based solutions. Offsets are not eligible for yearly emissions reductions prior to achieving the net-zero target.

Where to start?

For companies aiming to align with net-zero emissions by 2050, Ecometrica has Software as a Service (SaaS) solutions to help you complete a high-quality, transparent inventory as a basis for setting robust reduction targets. This includes comprehensive scope 3 reporting capacity with supporting calculations where needed. Our platform will facilitate tracking progress towards these objectives in both the near- and long-term through interactive and customizable data visualizations.

Our expert analysts can also help with the target-setting process with the approach best suited to your sector and company.

Please get in touch to discuss your requirements and book a free demo. 

The full list of the criteria can be found on the SBTi’s website.

References

Brander, M., Gillenwater, M., & Ascui, F. (2018). Creative accounting: A critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions. Energy Policy, 112, 29-33.

Dahlmann, F., Branicki, L., & Brammer, S. (2019). Managing carbon aspirations: The influence of corporate climate change targets on environmental performance. Journal of Business Ethics, 158(1), 1-24.

IPCC Intergovernmental Panel on Climate Change. (2018). Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. IPCC Special Report 15. Geneva, Switzerland, World Meteorological Organization.

Science Based Targets. (2019a). Foundations of Science-based Target-setting. Retrieved from

https://sciencebasedtargets.org/wp-content/uploads/2019/04/foundations-of-SBT-setting.pdf

Science Based Targets. (2019b). SBTi Criteria and Recommendations. Retrieved from https://sciencebasedtargets.org/wp-content/uploads/2019/03/SBTi-criteria.pdf

Slawinski, N., & Bansal, P. (2012). A matter of time: The temporal perspectives of organizational responses to climate change. Organization Studies, 33(11), 1537-1563

Slawinski, N., & Bansal, P. (2015). Short on time: Intertemporal tensions in business sustainability. Organization Science, 26(2), 531-549. 

Sullivan, R. (2009). The management of greenhouse gas emissions in large European companies. Corporate Social Responsibility and Environmental Management, 16(6), 301-309.