How organizations can use target-setting to best address the climate crisis.
With increasing pressures from investors and the public, organizations are beginning to go one step beyond greenhouse gas (GHG) accounting by developing organizational-level emissions targets in line with climate science. By taking this step, organizations are showing their understanding of the need to contribute to global mitigation efforts in order avoid dangerous levels of global warming.
Setting GHG targets that are 1) effective from a climate perspective, and 2) viable from a business perspective, present its challenges. With the recent IPCC Special Report (SR15) publishing dire warnings on the impacts of global warming of 1.5°C and beyond, it has become clear that there is a desperate need to reduce emissions rapidly and substantially in order to avoid “…long-lasting or irreversible changes, such as the loss of some ecosystems.” (IPCC, 2018). In order to reach the global goal of remaining below 1.5°C, all aspects of society will need to engage in mitigation efforts.
The illustration above is taken from the SR15, and shows that net global CO2 emissions must peak in 2020, and rapidly decline to reach net-zero around 2050 The central graph displays four different potential pathways (and their probability ranges), three of which fall within the constraints of the 1.5°C target (with no or limited temperature overshoot beyond 1.5°C), while the fourth only limits global warming to 2°C with at least a 66% probability. The box and whiskers plot at the bottom indicate the potential timing of reaching net zero CO2 emissions levels. A more detailed description of the figure is available from the IPCC’s Summary for Policymakers.
These trajectories present a significant challenge for organizations, as they require immediate climate action and transitioning to a net-zero carbon economy. They highlight that mitigation efforts in the immediate future will facilitate more difficult mitigation efforts required in the long-term. However, every challenge comes with an opportunity: organizations could lead the way towards avoiding a climate crisis – by setting targets consistent with the global 1.5°C temperature target and taking steps to reach these targets.
You can learn more about what the IPCC Special Report means for businesses by reading our article.
While the IPCC and its scientific contributors establish global temperature targets, the Science Based Targets initiative (SBTi) is at the forefront of establishing target-setting methodologies for organizations that want to set their own targets aligned with climate science. It provides the necessary resources for setting these targets and further acts to verify targets submitted by organizations. The SBTi then publishes verified emissions targets and the associated temperature ambitions (1.5°C, or well-below 2°C) of participating organizations, encouraging organizational transparency and climate action. In light of the IPCC’s SR15 report, the SBTi has updated their guidelines on target-setting. Some of its key criteria outline that:
- Targets must cover company-wide Scope 1 and Scope 2 emissions and may be combined as a single target.
- Targets must be set within 5-15 years from the date the target is submitted (considered a “mid-term target”).
- After October 2019, new targets submitted will only be accepted if they are consistent with limiting global warming to 1.5°C or well-below 2°C.
- While both absolute and intensity targets for Scope 1 and Scope 2 are recognized, intensity targets will only be accepted if “…they result in absolute emission reduction targets in line with climate scenarios for keeping global warming to well below 2°C or when they are modelled using an approved sector pathway.”(Science Based Targets, 2019b)
As the framework given by the SBTi provides options for organizations in various stages of business development and industries, it cannot provide a prescriptive approach for every organization. It is important to keep in mind the ultimate goal of setting organizational GHG targets is to set the stage for actual and significant reductions of GHG emissions, limited to the 1.5°C emissions budget as prescribed by the latest climate science. Accordingly, choosing how to use the criteria given by the SBTi will impact how effective organizational-level targets are from a climate mitigation perspective.
So, what is the best way to use these criteria in order to set GHG targets that most successfully address our climate crisis? Below is a list of tailored approaches that we, at Ecometrica, have concluded would help do this:
- In addition to setting a mid-term (5-15 year) target, consider also setting a long-term target (beyond 15 years) for your organization.
Research has shown that organizations with longer-term targets are more likely to innovate and show interest in multidimensional climate mitigation solutions – including developing broader investment interests and working with other sectors to achieve goals (Slawinski and Bansal 2012, 2015). Taking a longer-term perspective on addressing climate-related issues facilitates more consistent organizational strategizing and preparation. Some company leaders are already setting pathways out to net-zero by 2050.
- Favor setting an absolute target, over an intensity target.
While the SBTi does require that all intensity targets result in absolute emission reductions in line with the ‘well below 2°C’ ambition, research has shown that organizations with absolute targets are associated significantly with actual improvements in environmental performance, while those with intensity targets were not (Dahlmann et al. 2019). It is important to consider that setting targets is one thing, but achieving them is another. Intensity targets, while they may align with absolute targets in terms of actual emissions mitigated, they are less symbolic of societal demands for climate change mitigation, and more symbolic of economic and performance interests. A key concern with setting an intensity targets is that it most popularly relies on the Sectoral Decarbonization Approach (SDA) as presented by the SBTi. The SDA itself is based on sectoral activity projections drawn primarily from the International Energy Agency’s (IEA) emissions scenarios. Notably, however, the IEA’s scenarios are not aligned with the 1.5°C target (Science Based Targets, 2019a). Consequently, intensity targets relying on the SDA approach at this time will be limited to aligning with the well-below 2°C target – although even this target relies on an IEA scenario which assumes an unlikely mass commercialisation and deployment of carbon capture and storage technologies in the near-term.
- Set a target aligned with the 1.5° goal, instead of ‘well below 2°C’.
By setting a more stringent emissions target, such as one associated with the 1.5°C ambition, organizations are more likely to actually reduce emissions (Dahlmann et al. 2019). From a business perspective, innovation, environmental performance improvements and organizational change are more likely to be stimulated with stronger mitigation commitments.
- Set separate (instead of combined) Scope 1 and 2 targets.
By choosing to set separate Scope 1 and 2 targets, your organization may be better equipped to address reduction or improvement opportunities at the source level. By calculating and reporting on separate targets, a clear path for both scopes is visible. With Scope 1 emission sources being wholly within the control of the target setting organisation, they are the easiest to predict and estimate into the future with different technologies, business models, and initiatives. Separate targets help to avoid confusion or muddling of different emissions sources across scopes.
- Use location-based, instead of market-based Scope 2 emissions to determine your Scope 2 targets.
Research has highlighted issues with the market-based accounting approach for Scope 2 emissions, notably that the use of purchased contractual emissions factors fails to always ensure the additionality of renewable electricity generation (Brander et al., 2018). For a detailed review of the issues with using electricity purchasing instruments, read our article Green Electricity Purchasing Instruments – Are We Heading for Carbon-Gate? With such issues in mind, it is important to set Scope 2 targets that are founded upon a transparent and accurate reflection of an organization’s Scope 2 emissions. Using market-based Scope 2 emissions as the basis may muddle or distract from the focus on actual physical emissions reductions.
Reaching emissions targets along a given pathway carries different effort requirements, often becoming more difficult with each year. This emphasizes the need for both consistent (year-to-year) emissions accounting, and appropriate target-setting. Both are needed as not all organizations with established management of GHGs (e.g. emissions accounting) are actually reducing emissions (Sullivan, 2009). So, how can your organization best track emissions over time, while working towards reaching targets? This is where Ecometrica can help. Our award-winning online Sustainability Platform can help track emissions at all levels of your organization, it can identify relevant sources that have potential for becoming major sources of mitigated emissions, and it is set up to develop year-on-year comprehensive GHG inventories. Reliable and climate relevant targets can only be set once emissions are reliably tracked and accounted for. Ecometrica provides organizations with the services and tools required to do so.
Following the use of our Sustainability Platform to develop robust GHG inventories, Ecometrica’s expert Sustainability Analysts will assist your organisation in calculating the most relevant emissions and energy targets to address the climate emergency. Our collaborative process involves initial scoping of emissions sources for all Scopes, helping build internal support and understanding of the SBT methodologies and their associated concepts, calculating emissions reductions required, and providing technical support during the target submission phase to the SBTi.