The Science-Based Targets Initiative (SBTi): definition and application

The Science-Based Targets initiative (SBTi) was created in 2015 through a partnership between the CDP, the United Nations Global Compact, the World Resources Institute (WRI) and the World Wildlife Fund (WWF), and simultaneously with the signing of the Paris Agreements. It encourages companies to set goals to reduce greenhouse gas emissions based on scientific data, in order to fight climate change effectively.

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The philosophy behind SBTi is similar to that of the Paris Climate Agreement: just as States have committed themselves in a voluntary and differentiated manner to reduce their emissions and move towards carbon neutrality, companies can, through the SBT initiative, voluntarily commit themselves to reducing their emissions at a rate that is supposed to be compatible with the Paris Agreement.

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Its ambition is to allow companies to set decarbonization goals called “aligned with science” and compatible with limiting global warming, ideally at +1.5°C compared to the pre-industrial era : these goals must be in line with what science believes is necessary to limit the increase in global temperature to 1.5°C compared to pre-industrial levels.

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In other words, once a company has measured its greenhouse gas emissions, it can find in the SBTi toolbox the levels of emission reduction to achieve in order to be in line with global decarbonization goals.

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The SBTi has gradually become a reference both at the international level as a tool to help set decarbonization goals for companies of all sizes and in all sectors.

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Thus, the number of committed companies is growing at a high speed: there are more than 4600 committed companies, including more than 2,300 with objectives already validated!

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The ambition supported by the SBTi has grown over time, as global carbon budgets have been reduced: while it was initially possible for companies to set goals compatible with warming to 2°C, this is no longer possible.

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The minimum ambition for the short-term goals corresponds to limiting global warming Well below of 2°C (Well-Below 2°C), and companies are invited to set 1.5°C goals and commit themselves to long-term trajectories Net-Zero.

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How do you set up science-based goals?

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To implement science-based goals, businesses need to follow a series of steps.

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First, they need to assess the carbon footprint of the year that will serve as reference to the goals it will set for itself.

Second, they must define emission reduction goals that are in line with best scientific practices and that contribute to keeping global warming below 2°C.

This is where the SBT initiative is positioned, by providing a methodological framework for setting goals for companies.

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The SBTi distinguishes between so-called short-term objectives (5 to 10 years horizon) and long-term objectives (2050 horizon).

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The nature of the goals that a company can set depends on the time horizons considered.

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The SBT initiative offers companies the opportunity to combine different types of objectives and levels of ambition, depending on the scope of emissions considered.

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These methodological possibilities are summarised in the diagram below.

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In terms of the types of objectives, we can therefore distinguish:

• of the objectives of reduction in absolute value (TCO2eq) emissions: the annual linear reduction must be at least 4.2% for a 1.5°C objective or 2.5% for a well-below 2°C objective. These are absolute contraction objectives, in other words the percentage decreases are the same for all companies.

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• of the objectives of reduction in carbon intensity (tCO2eq/unit) physics : these can be contraction goals or sectoral convergence the carbon intensity of a product (for example, the carbon intensity of a ton of steel, one kWh of electricity, etc.).

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• reduction objectives in carbon intensity (TCO2eq/€ added value) economic : it must be an annual reduction of at least 7% per year. This is an objective of contracting economic intensity, in other words the percentage of decrease is the same for all businesses.

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• of goals of renewable energy supply (for scope 2), with a target of at least 80% by 2025, and 100% by 2030.

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• and finally, goals of supplier or customer commitment : the aim here is to determine a minimum percentage of suppliers who will have committed themselves to SBT within a given time horizon.

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A certain flexibility is thus granted to companies, in particular in terms of scope 3 decarbonization objectives: the SBTi has in fact taken note of the difficulties of decarbonizing the corporate value chain, and therefore tolerates that part of the emissions (less than a third of the scope 3 total) not be subject to reduction targets.

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Likewise, the methodologies known as supplier commitment or of reduction in physical or economic intensity aim to enable companies to commit themselves without forcing themselves to make absolute reductions, and to mobilize all stakeholders in reducing emissions.

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These different types of goals can be combined on emission categories and stations, as long as 95% of scopes 1 and 2 and more than 2/3 of scope 3 emissions are covered by valid SBT objectives.

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Thus and as an example, consider a company where 60% of scope 3 emissions come from inputs, 20% from freight, and 20% from other emission items (travel, immobilization, etc.).

This company can commit to 50% of its carriers being committed to SBT by 2030 and to a decrease in the economic intensity of its inputs by -52% by 2030 compared to the reference year 2022 (equivalent to an annual contraction of 7%).

Such objectives make it possible to cover more than 2/3 of scope 3, and therefore meet the criteria expected by the SBTi.

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What are the benefits and risks of engaging SBT?

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Businesses that participate in the SBT initiative benefit from several advantages.

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First of all, they can improve their reputation and brand image by showing their commitment to environmental sustainability: having emission reduction goals validated by the SBT initiative is a very strong evidence with all stakeholders seriousness and ambition of a company's low-carbon strategy.

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The financial benefits (direct and indirect) linked to the reduction of emissions are numerous: reduction of operational and energy costs, stimulation of innovation, better resilience and control of climate-related risks, and finally the opportunity to differentiate yourself from the competition by demonstrating a commitment to sustainability.

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It should be noted that the SBT initiative is only about setting goals.

In particular, it is not expected (from the SBTi perspective) that companies setting SBT goals will publish an action plan or climate strategy showing how they intend to go about achieving these goals.

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Nevertheless, it is strongly recommended to engage in strategic thinking in parallel with the goal setting stage on the feasibility and conditions for achieving the objectives (reduction actions required, changes in the business model to be implemented, suppliers to be engaged, eco-design stages of the products to be carried out, etc.).

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In fact, resources and guides are provided by the SBT initiative to help businesses engage in the process and develop effective action plans.

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The only obligation for a company (beyond meeting the criteria in defining the objectives) is to publish its programs annually. Businesses must therefore set up monitoring and reporting systems to measure their progress and ensure that they are on track to achieve their goals.

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As the SBT initiative is a voluntary framework for business engagement, there is therefore no sanctions or direct financial risks in case of non-achievement of the set decarbonization objectives.

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At most, companies will then be invited, in the event of a drift in real emissions (in comparison with the objectives set) to set up new objectives.

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On the other hand, there may be a reputational risk in the event of non-compliance with the objectives set, linked to the fact of having to publicly assume that the decarbonization objectives have not been achieved.

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This is why strategic considerations prior to defining an action plan that meets the objectives set are essential.

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How does that work in practice?

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Companies wishing to set goals validated by the SBTi must follow a journey in four stages :

• First, get involved formally by sending a letter of intent to the SBTi
• Once your carbon footprint has been completed, choose the reference year and expand targets and objectives that meet the criteria expected by the SBTi
• Submit with the SBT initiative its objectives for official validation
• Communicate publicly to the company's stakeholders the commitment made.

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It is important to note that SBTi is not only for large companies.

Small and medium-sized businesses (businesses with a size of less than 500 employees) can also participate, via a largely simplified process: all they need to do is complete a commitment form.

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It is thus possible to follow the companies involved on the SBTi website, and to see the type of decarbonization commitment, among the range of possible decarbonization goals that are proposed.

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If the company wishes to communicate publicly that the targets have been validated by the SBT, then it must formally submit its objectives to the SBTi for official validation.

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But a company that simply wants to set decarbonization goals (without official validation from the SBTi) can quite rely on the SBTi standard.

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Conclusion

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Setting decarbonization goals is a mandatory crossing point of any corporate climate strategy.

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The SBTi is therefore a welcome initiative, which offers a shared and recognized reference framework for voluntary companies eager to contribute sincerely and rigorously to the decarbonization of our societies.

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Over the years, it has thus established itself as a international methodological reference framework, as evidenced by the growing number of businesses committed to and submitting such goals.

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Numerous other methodological frameworks such as Net Zero Initiative (NZI) supported by Carbone 4 or the methodology ACT carried out by the CDP and ADEME, rely heavily on the SBTi to structure the stage of defining reduction objectives.

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The SBTi offers a certain flexibility for companies in terms of goal-setting possibilities : not all companies are therefore obliged to set absolute reduction targets in the short term, but can combine reduction objectives in terms of economic or physical intensity, in percentage of suppliers who are themselves committed to SBT, in terms of renewable energy supply, etc.

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This flexibility has the advantage of making it easier to reach the goals set, and thus motivating more companies to set decarbonization goals.

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However, there are several drawbacks caused by this permissiveness and methodological simplicity:

• if we consolidate all the SBT goals set by companies and if we assume that they are achieved, it is not certain that the global carbon budgets are respected, in other words that global warming is limited to the desired level (well below 2°C)
• the decarbonization objectives proposed by the SBTi do not sufficiently adapt to the specificities of each company, and in particular they are unsuitable for businesses contributing to decarbonization of our societies and driven to grow as part of the ecological transition.

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The fact remains that the SBTi has for the moment established itself as the reference framework, and that as many companies as possible are invited to set ambitious decarbonization goals, and thus contribute to the fight against climate change.

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