We’re heading towards 3,6 degrees if we look at what’s currently in national policies, and 2,8 degrees if countries follow through on their additional promises (Climate Action Tracker, 2016). With the global corporate sector contributing the largest source of greenhouse gas emissions, the need for corporates to electively adopt long term, aggressive targets for absolute emission reductions is more critical now than ever. And if the goal is to avert the irreversible and unpredictable consequences, these targets need to align to what the science is telling us.
The Science Based Target Initiative (SBTi) – a partnership between CDP, UN Global Company, WRTI and WWF – has been set up to help companies do just this. It offers extensive advice, guidance and tools to assist companies in setting targets that are aligned with science.
There has been some uptake by global corporates in setting of SBTs. Currently 260 companies have signed a commitment to SBTi to set within 2 years of commitment date, including seven South African companies (Mediclinic, Netcare, Pick ‘n Pay, Tiger Brands, Tongaat Hulett and Woolworths Holdings). None of these have submitted or had targets approved by the SBTi yet, but those that do will reap the benefits. Gaining visibility into what it will take to align your business model to a low (enough) carbon world can drive innovation and transform business practices, build credibility and reputation, and demonstrate leadership and influence policy (SBTi, 2015).
In general, though, South African corporates are still a long way away from stepping up to the plate in a significant way. The most basic requirement of Science Based Targets (SBTs) is that they need to be absolute – that is, that they need to guarantee predictable reductions in emissions in absolute terms. According to CDP 2016 results, roughly only half of South African company’s targets are absolute and only 25% of these look more than 5 years ahead and commit to an average annual reduction of 1.5% or more (two of the tenets of SBTs). The other half are intensity based targets, meaning that companies have committed to reducing emissions “per unit” of something (for example per unit of turnover) and therefore linked to the level of corporate activity. The obvious problem with this is that if output growth exceeds the reduction target, overall absolute emissions will actually increase.
Setting Science Based Targets: the 101
The good news is that setting SBT’s isn’t as daunting as it may seem. There are seven approved methodologies available, one of which is for U.S based companies only (the 3% method). SBTi encourages companies to follow the sector based methodology of the Sectoral Decarbonisation Approach (SDA) where possible, failing which, based on inherent characteristics the next best model should be selected:
Table 1: Science Based Target Setting Manual V1.0
In our opinion the SDA is by far the most sophisticated and sensitive option. This method allocates the total carbon budget allowance for a 2 degree pathway to each sector according to their current contributions and ability to reduce emissions. This sector allocation is then split between individual organisations based on their relative contribution to that sector’s allowance. It’s the only model to factor in the inherent constraints of each sector to mitigate emissions and to consider sectoral growth rates relative to population growth, resulting in targets that are realistically achievable.
The sectors covered in this methodology are Power generation, Iron & Steel, Cement, Chemicals, Aluminum, Pulp & Paper, Services/Commercial buildings and Transport. For companies operating across multiple sectors, it is possible to set separate targets for each of these sectors.
What would a company need to go ahead with setting a SBT? Using the SDA methodology, the minimum inputs are:
- Time space (minimum of 5, maximum of 15 years)
- Base year of carbon emission emissions on which to set target: this must include Scope 1 and 2, as well as Scope 3 emissions where on full assessment these emissions are +40% of total CF
- Company activity growth rate over the target year period: this is typically based on activity output (tonnes of product, gross lettable area, MWH
Our advice to you: if this is something you are considering – start sooner than later! The nature of the decarbonisation pathways designed by the IPCC is that they become increasingly aggressive over time. For companies aligning to these pathways, this means the percentage reduction target will be relatively more lenient earlier on. Since all companies will eventually need to align to global decarbonsation pathways (lest we embrace climate chaos), setting shorter term targets now will allow an organisation to comfortably transition into lower carbon technologies with a view to set more aggressive targets over time.
Climate Action Tracker. 2016. Effect of current pledges and policies on global temperature. [Online] available at: http://climateactiontracker.org/global.html
SBTi. 2015. Science Based Targets Setting Manual, version 1 [online] available at: http://sciencebasedtargets.org/wp-content/uploads/2015/09/SBTManual_PubComDraft_22Sep15.pdf