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Science-based Target Setting Manual 7/19/2017
Version 3.0
A product of the Science Based Targets initiative
[Include logos of CDP, UN Global Compact WRI and WWF]
Nicole Labutong, CDP Pedro Faria, CDP Heidi Huusko, UN Global Compact Bryan Jacob, WRI (consultant) Cynthia Cummis, WRI Jessica McGlyn, WRI (consultant) Nate Aden, WRI Renee Morin, (consultant) Stephen Russell, WRI Alberto Carrillo Pineda, WWF Carole Tornay, WWF Paola Delgado Luna, WWF
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Contents
Foreword .............................................................................................................................. 3Executive Summary ............................................................................................................... 4Key Terms ............................................................................................................................ 9List of Abbreviations ............................................................................................................. 111. Introduction ..................................................................................................................... 122. Making the Business Case for Science-based Targets ............................................................. 17
Benefits of Setting SBTs ........................................................................................... 173. Understanding Science-based Target Setting methods ........................................................... 22
3.1 Components of a science-based target method ................................................................. 233.2 Method parameters ...................................................................................................... 243.3 Selecting an SBT method ......................................................................................... 26
4. Setting a Science Based Target ........................................................................................... 304.1 Follow steps that apply across all scopes ......................................................................... 304.2 Model a Scope 1 and 2 Target ........................................................................................ 334.3 Model a Scope 3 Target ................................................................................................. 344.4 Adjust Targets to Ensure Continued Relevance ................................................................. 454.5 Secure Third Party Review ............................................................................................. 45
5. Building Internal Support for Science-based Targets .............................................................. 465.1 Get All Levels of the Company on Board ..................................................................... 465.2 Address Challenges and Push-back ................................................................................. 48
6. Communicating the Target and Progress .............................................................................. 506.1 Define the Audience ................................................................................................ 506.2 Decide Where to Disclose .............................................................................................. 516.3 Follow Guiding Reporting Principles ........................................................................... 526.4 Describe the Target ...................................................................................................... 526.5 Describe Progress Toward the Target .............................................................................. 54
Annex 1. Components of a Science Based Target Method ........................................................... 55A1.1 Carbon Budget ....................................................................................................... 55A1.2 Emissions Scenarios ................................................................................................... 55A1.3 Allocation Approaches ................................................................................................. 58
Annex 2. Method Descriptions ................................................................................................ 61References .......................................................................................................................... 68Acknowledgments ................................................................................................................. 71About the partner organizations in the Science Based Target initiative ......................................... 72Endnotes ............................................................................................................................. 73
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Foreword
Tobewrittenoncepubhasgonethroughinternalreview.
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Executive Summary
Key Findings
• Companiescanplaytheirpartincombattingclimatechangebysettinggreenhousegas(GHG)emissionsreductiontargetsthatarealignedwiththereductionpathwaysforlimitingglobaltemperaturerisetowithin2°C.Thesetargetsaretermedsciencebasedtargets(SBTs).
• SBTsofferaplethoraofadvantagesovermoreincrementalGHGreductiontargetsandboostcompanies’competitiveadvantageinthetransitiontothelow-carboneconomy.
• MultipleSBT-settingmethodsexistandvaryintermsoftheambitionofthetargetstheyoutput.
• Toensuretheirrigorandcredibility,SBTsshouldmeetarangeofcriteriarelatedtotargetduration,ambition,andcoverageofinternalandvaluechainsources.
• Gettinginternalstakeholdersonboardthroughallstagesofthetarget-settingprocessrequirescarefulplanning.
• OnceanSBThasbeenset,communicatingitfully,simply,andclearlyisimportanttoaccuratelyinformstakeholdersandbuildcredibility.
Context
IntheParisAgreementnationalgovernmentscommittedtolimittemperaturerisetowellbelow2
degreesCelsius(°C)andpursueeffortstolimittemperatureriseto1.5°C.Beyondthesethresholds,theworldwillincreasinglyexperiencedangerouslyelevatedamountsofsea-levelrise,droughts,flooding,andotherextremes.
Despitetheeffortsofgovernmentsandotheractors,totalanthropogenicGHGemissionscontinueto
increase.Undercurrenttrajectories,globalmeantemperaturesareprojectedtoincreaseby3.7to4.8°Cbytheendofthiscentury.Evenunderexistingcountry-levelcommitments,emissionslevelsin2030willbe24to60percenthigherthantheyshouldbeunderleast-cost2°Cscenarios(UNFCCCSecretariat2016).
Companieshaveapivotalroleinensuringthattheglobaltemperaturegoalsaremet,butmost
existingcompanytargetsarenotambitiousenough.ThemajorityofglobalGHGemissionsareeitherdirectlyorindirectlyinfluencedbythecorporatesector.Manycompanies,recognizingtheriskclimatechangeposestotheirbusinessandtheopportunityitcreatesforleadershipandinnovation,havealreadycommittedtochangebysettingemissionreductiontargets.Yet,todate,mostcompanies’targetshavebeenincrementalanddonotmatchtheambitionandtimelinesconsistentwitha2°Cfuture.SBTsrepresentamorerobustapproachforcompaniestomanagetheiremissionsoverthelonghaul.SBTsaregroundedonanobjective,scientificevaluationofwhatisneeded,ratherthanwhatisachievablebyanyonecompany.Andtheyofferafirmfoundationforcompanies’long-termclimatechangestrategies,boostingcompanies’competitiveadvantageinthetransitiontothelow-carboneconomy.Targetsareconsidered“science-based”iftheyareinlinewiththelevelofdecarbonizationrequiredtokeepglobaltemperatureincreasebelow2°Ccomparedtopre-industrialtemperatures.
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CompaniesareincreasinglyadoptingSBTs,althoughuncertaintyexistsregardingbestpractices.Over40companieshavealreadysetanSBTandovertwohundredmorehavecommittedtosetanSBTinthenearfuturethroughtheScienceBasedTargetsinitiative(seebelow).BecausesettingSBTsisanemergingpractice,considerableuncertaintyexistsamongstcompaniesaroundthebenefitsofsettingsSBTs,whatkindoftargetmayconstituteanSBT,andbestpracticesforbothgaininginternalcompanysupportforSBTadoptionandcommunicatingSBTstoexternalaudiences.ThisuncertaintypresentsabarriertofurtheradoptionofSBTs.
About This Report
Thismanualprovidesstep-wiseguidanceandrecommendationsonsettingSBTs. Itcovers themainphases insettinganSBT, fromunderstandingthebusinessbenefitsofsettingSBTstocommunicatingprogressagainstestablishedSBTs(FigureES-1).
FigureES-1:ChaptersintheManual
Note:TechnicalannexesprovidesupplementaryinformationtoChapter3onhowSBT-settingmethodsworkandonthespecificSBTmethodsavailable.
ThismanualisaproductoftheScienceBasedTargetsinitiative,whichidentifiesandpromotes
innovativeapproachestosettingambitiousandmeaningfulcorporateGHGreductiontargets.Thecontentofthismanualwasdevelopedbasedoninterviewswithmorethan20companieswithexperienceinsettingSBTs.ItalsodrawsuponrecommendationsandcriteriadevelopedbytheSBTinitiativeforthereviewofproposedSBTssubmittedtotheinitiativeaspartofitsCalltoActioncampaign(seeBoxES-1).AtechnicaladvisorygroupcomprisingexpertsfromindustryandNGOsprovideddetailedinputonmultipledraftsofthemanual. Companiesaretheprimaryintendedaudience,althoughthemanualmaybeusefulforother
stakeholdersinterestedinSBTs.Companies(andanysupportingconsultants)shouldconsultthismanualwhenconsideringordevelopinganewGHGemissionsreductiontarget.Companiesmayalsousethismanualtoestablishwhetherexistingtargetsarealignedwithscience.Aboveall,companies
1.Introduction 2.BenefitsofSettingSBTs
3.UnderstandingSBTsettingmethods
4.SettinganSBT
5.BuildingInternalSupport
6.Communicatingthetargetand
progress
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shouldusethismanual(andSBTsmorespecifically)asaframeworkfortheiroverarchingGHGmanagementstrategy.Otherstakeholders,includinginvestors,environmentalgroups,policymakers,andacademics,canusethismanualtolearnaboutbestpracticesforsettingSBTs.ThismanualrepresentsasnapshotofexistingbestpracticesinsettingSBTs.Overtime,theexpectationofwhatconstitutesanSBTmaychangetoreflectadvancesineconomicmodelling,climatescience,andglobalemissionsreductionefforts,andtoreflectfurtherlessonslearnedfromsettingSBTs.Also,newdataresourcesandtoolsmaybecomeavailableinthefuturethatsupportsettingSBTsbasedonsectoralorgeographicconsiderationsthatcurrentlycan’tbesupportedusingexistingdata.Whilethemanualnecessarilyconcentratesoncurrentlyavailabletools,itoutlinesgeneralrecommendationsthatshouldguidefuturetargetsettingpracticesevenastheunderlyingscienceevolves.
ThismanualdoesnotprovideguidanceonimplementingGHGreductionmeasures.CompaniescanuseavarietyofmeasurestoreduceGHGemissions,includingincreasingenergyefficiencyanddecarbonizingenergysources.SuccessfulstrategiesforachievingSBTswillmostlikelyincludeamixofmeasuresdependingonacompany’sgoals,startingposition,thecostofvariousalternatives,andexternalmarketconditions.Decidinguponwhichstrategyismostappropriateforanyonecompanyisbeyondthescopeofthismanual.BoxES-1.AbouttheScienceBasedTargetsinitiative
TheSBTinitiativechampionsSBTsettingasapowerfulwayoffuture-proofingcompanies’growth
inthetransitiontothelow-carboneconomy.
ItisacollaborationbetweenCDP,WorldResourcesInstitute(WRI),theWorldWideFundforNature(WWF),andtheUnitedNationsGlobalCompact(UNGC).Theinitiative:
• ShowcasescompaniesthathavesetSBTsthroughcasestudies,eventsandmediatohighlighttheincreasedinnovation,reducedregulatoryuncertainty,strengthenedinvestorconfidenceandimprovedprofitabilityandcompetitivenessgeneratedbysettingSBTs.
• DefinesandpromotesbestpracticeinsettingSBTswiththesupportofaTechnicalAdvisoryGroup.
• Offersresources,workshopsandguidancetoreducebarrierstoadoption.• Independentlyassessesandapprovescompanies’targetsthroughaCalltoActioncampaign
thatcallsoncompaniestodemonstratetheirleadershiponclimateactionbypubliclycommittingtosetSBTs.Companiesthenhavetwoyearstosubmitatargettotheinitiative,whichshowcasesthetargetafterhavingconfirmeditmeetsspecificcriteria.
Theinitiative’soverallaimisthatby2020,science-basedtargetsettingwillbecomestandardbusinesspracticeandcompanieswillplayamajorroleindrivingdownglobalGHGemissions.EmbeddingSBTsasafundamentalcomponentofsustainabilitymanagementpracticesiscrucialinachievingthis.Formoreinformation,seehttp://sciencebasedtargets.org/
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Key issues in Setting SBTs
CompanieshavesoughtguidanceonarangeofissuesconnectedtosettingSBTs.Someofthemost
pressinginclude:
WhatarethebusinessbenefitsofsettinganSBT?Arbitrarytargetsorincrementaltargetsbasedonwhatisconfidentlyachievablemayresultinsomebusinessadvantages,suchasreducedcosts.SBTscanrequiregreaterinternalinvestmentandcompaniesareoftenuncertainaboutwhetherandhowSBTscanallowthemtofurthercapitalizeonthesebenefits.
WhatmethodsexistforsettingSBTs?Multiplemethodsexist,differingintermsofwhethertheycalculatetargetsasapercentagereductioninabsoluteemissions,emissionsintensityperuniteconomicoutput,oremissionsintensityperamountofphysicalproduct.Themethodsalsovaryinsectoralspecificityandmaybebasedondifferentscientificdatasetsandemissionsprojections.Differentmethodsmaythereforeyieldtargetsthatrequiresubstantiallydifferentactionfromcompaniesanditcanbeunclearwhichmethodsarepreferredunderwhichcircumstances.
WhatdoesacredibleSBTlooklike?Keyconsiderationsinclude:WhattimeperiodshouldanSBTcovertonotonlyfacilitateinvestmentinlow-carbontechnologiesthataretransformativeoverthelong-term,butalsodriveemissionsreductionsoverthenear-term?Whatpercentageoftheemissionsfrominternaloperations(“scope1and2emissions”)andvaluechains(“scope3emissions”)shouldanSBTcover?Whenarevaluechaintargetsimportant?AndhowmayrenewableenergypurchasesandoffsetsbeusedtowardanSBT,ifatall?Whatareeffectivecommunicationstrategiesforgaininginternalbuy-inandbuildingcredibility?TheeffectivecommunicationofanSBTguidesinternalmanagementdecisions,increasesbuy-infromemployees,andenhancescorporatereputation.BecauseSBTsusuallyentailgreatercommitmentonthepartofcompaniestoaltertheirbusinesspractices,gettingthecommunicationrightmatters.
Conclusions and recommendations
SBTsoffermanyadvantagesovermoreincrementalGHGreductiontargets.SBTsaremoreeffectivein:• Buildingbusinessresilienceandincreasingcompetitiveness.• Drivinginnovationandtransformingbusinesspractices.• Buildingcredibilityandreputation.• Influencingandpreparingforshiftsinpublicpolicy.
SBT-settingmethodscanbecomplexandcertainmethodsarepreferredoverothers.
• Generally,allSBT-settingmethodshavethreecomponents:acarbonbudget(definingtheoverallamountofGHGsthatcanbeemittedtolimitwarmingtowithin2°C),anemissionsscenario(definingthemagnitudeandtimingofemissionsreductions),andanallocationapproach(defininghowthebudgetisallocatedtocompanies).
• Sixmethodsarecurrentlyavailablethateachhaveapplicabilitytomultiplesectors.• Companiesshouldnottodefaulttothe“easiest”option,butshouldchoosethemethodand
targetthatbestdrivesemissionsreductionstodemonstratesectorleadership.• TocalculateSBTs,companiesshoulduseamethodthatisbasedeitheronsector-specific
decarbonizationpathways(i.e.,the“SectoralDecarbonizationApproach”method)oronastraightforwardpercentagereductioninabsoluteemissions.
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• Economicintensitytargetsmaybeset.Ingeneral,however,anintensitytargetshouldonlybesetifitleadstoabsolutereductionsinlinewithclimatescienceorismodeledusingasector-specificdecarbonizationpathwaythatassuresemissionreductionsforthesectorasawhole.
Toensuretheirrigorandcredibility,SBTsshouldmeetarangeofcriteria.Mostimportantly:
• AnSBTshouldcoveraminimumof5yearsandamaximumof15yearsfromthedatethetargetispubliclyannounced.Companiesarealsoencouragedtodeveloplong-termtargets(e.g.,through2050).
• Theboundariesofacompany’sSBTshouldalignwiththoseofitsGHGinventory.• Theemissionsreductionsfromscope1and2sourcesshouldbealignedwith2°C
decarbonizationpathways.• SBTsshouldcoveratleast95%ofcompany-widescope1and2emissions.• Companiesshoulduseasingle,specifiedscope2accountingapproach(“location-based”or
“market-based”)forsettingandtrackingprogresstowardanSBT.• Ifacompanyhassignificantscope3emissions(over40%oftotalscope1,2and3emissions),it
shouldsetascope3target.• Scope3targetsgenerallyneednotbescience-based,butshouldbeambitious,measurable,and
clearlydemonstratehowacompanyisaddressingthemainsourcesofGHGemissionswithinitsvaluechaininlinewithcurrentbestpractices.
• Thescope3targetboundaryshouldincludethemajorityofvaluechainemissions;forexample,thetopthreeemissionssourcecategoriesortwo-thirdsoftotalscope3emissions.
• Thenatureofascope3targetwillvarydependingontheemissionssourcecategoryconcernedandtheinfluenceacompanyhasoveritsvaluechainpartners,aswellasthequalityofdataavailablefromthosepartners.
• SBTsshouldbeperiodicallyupdatedtoreflectsignificantchangesthatwouldotherwisecompromisetheirrelevanceandconsistency,overtime.
• OffsetsandavoidedemissionsshouldnotcounttowardSBTs.Gettinginternalstakeholdersonboardthroughallstagesofthetarget-settingprocessrequirescareful
planning.
• StaffresponsibleforsettinganSBTshouldpartnercloselywithalllevelsofthecompanyduringthetarget-settingprocesstosocializegoals,assessfeasibility,andco-createpracticalimplementationplans.
• Staffshouldanticipatetheissuesthatcommonlycreateinternalpush-backandformulateready-maderesponses.
• Forscope3targets,companiesshouldworkcloselywithandsupportsuppliersduringthetarget-settingprocesstoincreasebuy-inandenableimplementation.
Onceatargethasbeenset,communicatingitfully,simply,andclearlyisimportanttoaccuratelyinform
stakeholdersandbuildcredibility.
• CompaniesshouldfollowtheGHGProtocolaccountingandreportingprinciplestodisclosequantitativeandqualitativeaspectsoftheirSBTssothataudiencescanfullyunderstandtheSBTs’context,implications,andnuances.
• Companiesshouldreportannualprogressinreachingtheirtargets.• SBTsshouldbecommunicatedinunderstandabletermsandinengagingways,suchasthrough
diagramsandinfographics,whileavoidingjargon.
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Key Terms
Absoluteemissiontarget
AnoverallreductionintheamountofGHGsacompanyemitsintotheatmospherebyatargetyearrelativetolevelsinabaseyear.
Allocationapproach
Thewaythecarbonbudgetunderlyingagivenemissionsscenarioisallocatedamongcompanieswiththesamelevelofdisaggregation(e.g.inaregion,inasector,orglobally).
Assessmentreport(AR)
MaterialpublishedbytheIPCCprovidingafullscientificandtechnicalassessmentofclimatechange.
Baseyear Theperiodinhistoryagainstwhichacompanytracksperformanceovertime.Carbonbudget Theestimatedamountofcarbon(orCO2)theworldcanemitbeforewarmingwill
exceedspecifictemperaturethresholds.Commonlytakenas1000GTCO2fora2oCthreshold.
CO2equivalent(CO2e)
Aunitusedtoexpresstheglobalwarmingpotentialofdifferentgreenhousegasesasasinglefigure,namelytheequivalentamountorconcentrationofcarbondioxide.
Emissionsintensitytarget
Areductioninemissionsrelativetoaspecificbusinessmetric,suchasproductionoutputorfinancialperformanceofthecompany(e.g.,tonneCO2epertonneproductproducedorvalueadded).Thetargetisachievedbyatargetyearrelativetolevelsinabaseyear.
Emissionsscenario
AforecastoffutureemissionsandatmosphericGHGconcentrations,usedtoassesstheimpactofsocioeconomicandtechnologicalchangesonfutureemissions.
EnergyTechnologyPerspectives(ETP)
DocumentpublishedbytheIEAthatprovidesscenariosthatsetoutpathwaystoasustainableenergyfutureinwhichtechnologychoicesaredrivenbycostsandenvironmentalfactors.
Greenhousegas(GHG)
Agasthatabsorbsandemitsradiationintheatmosphere,contributingtothegreenhouseeffect.GHGsinclude(amongothers)watervapor,carbondioxide,methane,nitrousoxide,ozone,andCFCs.
Heterogeneoussector
Asectorthatcannotbedescribedusingasinglephysicalindicatorbecauseitproducesadiversearrayofproductsthateachhaveuniquecharacteristicsandtraitsandaredifficulttocomparetooneanother.
Homogeneoussector
Asectorinwhichcompaniesmakeproductsthatareuniformbothwithincompaniesandacrossthesectorasawhole,andthatcanbedescribedusingasinglephysicalindicator.
Offset DiscreteGHGreductionsusedtocompensateforGHGemissionselsewhere.Representativeconcentrationpathway(RCP)
AGHGconcentrationtrajectorydevelopedintheIPCC5thAssessmentReport(AR5)forclimatemodelingandresearch.
Scope1emissions
Emissionsfromsourcesthatareownedorcontrolledbythereportingcompany.
Scope2emissions
Emissionsfromthegenerationofelectricity,heat,orsteamthathasbeenpurchasedbythereportingcompany.
Scope3emissions
Allotherindirectemissionsfromsourcesthatarelocatedalongthereportingcompany’svaluechain.
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Targetyear Theyearbywhichacompanyintendstomeettheemissionsreductioncommittedtoinatarget.
TwoDegreesScenario(2DS)
AnemissionsscenariodevelopedintheIEA’sETPthatdescribesanenergysystemconsistentwithanemissionstrajectorythatwouldgivea50percentchanceoflimitingaverageglobaltemperatureincreaseto2°C.
Value-added Dependingonaccountingterminology,thisisdefinedasgrossprofit,operatingprofit,revenueminusthecostofpurchasedgoodsandservices,orEBITDAplusallpersonnelcosts.
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List of Abbreviations
AR5 FifthAssessmentReportfromtheIPCC
CH4 methane
C-Fact CorporateFinanceApproachtoClimate-stabilizingTargets
CO2 carbondioxide
CO2e carbondioxide-equivalent
CSO Context-basedCarbonMetric
CSI ClimateStabilizationIntensityTargets
ETP EnergyTechnologyPerspectives
GDP grossdomesticproduct
GEVA GreenhousegasEmissionsperValueAdded
GHG greenhousegas
IEA InternationalEnergyAgency
IPCC IntergovernmentalPanelonClimateChange
kWh kilowatthour
RCP representativeconcentrationpathway
SBT science-basedtarget
SDA SectoralDecarbonizationApproach
UNFCCC UnitedNationsFrameworkConventiononClimateChange
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1. Introduction
By How Much Must Global Emissions be Cut?
TheFifthAssessmentReportfromtheIntergovernmentalPanelonClimateChange(IPCCi)showsthatdespiteeffortstomitigateclimatechange,greenhousegas(GHG)emissionslevelshaveincreasedby31%between1990and2010(Blancoetal.2014).Theworldiscurrentlyemittingapproximately50GtCO2e/yearintotheatmosphere(Blancoetal.2014)and,asthepopulationandtheeconomycontinuetogrow,willemit56.3 GtCO2e/year by 2030,evenwithcurrentgovernmentpledges(UNFCCC Secretariat 2016).Underthistrajectory,globalmeantemperaturesareprojectedtoincreaseby2.7to3.7°Cbytheendofthiscentury(WRI2015),withdevastatingimpactsonnaturalsystems,waterresources,agriculturalproductivity,andultimatelyoneconomic,political,andsocialstability.ThesciencesaysthatglobalGHGemissionsmustbecutbybetween49and72%from2010levelsby2050(Clarkeetal.2014)ii.Otherwise,theglobaltemperatureincreasewillexceed2ºC compared to pre-industrial temperaturesandtriggercatastrophicchangestotheearth’sclimate.Anincreasingnumberofscientistshaveindicatedthatevena2°Cincreaseistoohightoensureclimatestabilityandarecallingforalimitof1.5ºC(e.g.,Schellnhuberetal.2016).A1.5ºClimitmeansfeweremissionsarepossibleandthatglobalenergyandindustryemissionsmustbephasedoutearlier(Table1-1).Table1-1.ComparingAllowedEmissionsTrajectoriesBetweenthe1.5ºCand2ºCLimits 1.5ºClimit 2ºClimit
Amountofemissionspossible(fromyear2012)beforetemperaturelimitishit
400GTCO2 1010GTCO2
Yearbywhichglobalemissionsmustpeak
Before2020 Before2020
Requiredreductioninglobalemissionsby2050,from2010levels
70-95% 49-72%
Yearbywhichglobalenergyandindustryemissionsmustbephasedout
Between2045and2055 Between2060and2075
Source:Clarkeetal.2014.Nearly200countriesparticipatedinthetwentyfirstUnitedNationsFrameworkConventiononClimateChange(UNFCCC)ConferenceofParties(COP21)andsignedontotheaccompanyingParisAgreementtohold“theincreaseintheglobalaveragetemperaturetowellbelow2°Cabovepre-industriallevelsandtopursueeffortstolimitthetemperatureincreaseto1.5°C”(UNFCCC2015).Theycommittedtoavarietyofsteps,includingasignificantreductioninGHGemissions.Inspiteofthisambition,asubstantialshortfallexists--eventhebesteffortsunderexistingcommitmentswouldleadtoemissionslevelsin2030thatare24to60%higherthantheyshouldbeunderleast-cost2°Cscenarios(UNFCCC Secretariat 2016).Businesshasacriticalroletoplayinbridgingthisgap.WhatisaScience-BasedTarget?
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Inthismanual,GHGemissionsreductiontargetsareconsidered“science-based”iftheyareinlinewiththelevelofdecarbonizationrequiredtokeepglobaltemperatureincreasewithin2°Cofpre-industriallevels.Overtime,theexpectationofwhatconstitutesascience-basedtarget(SBT)maychangetoreflectadvancesineconomicmodelling,climatescience,andglobalemissionsreductionefforts.Inparticular,targetsmaybecomescience-basedonlyiftheyarealignedwith“wellbelow2°C”or1.5°Cscenarios,inkeepingwiththeParisAgreement.WhilecompaniesareencouragedtosetSBTsalignedwith“wellbelow2°C”or1.5°Cscenarios,doingsoisnotcurrentlyacoreexpectationandthismanualfocusesonmethodsfora2°Cincreaseiii.Onceset,SBTsarenotfixed,butrathershouldbeadjustedovertimetoreflectchangesinclimatescienceandotherfactors(seeChapter4.4). The Vital Role of Business Globalemissionsresultfromtheactivitiesofmajoreconomicsectors,includingelectricityandheatproduction;agriculture,forestryandotherlanduse(AFOLU);commercialbuildings;transportandindustry(Figure1.1).Figure1.1.TotalAnthropogenicGHGEmissions(GtCO2eperyear)byEconomicSector,2010Data
Note:OtherEnergycoverssourcesotherthanpublicelectricityandheatproduction,suchasfuelcombustionincokeovensandblastfurnaces.Source:AdaptedfromIPCC2014a.Companiesoperatingwithinalltheseeconomicsectorshaveavitalroletoplayinfacilitatingthetransitiontoalow-carbonfuture.Manycompanies,recognizingtheriskclimatechangeposestotheirbusinessandtheopportunityitcreatesforleadershipandinnovation,havealreadycommittedtochangebysettingemissionreductionstargets,andtrackingandpubliclyreportingGHGemissions.Forexample,outofasampleof1089companiesthatcollectivelyaccountfor12%ofglobalemissions,fully85%ofthecompanieshadsetatarget(CDP2016).
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However,mostofthesetargetsdonotequatetothereductionsrequiredtomeetthethreatposedbyclimatechange:theyarenotasambitiousasthescienceindicatestheyneedtobe,don’tcoverameaningfulpercentageofthecompanies’emissions,orlackalong-termperspective(i.e.gobeyond2020)(CDP2015a;CDP2016).Forexample,ofthesame1089companies,only1%hadsetanSBT(Figure1.2)andcombinedreductionsfromthosetargetsonlyequalonequarterofthetotalreductionsneededindicatedbya2°Cpathway(CDP2016).Figure1.2:IncrementalTargetsareMuchMoreCommonthanSBTsAmongaSetof1089Companies
Source: CDP (2016).
BusinessOpportunityinFillingEmissionsGap
TheLowCarbonTechnologyPartnershipsInitiative(LCPTi)ivcreatedlow-carbontechnologydeploymentactionplansforninebusinesssectors.PwCestimatedthatifitsambitionswererealized,theLCPTicouldcontribute65percentoftheemissionreductionsnecessarytokeeptheworldwithinthe2°Cscenarioby2030.PwCalsoestimatedthattheactionplanscouldhelp“channel$5-10trillionofinvestmenttowardlowcarbonsectorsoftheeconomyandsupport20-45millionperson-yearsofemployment.(PWC2015)”
DecarbonizationofthePowerSector
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ElectricitygenerationcontributesapproximatelyonethirdofglobalGHGemissions(Figure1-1).Therefore,ambitiousactionbypowercompanieswillbevitaltokeepglobalwarmingwithinthe2°Climit.Thepowersectorisexpectedtodecarbonizethroughashiftinelectricitygenerationfromcentralizedtodecentralizedproductionandfromfossilfuelstorenewables.Besidesthemeasurestakenbythepowersectoritself,companiesinothersectorscaninfluencetheuseoflow-carbonenergybyinvestinginoptions,suchaswind,solar,andgeothermalenergysources.Decouplingemissionsfromeconomicgrowthwillalsobeacriticalcomponentofafuture,low-carboneconomyandispossible.Forexample,thelargest100electricpowergeneratorsintheUSachieveda12percentreductioninCO2eemissionsfrom2008to2013,evenasthetotalamountofgenerationincreased(CERES2015).Forsuchdecouplingtobeachieved,companieswillhavetoavoidinvestmentsincarbonintensiveinfrastructuretopreventlockingthemselvesintoahigh-carbongrowthpathand/orhavingstrandedassetsontheirbalancesheetsthatwouldhavetoberetiredearlyinordertomeetthe2°Climit.
WhyShouldmyCompanyCare?
SmartcompaniesunderstandtherisksposedbyclimatechangeanddemonstrateleadershipbysettingSBTs.CompaniesthatsetSBTsbuildlong-termbusinessvalueandsafeguardtheirfutureprofitabilityby(seeChapter2forfurtherdiscussion):
• Buildingbusinessresilienceandincreasingcompetitiveness• Drivinginnovationandtransformingbusinesspractices• Buildingcredibilityandreputation• Influencingandpreparingforshiftsinpublicpolicy
PurposeoftheManual
ThismanualisaguidetodevelopSBTs.ItincorporatesbestpracticesandlessonslearnedfromtheSBTinitiative’swork.Inparticular,itincorporatesthecriteriaandrecommendationsfromtheinitiative’sCall to Actioncampaignasbestpractice,butdoesnotrequireanyofthesecriteriatobemetwithinthecontextofthis“how-to”manual.
WhoShouldUseThisManual?
Thismanualshouldbeusedbycompanies(andanysupportingconsultants)consideringorintheprocessofdevelopinganewGHGemissionsreductiontarget,oradjustingaprevioustarget.CompaniesmayalsousethismanualtoestablishwhetherexistingtargetsarealignedwithscienceandasaframeworkfortheirGHGmanagementstrategy.Additionally,investors,environmentalgroups,policymakers,andacademicscanusethismanualtolearnaboutbestpracticesforsettingSBTs.
WhatIsinThismanual?
ThebulkofthismanualguidesthereaderatahighlevelthroughthedifferentstepsofsettinganSBT,includingdefiningthebusinesscase(Chapter2),understandinghowtoapplythevariousSBTmethods(Chapters3and4),gettinginternalbuy-in(Chapter5),andcommunicatingthetargetandperformanceprogress(Chapter6).Twotechnicalannexesprovidemorein-depth,technicalinformationonavailablemethodsandchoosingamongstthesemethods.HowWasThisManualDeveloped?
Thismanualwasdeveloped throughamulti-stakeholderprocess coordinatedby theSBT initiative.AtechnicaladvisorygroupofexpertsfromindustryandNGOsprovideddetailedinputonmultipledrafts.Inaddition,morethan20companieswithexperienceinsettingSBTswereinterviewedtounderstand
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bestpracticesanddevelopexamples.Adraftofthemanualwasalsoreleasedforapubliccommenttogain additional input from stakeholders world-wide. This process included a webinar and in-personworkshopsinWashington,DC;Mumbai,India;andSãoPaulo,Brazil.
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2. Making the Business Case for Science-based Targets
ThischapteroutlineshowcompaniescanbenefitfromsettingemissionsreductiontargetsandspecificallyhighlightsthedriversforsettingambitiousSBTs.
Benefits of Setting SBTs
Arbitrarytargetsortargetsbasedonwhatisconfidentlyachievableorwhatsectorpeersaredoingmayresultinsomebusinessadvantages,butSBTsallowacompanytocapitalizeonthesebenefitstotheirfullestextentandmovebeyondincrementalchange(Table2-1).RecognizingthepowerandutilityofSBTs,morethantwohundredcompanieshavecommittedtosetanSBTthroughtheSBTinitiative’sCalltoActioncampaign.LandSecurities:Companyquote
TomByrne,EnergyManageratLandSecurities:“Ultimately,thesciencebringsmeaning,andgroundsourambitioninreality:targetsarenolongernumberspulledfromthinair,theyaregoalslinkedtoarealissue.Science-basedtargetscommitustowhatisrequired,notjustwhatisachievable.Inthissense,theyproveleadershipandprovidethe‘spine’ofalong-termsustainabilitystrategy.”
Table2-1.TheBenefitsofAdoptinganSBT
Opportunity CommonPractice–IncrementalTargets Science-basedTargetsBuildbusinessresilienceandincreasecompetitiveness
AreductioninGHGemissionsoftencorrespondstodecreasedcostsandanincreaseinacompany’soperationalefficiency.
Incrementaltargetsmaylimitcompaniestoonlygoingafterthe“lowhangingfruit”.MethodstosetSBTschallengebusinesstore-alignwiththelow-carboneconomy,capitalizingonarangeofopportunitiesbeyondcost-savings.
Driveinnovationandtransformbusinesspractices
Settingtargetscaninspirecompaniesandsupplychainactorstodiscovernovelsolutionsandproductofferings.Becausetargetsarenear-termandnota“stretch”,companiesmaynotbepushedtotransformbusinesspractices.
BecauseSBTsincludealong-termvision,companiescanthinkbeyondthenear-term,commonsolutionsforGHGemissionsreductions.Newtechnologiesandfinancingoptionscanbedevelopedinacorporateenvironmentthatprioritizespreparingforalow-carboneconomy.
Buildcredibilityandreputation
CompaniesthataretransparentintheirGHGreductioneffortsgarnerreputationalcredibilitythroughdemonstratingtheircommitmenttoaddressingclimatechange.However,investorsandotherstakeholdersarenowdemandingtargetsbasedonexternal,science-drivenprojections,whichcouldputthesecompaniesatrisk.
SBTshavehighercredibilitywithstakeholders.Scienceisrequiringcompaniestoincreasetheirlevelofambition.CompanieswithSBTsareoftenlower-riskoptionsforlong-terminvestment.
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Opportunity CommonPractice–IncrementalTargets Science-basedTargetsInfluenceandprepareforshiftsinpublicpolicy
Incrementaltargetssendasignaltopolicymakersthatcompaniestakeclimatechangeseriously.
SBTshelpcompaniesadapttochangingpoliciesandsendastrongersignaltopolicymakers,allowingcompaniestobetterinfluencepolicydecisions.
BuildBusinessResilienceandIncreaseCompetitiveness
ByreducingtheGHGemissionsfromitsoperationsandvaluechain,acompanycanincreaseitsresilienceandcompetitivenessinalow-carboneconomy.Achievingsteeperemissionsreductionscanhelpacompanysavemoremoneywithrespecttoenergycostsfrommanufacturingandlogisticsoperations,amongstothers,andthereforecanincreaseitscompetitiveness.Also,decreasingenergyconsumptionreducesacompany’sexposuretotherisksassociatedwithfossilfuelpricefluctuations.SBTscanalsohelpcompaniesachievehigherinternalratesofreturnoninvestmentsthancompetitors(WeMeanBusiness2014).
P&G:AmbitiousTargetsSpurringInnovationandEnergySavings
InFY14/15,Procter&Gamble(P&G)setanSBTofa30%reductioninabsolutescope1and2emissionsby2020,froma2010baseyear.Renewableenergywillbekeytohelpingthecompanyachieveitsgoal.P&GhaspartneredwithEDFRenewableEnergytobuilda100MWwindfarminTexas.AccordingtoP&G,itwillprovide"enoughwindpowerelectricitytomanufacture100%ofourFabricandHomeCareproducts...intheU.S.andCanadav."Thisisequivalenttoeliminating200,000metrictonsofGHGsperyear.P&Gisalsolookingtoitsemployeestofindnewwaystoreduceenergy.Thecompanylaunchedaprogramcalledthe“Powerof5”designedtogiveemployeesachanneltosharetheirideastoreduceenergyusageandsavemoney.Sofar,theprogramhasgeneratedmorethan$25millioninnew,energy-savingopportunities,whichwillbeimplementedoverthenexttwotothreeyears.
DriveInnovationandTransformBusinessPractices
Havingaggressivereductiontargetscandrivegreaterinnovationandinvestment.Ambitioustargetscanmotivateemployeesfromallpartsofabusinesstothinkbeyondincrementalchangesandbetrulytransformationalintheirbusinesspractices.Innovationmotivatedbyambitioustargetscanleadtonewbusinessmodelsandsourcesofvalue.Innovationcanhelpredefineacompany’sbottomlinebycreatingnewproducts,newwaystosourcematerials,newwaystointeractwithcustomers,andnewwaystogrowmarkets.Radicalinnovationcan,inturn,disruptcurrentlyunsustainableeconomicsystems.Ambitioustargetscanalsospurinnovativefinancingpracticessuchasinternalcarbonpricingorcarbontaxes.Creativefinancingpracticescanenablethesignificantcapitalandresearchanddevelopment(R&D)investmentsneededtoachieveambitioustargetsandachievingthesetargetscan,inturn,resultinanimprovedbottomline.Dell:InnovationinSoldProductsandServicesTheenergyusedbyDell’sproductsisthelargestcontributortoitstotalcarbonfootprintandinnovationsinproductenergyefficiencyareakeypartofitsoverallemissionsreductionstrategy.AspartofitsSBT,Dellcommittedtoreducetheenergyintensityofitsproductportfolio80%by2020,froma2011baseyear.Dellisleveragingtechnologyacrossitsproductlines,suchaslaptops,desktops,servers,andnetworkingequipment,tomeetthistarget.Oneexampleofthisinnovationis
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Dell’snewgenerationofbladeserverswhichactlikeastreamlineddatacenter,withamuchsmallerGHGfootprintthantypicaldatacenters.Customersgainspaceandprocessingpower,freeuptheirITteamandreduce their power costsbyupto20percent,comparedtoidentically-configuredcompetitiveofferings.Dell’sPrincipalEnvironmentalStrategist,JohnPflueger,said:“Engineerslovedata!Givethemthedataandtheywillrespond.Theycannowgoinandworkoutwherethebiggestenergyfootprintsareinthecompany.Theyhavealicencetoinnovateinordertomeetthebusinessstrategygoals.Thefactisifyouwanttosolveaproblem,youneedtoknowthescaleandnatureoftheproblemyouaretryingtosolve.Whenyouhavethisinformationandtheseinsights,thenyouknowwhatyouneedtodo.”vi
Walmart:companyquote
Fred Bedore, senior director of sustainability at Walmart:"Ithinkwhatever'srightinfrontofyoufeelsthemostdifficult,butthat'salsowherealotofthebreakthroughinnovationhappens.[…]Withsettingsciencebasedtargets,notonlyisthatprobablythelongesttimehorizonforoneofourspecificgoals,butit'salsoprobablyoneofthemostaggressiveandcomprehensivegoalsthatwe'vesetasacompany.SoIthinkitwillreallypushusandpushourstakeholderstoreallygettothoseinnovations."
KelloggCompany:InnovationinSupplychainsAspartofitsSBT,KelloggCompanyhascommittedtoreduceabsolutescope3emissions20%by2030and50%by2050,froma2015baseyear.ThisisKellogg’sfirstquantitativescope3targetandtoachieveitthecompanyisengagingitssupplierstoestablishabaseyearGHGinventoryandidentifywhatchangescanbemade.SinceKelloggsetthistarget,ithasalreadyengaged75%ofitssuppliers(over400intotal),encouragingthemtorespondtotheCDPquestionnaireonemissionsandmaterialstohelpthemunderstandthechallengeandavailableoptions.Kelloggalsohas35programsaroundtheworldtohelpfarmersdecreasetheirfootprint,andissupportinghalfamillionfarmerstoimplementsmartagriculturalpracticesfocusedonemissionreductionsandresiliency.Kelloggisalsocollatingtheresearchresultsandlessonslearnedandsharingthemwithindividualfarmers.vii
BuildCredibilityandReputationwithEmployees,Customers,Investors,andOtherStakeholders
SBTsrepresentarigorous,non-arbitraryapproachtosetstretchgoalsandhelpcreateapathwayformeaningfulGHGemissionreductionefforts.Settingtargetsbackedbyanexternalcommunityofclimateexpertslendscredibilitytocorporatesustainabilitygoalsandcanenhanceacompany’sreputationintheeyesofitsemployees,customers,policymakers,environmentalgroups,andotherstakeholders.Companiesmightalsogainreputationaladvantagewithsomeinvestors.Moreinvestorsarerecognizingthematerialityandriskofclimatechangeformanysectors.Forexample,since2010,therehasbeena54%riseinthenumberofinstitutionalinvestors(from534to822)requestingdisclosureofclimatechange,energyandemissionsdatathroughCDP(CDP2015b).Asof2016,sixtypercentoftheworld’s500biggestassetownersareactingtoreducetheirexposuretoclimateriskandincreasetheirinvestmentinthelowcarboneconomy(AODP2017).
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ThevisibilityandpositivereputationgarneredbyhavinganSBTshouldalsobolstergeneralemployerattractiveness.Forexample,asurveybyNetImpactshowedthat80%ofmillennialswanttoworkforacompanythatcaresaboutitsimpacts.InvestorsIncreasingInterestinClimateRiskandOpportunity
Theinvestmentcommunityisincreasinglyrecognizingthematerialriskclimatechangeposesformanysectors,eitherintermsofhowitimpactsagivencompanyorhowthatcompanyunderstandsandmanagesitsrisk.Someexamplesofinvestorinitiativesinclude:
• TheGlobalInvestorsCoalitiononClimateChange(GICCC),ajointinitiativeoffourregionalclimatechangeinvestorgroups,issuedaStatementatCOP21endorsedby409investorsrepresentingmorethanUS$24trillioninassets.Theinvestorscommittedtoseveralsteps,includingto“workwiththecompaniesinwhichweinvesttoensurethattheyareminimizinganddisclosingtherisksandmaximizingtheopportunitiespresentedbyclimatechangeandclimatepolicyviii.”
• TheSustainableAccountingStandardsBoard(SASB),anon-profitorganization,iscreatingindustrystandardsforthedisclosureofmaterialsustainabilityinformationinmandatorySECfilingsthatinvestorscanusetoassessandmakedecisionsaboutacompany.
• TheFrenchgovernmentnowmandatesthatfinancialinstitutionsdisclosetheirclimaterisk.• The2015UNParisAgreementonClimateChangecommitsgovernmentsto“Makingfinance
flowsconsistentwithapathwaytowardslowgreenhousegasemissionsandclimate-resilientdevelopment.(UNFCCC2015)”
• TheTaskForceonClimate-relatedFinancialDisclosures(TCFD)isdevelopingvoluntary,consistent,climate-relatedfinancialriskdisclosuresforusebycompaniesinprovidinginformationtoinvestors,lenders,insurers,andotherstakeholders.
NRGEnergy:UsingSBTstoFuture-proofBusiness
NRGEnergyprovideselectricitytonearly3millionretailcustomersacrosstheUnitedStates.Ithascommittedtoreduceabsolutescope1,2and3emissions50%by2030,and90%by2050,froma2014baseyear.NRGhasbeeninvestingheavilyincleanenergywithaviewtobecomingtheleadinggreenenergyproducerintheU.S.“Settingascience-basedtargetdirectlyansweredtheneedsofourcustomers,allofwhomarethinkingabouttheirownfootprints.Itisalsocriticalforinvestorswhoneedtoknowthatwearethinkingofpotentialrisks,intheshort-,medium-andlong-term,”saidLaurelPeacock,Sr.SustainabilityDirectoratNRG.“Havinganambitioustarget[…]isimportanttoshowthatwewillremainreliable,sustainable,safesuppliersnowandinthefuture.ix”
LandSecurities:Companyquote
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TomByrne,EnergyManageratLandSecurities:“Havingourtargetapprovedhasundoubtedlyenhancedourreputationandrelationshipwithinvestors.Wearenowanevenbetterlong-terminvestmentprospect.Aslongaswekeepupdatingitinlinewiththelatestscience,ourtargetfuture-proofsusforinvestorrequirementsforthenext50years.Inthesustainabilityteamweareincreasinglytakingcallsfrominvestorswhowanttotalkaboutwhatwe’redoing.Somearethinkingaboutsettingtheirownscience-basedtargets,whileothersarethinkingofmakingthemarequirementforcompaniestheyinvestin.”Ithinkthetargetalsoputsusinagoodpositionvis-à-visgovernmentregulation.WearefullycompliantwiththeUKgovernment’sexistingtargets,andwouldbewellplacedweretheytointroducemorestringentregulationforcompanies.Indeed,Ithinkthatindustryisnowleadinggovernmentonthis:weareshowingwhatcompaniescandoontheirown,andhopefullycreatinganenvironmentinwhichotherswillfollowsuitandthebarwillberaised.”x
Coca-ColaEnterprises:CompanyQuote
JoeFranses,DirectorofCorporateResponsibilityandSustainabilityatCoca-ColaEnterprises:
“Manyofourmajorretailcustomers-includingTesco,CarrefourandSainsbury’s-arealsoputtinginplaceplanstosignificantlyreducetheirowncarbonemissionsandemissionsacrosstheirownsupplychains.Thismeansthatmajorsuppliers,includingCCE,willneedtoensurethatcarbonreductiontargetsarefullyaligned.Weexpectthesameofoursuppliers.”xi
InfluenceandPrepareforShiftsinPublicPolicy
SettingandmeetingSBTscanreduceacompany’sexposuretomorestringentemissionsandenergyregulations,helpingitsmoothlyadapttoregulatoryandpolicychangesthatmightotherwiseimpactdailybusinessoperationsandimpedefinancialgrowth.Leadingcompanies’adoptionandimplementationofSBTsalsodemonstratesthetechnicalandeconomicfeasibilityoflow-carbonproductionforpolicymakersandotherstakeholders.CompanieswithSBTscanalsoinfluencepolicybysignalingtheirsupportforlow-carbonpoliciesandcreatingdemandforlow-carbontechnologypathwaysandrenewableenergysolutionsthatwouldbenefitfrommorefavorablepolicyconditions.Companyquote:Dell
JohnPflueger,PrincipalEnvironmentalStrategistatDell:“IthinktheAmericanBusinessActsonClimatePledgewasarealwatershedmoment.ItwasabigsignalfromtheFederalgovernmentthatcompaniesneededtostartlookingseriouslyattheseissues.Thegovernmentdoesn’tjustsetrulesandaculture,butitisalsoapotentialcustomer.Itcanindicateitssupportforlow-carboninnovationbypurchasingthoseproducts,sointhatsense,havingasciencebasedtargetshouldstandusingoodstead”.
SettinganSBTisnotatoddswitheconomicgrowth.Asdemonstratedbythebenefitsnotedabove,aspiringtoinnovativebusinessstrategiescancatalyzefinancialsuccessandprepareacompanytothriveinalow-carboneconomy.Companieswillcollectivelybenefitfromanenvironmentthatremainsconducivetobusinessandmitigatesdisruptiontobusinessoperations.Inordertoensurethisfuturestate,companieswillneedtosettargetsthatareinlinewiththeglobal2°Climit.
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3. Understanding Science-based Target Setting methods
ThischapterdescribesthegeneralmethodologicalapproachforsettinganSBT.Itthenprovidesahigh-leveldescriptionofthespecificmethodscurrentlyavailableandguidanceonhowtochooseamongstthosemethods.
Annexes1and2ofthisGuidanceprovidesfurther,technicalguidanceontheseissues.
KeyInsightsinThisChapter
• ThekeycomponentsofanSBTmethodarethecarbonbudget(definingtheoverallamountofGHGsthatcanbeemittedtolimitwarmingtowithin2°C),emissionsscenario(definingthemagnitudeandtimingofemissionsreductions),andallocationapproach(defininghowthebudgetisallocatedtocompanies).
• Sixmethodsarecurrentlyavailablethateachhaveapplicabilitytomultiplesectors.• Somemethodswillbemoresuitableforcertaincompanies/sectorsthanothers.• Companiesshouldnottodefaulttothe“easiest”option,butshouldchoosethemethodand
targetthatbestdrivesemissionsreductionstodemonstratesectorleadership.• Companiesshoulduseeitherasector-basedmethodoranabsoluteemissionscontraction
approachtocalculateSBTs.• Economicintensitytargetsmaybeset.Ingeneral,however,anintensitytargetshouldonly
besetifitleadstoabsolutereductionsinlinewithclimatescienceorismodeledusingasector-specificdecarbonizationpathwaythatassuresemissionreductionsforthesectorasawhole.
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3.1 Components of a science-based target method
Ingeneral,anSBTmethodcomprisesthreecomponents(Figure2-1):1. Acarbonbudget2. Anemissionsscenario3. Anallocationapproach.
Figure2-1.MainElementsofMethodsforSettingSBTs
CarbonBudget:Thereisafiniteamountofcarbonthatcanbeemittedintotheatmospherebeforewarmingwillexceedspecifictemperaturethresholds.Thisamountistermedthecarbonbudget.AllSBTmethodsarebasedonkeepingthetotalcumulativeglobalemissionsbelowthetotalavailablecarbonbudgetfora2°Cthreshold.Thisbudgetis1010GtCO2from2013(IPCC2014b)or700GtCO2from2017(Rockströmetal.2017).
EmissionsScenario:Anemissionsscenariomainlyrepresentsawayofdistributingtheavailablecarbonbudgetovertime.AlthoughitisnotpossibletopredictexactlywhenandtowhatextentGHGswillbeemittedinthefuture,severalscenarioshavebeendevelopedbyorganizationssuchastheIPCCandtheInternationalEnergyAgency(IEA)xii.Thescenariosvary,dependingonassumptionsmadeaboutpopulationandeconomicgrowth,andabouttechnologicaladvancesandtheircost-effectiveness.ThescenariosmayalsocoverdifferenttimeperiodsorbemodelledusinginformationonGHGconcentrationsortemperatureincreases(seeAnnex1formoredetails).Inaddition,scenariosvaryintermsoftheextenttowhichtheyaredisaggregatedbysectorand/orregion.AllocationApproach:Anallocationapproachreferstothewaythecarbonbudgetunderlyingagivenemissionsscenarioisallocatedamongcompanieswiththesamelevelofdisaggregation(e.g.inaregion,inasector,orglobally).
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TheSBTmethodsreferencedinthismanualusetwomainapproachestoallocateemissionsatacompanylevel:
1. Convergence,whereallcompanieswithinagivensectorreducetheiremissionsintensitytoacommonvalueby2050asdictatedbyaglobal2°Cpathway(e.g.,theemissionsintensityofallelectricpowercompaniesconvergestoamaximumof29gCO2eperkWhofelectricityin2050).Thereductionresponsibilitiesallocatedtoacompanyvarydependingonitsinitialcarbonintensityandgrowthraterelativetothoseofthesector,aswellasthesector-wideemissionsintensitycompatiblewiththeglobal2°Cpathway.Theconvergenceapproachcanonlybeusedwithsector-specificemissionsscenariosandphysicalintensitymetrics(e.g.,tonnesGHGpertonneproductorMWhgenerated).
2. Contraction,whereallcompaniesreducetheirabsoluteemissionsoreconomicemissionsintensity(e.g.,tonnesGHGperunitvalue-added)atthesamerate,irrespectiveofinitialemissionsperformance,anddonothavetoconvergeuponacommonemissionsvalue.Thecontractionapproachcanbeusedwithsector-specificorglobalemissionsscenarios.
3.2 Method parameters Inadditiontothecarbonbudget,emissionscenarioandallocationapproach,eachmethodrequirescompanydatainputsandgeneratesoutputsthatcanbeusedasabenchmarktoinformtargetsetting. Company Inputs Company-specificdataneededtoproduceatargetunderanyoftheSBTmethodsinclude:
• baseyear• emissionsinthebaseyear,disaggregatedbyscope• activitiesinthebaseyear(e.g.,buildingfloorarea,distancetravelled,valueadded,etc.)• targetyear
Somemethodsrequireadditionalcompanyinputssuchassectorclassification.Annex2liststheprimaryinformationneededbyeachofthemethods. Becauseeachmethodissensitivetotheinputsused,anderrorscanpropagatethroughoutthemethods,companydatashouldbeasaccurateaspossible(seealsoChapter4.3).Projected Outputs Dependingonthemethod,thetargetoutputcanbeanabsolutefigure,anintensityfigure,orboth.AnabsolutetargetisdefinedintermsofanoverallreductionintheamountofGHGsemittedtotheatmospherebythetargetyear,relativetothebaseyear(e.g.,reduceannualCO2eemissions25%by2025,from2000levels).Inturn,anintensitytargetisdefinedbyareductioninemissionsrelativetoaspecificbusinessmetric,suchasproductionoutputorfinancialperformanceofthecompany(e.g.,tonneCO2epertonneproductproducedorvalueadded).Dependingonreportingandcommunicationpreferences,acompanycanchoosetousethetargetformatoutputbyamethodand/ortranslateittootherformats(e.g.,useproductiondatatoconvertanabsolutetargetintoanintensitytarget).Belowareillustrativeexamplesofpublishedabsoluteandintensitytargets:ExamplesofAbsolutetargets:
• Scopes1and2:Procter&Gamblecommitstoreduceemissionsfromoperations30%by2020froma2010baseyear.
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• Scopes1,2and3:GeneralMillscommitstoreduceabsoluteemissions28%acrossitsentirevaluechain(scopes1,2and3),fromfarmtoforktolandfillby2025,usinga2010baseyear.
ExamplesofIntensitytargets:• Scope1:EnelcommitstoreduceCO2emissions25%perkWhby2020,froma2007baseyear.• Scopes1,2and3:Thalyscommitstoreducecorporatescope1,2and3GHGemissionsper
passengerkilometerby41.4%by2020,comparedtoa2008base-year.
ExampleofCombination(AbsoluteandIntensity)targets:• Scopes1,2and3:Coca-ColaEnterprisescommitstoreduceabsoluteGHGemissionsfromtheir
corebusinessoperations50%by2020,usinga2007base-year.Coca-ColaEnterprisesalsocommitstoreducetheGHGemissionsfromtheirdrinks33%by2020,usinga2007base-year.
Comparing Absolute and Intensity Targets Eachtypeoftargethasadvantagesanddisadvantages.Forexample,intensitytargetsdonotnecessarilyleadtoreductionsinabsoluteemissions.Thisisbecauseincreasesinbusinessoutputcancauseabsoluteemissionstoriseevenifefficiencyimprovesonaperunitbasis.Figure3-1illustratesthispoint.Figure3-1.IntensityReductionTargetsCanLeadtoAbsoluteEmissionsIncreasesWhenProductionLevelsIncrease
Anotherchallengewithintensitytargetsisthatitcanbedifficulttocomeupwithasingle,meaningfulactivitymetricthatcoversallofacompany’soperations,particularlywhenthoseoperationsgenerateadiverseproductmix.Physicalintensitymetrics(e.g.,tonnesGHGpertonneproductorMWhgenerated)arebestsuitedforusewithinsectorsthatcreateauniformproduct(“homogeneous”sectors,suchasthesteelorcementsectors).Economicintensitymetrics(e.g.,tonnesGHGperunitvalue-added)arebestsuitedforusewithinsectorswhoseproductsvaryalotandaredifficulttodirectlycompareagainsteachother(“heterogeneous”sectors,suchastheretailorchemicalsectors).However,aneconomicintensitymetricmaynotcorrelatewithproductemissionsand,ifpricesofacompany’sproductsarevolatile,aneconomicmetricisnotusefulfortrackingemissionsperformance(seealsoChapter3.3).Absolutetargetsalsohavesomeshortcomings.TheydonotallowcomparisonsofGHGintensityamongstpeersandtheydonotnecessarilytrackwithefficiencyimprovements,asreportedreductions
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canresultfromdeclinesinproductionoutput,ratherthanimprovementsinperformance.Table3-1summarizesthemainadvantagesanddisadvantagesofbothtypesoftargets.Table3-1.TheMainAdvantagesandDisadvantagesofAbsoluteandIntensityTargets AbsoluteTarget IntensityTarget
Advantages DesignedtoreducethequantityofGHGsemittedtotheatmospherebyaspecificamountEnvironmentallyrobustandmorecredibletostakeholdersasitentailsacommitmenttoreducetotalGHGsbyaspecifiedamount,thusalsomakingthecontributiontoglobalemissionsreductionseffortspredictableandtransparent.
ReflectsGHGperformanceandefficiencyimprovementsindependentofbusinessgrowthordeclineMayincreasethecomparabilityofGHGperformanceamongstcompanies
Disadvantages DoesnotallowcomparisonsofGHGintensity/efficiencytothatofpeersReportedreductionscanresultfromdeclinesinproduction/output,ratherthanimprovementsinperformanceTargetmaybemorechallengingtoachieveifthecompanygrowsandgrowthislinkedtoGHGemissions
Lessenvironmentallyrobustandlesscredibletostakeholdersbecauseabsoluteemissionsmayriseevenifintensitydecreases(e.g.,becauseoutputincreasesmorethanGHGintensitydecreases).Companieswithdiverseoperationsmayfinditdifficulttodefineasinglecommonbusinessmetric.Aneconomicintensitymetricmaynotcorrelatewithemissionstiedtophysicalproductionprocesses.
3.3 Selecting an SBT method AvailableMethods
ThisguidancemanualprovidesdetailsonsixSBTmethods,allofwhicharefree,publiclyavailable,andapplicabletomorethanonesector(Table3-2).
1. Onemethodusesconvergenceofemissionsintensitytocreatephysicalintensitytargets:SectoralDecarbonizationApproach(SDA).
2. Onemethodusescontractionofabsoluteemissionstocreateabsolutetargets:AbsoluteEmissionsContractionxiii.TheSDAalsousescontractionofabsoluteemissionsforageneral“OtherIndustry”sector,whichcomprisesmanufacturingsectorsforwhichdataaren’tavailabletosupporttheuseoftheconvergenceofemissionsintensityapproach(seeAnnex1).
3. Fourmethodsusecontractionofeconomicintensitytocreateeconomicintensitytargets:CorporateFinanceApproachtoClimate-stabilizingTargets(C-FACT),ClimateStabilizationIntensityTargets(CSI),Context-basedCarbonMetric(CSO),andGreenhouseGasEmissionsperValueAdded(GEVA).
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Thesemethodsalsovaryintermsoftheirsectordisaggregation.TheSDAisbasedonsectoral2°Cpathwaysandcanbeappliedtospecificsectors(seeBox3-1).Stillothermethodscanbeusedwithanysectoralemissionsscenario(AbsoluteEmissionsContraction)orcanbeadaptedforusewithanyscenario(GEVA,CSI,CSO)–thelevelofsectordisaggregationofthesemethodswillthereforedependonthatoftheunderlyingscenario.Annex2furtherdetailsthekeyfeaturesofeachmethod.Beyondthesesixmethods,itisexpectedthatnewscenariosandmethodswillbedevelopedforarangeofspecificsectors.InformationonthesewillbepostedtotheSBTinitiative’swebsiteasthemethodsaremadepubliclyavailableand/orvalidatedbytheinitiative.Currently,availabledatadonotsupportthedisaggregationofemissionspathwaysbycountryorregion;seeAnnex1forfurtherdetails.Table3-2:KeyFeaturesofSBTMethodsMethod Allocationapproach Sectors Typeof
Target
Output
AbsoluteEmissionsContraction
Contractionofabsoluteemissions
Dependsonemissionsscenario
Absolute
CorporateFinanceApproachtoClimate-stabilizingTargets(C-FACT)
Contractionofemissionsintensity
Dependsonemissionsscenario
Absoluteandeconomicintensity
ClimateStabilizationIntensityTargets(CSI)
Contractionofemissionsintensity
Dependsonemissionsscenario
Economicintensity
Context-basedCarbonMetric(CSO)
Contractionofemissionsintensity
Dependsonemissionsscenario
Economicintensity
GreenhouseGasEmissionsperValueAdded(GEVA)
Contractionofemissionsintensity
Dependsonemissionsscenario
Economicintensity
SectoralDecarbonizationApproach(SDA)
Convergenceofemissionsintensity
Various Physicalintensity
Contractionofabsoluteemissions
1sectorcoveringmiscellaneousmanufacturingindustries
Absolute
Box3-1.SDASectorsCurrently, the SDA provides sector-specific pathways for the following sectorsa:
• PowerGeneration• Iron&Steel• Cement• Aluminum• Pulp&Paper• Chemicalsb• Services/commercialbuildings• Passengertransport
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TheSDAalsocalculatesSBTsforageneral“OtherIndustry”sectorthatcoverstheconstructionindustryandawiderangeofmanufacturingsectors(e.g.,foodandbeverage,electronics,machinery).Notes:
a. TheSDAsectorsaredrawnfromtheInternationalEnergyAgency(IEA).AnappendixintheSDAuserguidancemapstheIEAsectorsagainstcommonindustrialclassificationsystems:http://sciencebasedtargets.org/wp-content/uploads/2015/05/Sectoral-Decarbonization-Approach-Report.pdf.
b. TheheterogeneityofthechemicalsectorlimitsthepresentutilityofthisSDApathway.Choosing an SBT Method TheSBTinitiativerecommendscompaniesuseeitherasector-basedmethod(SDA)orAbsoluteEmissionsContraction.Aneconomiccontractionmethodmayalsobeusedtosetaneconomicintensitytarget(usingC-FACT,CSI,CSO,orGEVA).Ingeneral,anintensitytargetshouldonlybesetifitleadstoabsolutereductionsinlinewithclimatescienceorismodeledusingasector-specificpathway(e.g.,SDA)thatassuresemissionreductionsforthesectorasawhole.Becauseintensityandabsolutetargetseachhaveadvantagesanddisadvantages,itisrecommendedthatcompaniesexpresstheirtargetsinbothabsoluteandintensityterms.Ifacompanyoperatesinmorethanonesector,itshouldidentifythetopsectorsthatcoveramajorityofitsoperations.Themethodsthatapplytothesesectorscanthenbeusedasabenchmarktodeterminetheaggregatedfinaltarget.Forexample,acompanymightoperateinthealuminumsectorandhavepowergenerationoperationstosupportthealuminumproduction.Inthiscase,thecompanycouldsettwodifferenttargetsusingboththealuminumandpowergenerationsectorpathwaysintheSDA.Similarly,acompanycouldusemultiplemethodsfordifferentscope3emissionscategories(seeChapter4.3).Acompanyshoulddevelopanaggregatedtargetthatappliesacrossitsentirestructureforexternalreportingandcommunication,althoughseparateinternaltargetsmaybedevelopedbyregion,sector,facility,oremissionscategoryforeaseoftrackingandexecution.CompaniesShouldChoosetheMostAmbitiousTargetInsomecases,variationwillexistintheambitionandreductionpathwaysoftargetsoutputbythedifferentmethods.Forexample,differentscenariosintheIPCC’sFifthAssessmentReportresultinrequiredreductionsof49%and66%between2010and2050(seeAnnex1).Tohelpensureadherencetothecarbonbudget,companiesshouldnotdefaulttothetargetthatiseasiesttomeet.Companiesshouldinsteadusethemostambitiousdecarbonizationscenariosandmethodsthatleadtotheearliestreductionsandtheleastcumulativeemissions.Acompanyshouldscreenseveralofthemethodsandchoosethemethodandtargetthatbestdrivesemissionsreductionstodemonstratesectorleadership.Methodselectionmayalsobeinfluencedbypracticalconsiderations,suchastheavailabilityofinputdataforthebaseyearandtargetyear.ElectricPowerGenerationCompaniesElectricpowergenerationcompaniesshouldsetscope1targetsthatareatleastasambitiousasthosedeterminedbytheSDA.ThisisbecausethepowersectoristhesinglelargestcontributortoglobalGHG
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emissions(Figure1-1)andcancost-effectivelyreduceitsemissionsbyanamountthatmaybeunderestimatedbyothermethods.SettingSBTsinSectorswithPriceFluctuationsForsectorswithlimitedfluctuationsinproductpricesovertime,growthinemissionsisoftentiedtoeconomicgrowthofthecompany:ifacompanysellsmoreproducts,moreemissionsareproducedtomakethoseproducts.Insuchcases,aneconomicintensitytargetmaybeappropriate.Forsomesectorsthefinancialgrowthofacompanyisnotalwaystiedtoincreasedemissionsandcanbeinfluencedbyothermarketforces,suchassupplyanddemand,andpricefluctuations.Forexample:
• Apharmaceuticalcompany’spricesforcertaindrugsmayfluctuatebasedondemand,patents,orregulatoryfactors.
• Thevalueadded(orgrossprofit)ofaluxurybrandcompanycanberelatedtomarketingandconsumerwillingnesstopayforapremiumproduct,introducingvariabilityintopricing.
• Thepriceofmanycommodities(e.g.,metalsandagriculturalcommodities)issetbytradesplacedoncommodityexchanges.
InsuchcasescompaniesshoulddevelopSBTsusingthecontractionofphysicalintensity(SDA)orthecontractionofabsoluteemissions.
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4. Setting a Science Based Target
ThischapteroutlinesastepwiseprocessforusingtheSBTmethod(s)toinformascope1,2,and3target.ItincorporatestheexistingcriteriaandrecommendationsfromtheSBTinitiative’sCalltoActioncampaignasbestpractice.BecauseSBTsarebuiltuponcorporateGHGinventories,thischapteralsoreferencesrelevantrequirementsinGHGProtocolstandardsforGHGinventorydevelopment.ThischapterfirstdiscussescorerecommendationsandstepsthatapplyacrossallscopesindesigninganSBT.Itthenoutlinesspecificrecommendationsforscope1and2targetsand,separately,scope3targets.ItcloseswithguidanceonhowSBTsshouldbeadjustedovertimetoensuretheircontinuedrelevance,aswellaswithoptionsforthethird-partyreviewofproposedSBTs.TheCalltoAction’scriteriaandrecommendationsmaychangeslightlyovertimetoincorporatefurtherlessonslearned.UsersareencouragedtoconsultthecurrentlistoftheCalltoAction’scriteriaandrecommendations,availablefromtheSBTinitiative’swebsitexiv.KeyInsightsinThisChapter
• AnSBTshouldcoveraminimumof5yearsandamaximumof15yearsfromthedatethetargetispubliclyannounced.Companiesarealsoencouragedtodeveloplong-termtargets(e.g.,through2050).
• Theboundariesofacompany’sSBTshouldalignwiththoseofitsGHGinventory.• Theemissionsreductionsfromscope1and2sourcesshouldbealignedwith2°C
decarbonizationpathways.• SBTsshouldcoveratleast95%ofcompany-widescope1and2emissions.• Companiesshoulduseasingle,specifiedscope2accountingapproach(“location-based”
or“market-based”)forsettingandtrackingprogresstowardanSBT.• Ifacompanyhassignificantscope3emissions(over40%oftotalscope1,2and3
emissions),itshouldsetascope3target.• Scope3targetsgenerallyneednotbescience-based,butshouldbeambitious,
measurable,andclearlydemonstratehowacompanyisaddressingthemainsourcesofGHGemissionswithinitsvaluechaininlinewithcurrentbestpractices.
• Thescope3targetboundaryshouldincludethemajorityofvaluechainemissions;forexample,thetop3categoriesortwo-thirdsoftotalscope3emissions.
• Thenatureofascope3targetwillvarydependingontheemissionssourcecategoryconcernedandtheinfluenceacompanyhasoveritsvaluechainpartners,aswellasthequalityofdataavailablefromthosepartners.
• SBTsshouldbeperiodicallyupdatedtoreflectsignificantchangesthatwouldotherwisecompromisetheirrelevanceandconsistency,overtime.
• OffsetsandavoidedemissionsshouldnotcounttowardSBTs.
4.1 Follow steps that apply across all scopes
A varietyofconsiderationsandstepsapplyacrossallthreescopes:
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ChooseaBaseYear
Themeaningfulandconsistenttrackingofemissionsperformanceoverthetargetperiodrequirescompaniestoestablishabaseyear.Twocriteriaareimportantforselectingabaseyear:verifiabledataonscope1,2,and3emissionsmustexistforthebaseyear,andthebaseyearmustberepresentativeofacompany’sGHGprofile.TheSBTinitiativerecommendschoosingthemostrecentyearforwhichdataareavailableasthetargetbaseyear.Sometimes,individualyearsmaynotserveasrepresentativebaseyears.Insuchcases,companiescouldaverageGHGdataformultiple,consecutiveyearstoformamorerepresentativebaseyearthatsmoothsoutunusualfluctuationsinemissions.Forexample,acompanythathadanuncharacteristicyearin2009couldsetitstargetas:‘By2025emissionswillbe40%lowerthanaverageemissionsforthe2008-2010period’.Also,thebaseyearshouldbechosensuchthetargetisforward-lookinganddoesnotcoverprogress-to-datealreadyachievedbythecompany.Whilecompaniesdeservecreditforpastprogress,theintegrityofanSBTwouldbesuspectifthereislittlelefttoaccomplishbythetimethetargetisannounced.Finally,variousfactorsmaynecessitaterecalculationsofthebaseyear(andSBTasawhole)toensurethecontinuedrelevanceoftheSBT.SeeChapter4.4forfurtherguidanceonthistopic.ChooseaTargetYear
Theimpactsofclimatechangewillbefeltforyearstocome.Settinglong-termSBTs(e.g.,through2040or2050)encouragesplanningtomanagethelong-termrisksandopportunitiesconnectedwithclimatechange.Thesemayincludethecreationofnewservicesandmarkets,andtheneedforlargecapitalinvestmentsthatofferGHGbenefits.However,long-termtargetsalonedonotmatchthedecisionhorizonsofmanycompaniesandmightencouragelaterphase-outsoflessefficientequipment.Mid-termtargets(thosebetween5and15yearsinthefuture)canbeinstrumentalforidentifyinginefficienciesandopportunitiesforemissionreductions.Companiesshouldsetatargetthatcoversaminimumof5yearsandamaximumof15yearsfromthedatethetargetispubliclyannounced.Itisalsorecommendedtosetlong-termtargetsbeyondthisintervalandsetinterimmilestonesatfive-yearintervals.InterimtargetsshouldbealignedwiththeemissionscenariousedtosettheSBT;seeAnnex1forfurtherguidance.CompaniesshouldbeawarethatSBTsettingmethodsvaryintheearliestpossiblebaseyear(often2010)andthelatesttargetyear(often2050).Wherethelatestpossibletargetyearisearlierthan2050(2025inthecaseoftheCSOmethod),companiescanusethosemethodsandextendtheprojectionsmathematicallyorconsiderothermethodstodeveloplong-termtargets.Variouscompanies:FramingandCommunicatingShortandLong-termTargets
• Pfizerdetermineditneededtoreduceitsemissions60to80%by2050from2000levels,inordertostayona2oCtrajectory.Doingsowouldrequirea20%reductionby2020,from2012levels.Settinga2050goalalonewouldbechallengingbecauseoftheuncertaintiesintroducedbyalongtargetperiod.Pfizerthereforeusesthenearer-term(2020)goal,butclearlycommunicatesthatitisontracktomeetthe2050target.
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• Nestlémadea2020commitment,whichisonthetrajectorytoa2050target.However,Nestlébelievesthatshorter-termtargetshavemoremeaningandcreatemoreownershipamongemployeeswhomaystillbetherein2020andthuswillfeelresponsible.
• Marshasboth2020and2040targets,andbenchmarksitselfona3%annualreductionwithaneyeonefficiencyactivitiesthatareunderway.Itbelievestheshorter-termtargetengendersgreateraccountability.Butthelonger-termgoalhelpsensurethatshort-termstrategiesdon’tlockitintoinvestmentsordecisionsthatwouldcauseittoveeroffalow-carbontrajectoryafter2020.
SetScope1,2and3TargetsinTandem
WhensettinganSBT,acompanyshouldconsiderallthreescopesatthesametime.Inparticular:• AcompanyshouldaligntheboundariesofitsSBTwiththoseofitsGHGinventory.Thereare
threedifferentapproachesfordeterminingwhichoperationsareincludedinaninventory:operationalcontrol,financialcontrolandequityshare.Acompanymustselectasingleapproachbasedonarangeofcompany-specificconsiderationsandapplythatapproachconsistentlyacrossitscorporatestructure.TheGHGProtocolCorporateStandard(WRI&WBCSD2004)providesfurtherguidance.
• Companiesmaysetasingletargetforallscopes(seealsoChapter4.3).Insuchcases,thescope1and2portionofthetargetmustbescience-based.
• Ifseparatetargetsaresetfordifferentscopes,companiesshouldusethesamebaseyearandtargetyear.Acommontargetperiodwillsimplifydatatrackingandcommunicationaroundthetarget.Wherevaluechaindataaredifficulttoobtain,however,itisacceptabletousedifferentbaseyears.
• EmissionsthatfallunderonescopeshouldnotbeaddedtoanotherscopeforthepurposesofsettinganSBT.Forexample,theemissionsfromacompany’stier1suppliersshouldnotbeaddedtoitsscope1emissions.
ExcludetheUseofOffsets
TheuseofoffsetsshouldnotbecountedtowardattaininganSBT.Instead,companiesshouldsettargetsbasedonreductionswithintheirownboundariesortheirvaluechains.Offsetsmaybeuseful,however,asanoptionforcompanieswishingtofinanceadditionalemissionreductionsbeyondtheSBT.
ExcludeAvoidedEmissionsfromSBTs
Avoidedemissionsoccuroutsideofacompany’sscope1,2and3inventoryandrequireamethodologyinformedbyprojectaccountingtoestimate.Anyestimatesofavoidedemissionsmustbereportedseparatelyfromacompany’sscope1,2and3emissions,andshouldnotbecountedtowardSBTs,includinganyscope3target.
DetermineHowtoTreatSubsidiaries
Complexbusinessrelationships(subsidiaries,joint-ventures,etc.)cancomplicatehowthetargetboundaryisdrawn.Ideally,parentcompaniesshouldsetSBTsforsubsidiaries.However,itcanbeacceptableforasubsidiarytosettargetsdirectlyifithasoperationalandmanagerialindependence.AndincaseswhereboththeparentcompanyandsubsidiarysetSBTs,caremustbetakentocommunicatewhetherthetargetsoverlap.Thalys:SettingTargetsforSubsidiaries
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Internationaltrainoperator,Thalys,wasfoundedbySNCF,theNationalRailCompanyofBelgium(SNCB),andDeutscheBahn.ThoughThalysispartlyownedbySNCF,itoperatesindependently.ThalyshasanSBTtoreducescope1,2and3GHGemissionsperpassengerkilometer41.4%by2020,froma2008base-year.SNCFhasalsocommittedtosetanSBTand,sinceithasmaintenanceresponsibilityatsomeofThalys’sites,willhavetodistinguishitsadditionaltargetsfromthoseofThalys’.xv
4.2 Model a Scope 1 and 2 Target
AnSBTmustleadtoemissionsreductionsfromscope1and2sourcesthatarealignedwithscience.Importantstepsincludedecidingwhichemissionssourcestoincludewithinthetargetboundariesandhowtoaccountforscope2emissions. Set Target Boundaries Keyconsiderationsforsettingtheboundaryofascope1and2SBTare:
● Whichscopes?SBTsshouldalwayscoveracompany’soverallscope1and2emissions,evenifonescopetotalmayseeminsignificantcomparedtotheother.Thisistoensurethattherisksandopportunitiesofchangingenergysourcesarecaptured.
• WhichGHGs?BasedontheGHGProtocolCorporateStandard,inventoriesandtargetboundariesmustincludetheemissionsofsevendifferentGHGsorclassesofGHGscoveredbytheUNFCCC/KyotoProtocol:carbondioxide(CO2),methane(CH4),nitrousoxide(N2O),perfluorocarbons(PFCs),hydrofluorocarbons(HFCs),sulphurhexaflouride(SF6),andnitrogentriflouride(NF3).
● Whichgeographicaloperations?SBTsshouldcoverthesamegeographicaloperationsasthecorporateGHGinventory.
Ingeneral,acompanyshouldexcludenomorethan5percentofitsaggregatescope1and2emissionsfromitsinventoryandtarget.Companiesshoulddisclosewhetherandwhyspecificoperationsandsourceshavebeenexcluded(seeChapter6).AccountforScope2Emissions
Settingandtrackingperformanceagainstscope2targetsentailssomeuniqueconsiderations:ShouldaCompanyUsethe“Location-based”or“Market-based”Approach?:RenewableenergyislikelytobeaninstrumentalpartofcorporatestrategiestorealizeSBTs.TheGHGProtocolScope2Guidance(WRI&WBCSD,2015)definestwoapproachesforcalculatingthescope2emissionsfrompurchasesofrenewableenergyandotherformsofenergy.The“location-based”approachisdesignedtoreflecttheaverageemissionsintensityofgridsonwhichenergyconsumptionoccursandmostlyusesgrid-averageemissionfactors.Incontrast,the“market-based”approachisintendedtohelpcompaniesreflecttheemissionsimpactsofdifferentiatedelectricityproductsthatcompanieshavepurposefullychosen(e.g.,supplier-specificemissionsratesandpowerpurchasingagreements).ForthepurposesofsettingSBTs,companiesshouldchoosetheresultsofonlyoneapproachwhencalculatingbaseyearemissionsandtrackingperformance.Also,ifacompanychoosestousethemarket-basedapproach,itshouldassessallcontractualinstrumentsforconformancewiththeScope2QualityCriteriaxvi.HowShouldPurchasedHeatandSteambeAccountedFor?:Theemissionsfrompurchasedheatandsteamfallunderscope2inacorporateinventory.However,forthepurposesofsettinganSBT,companiesshouldmodelheat-andsteam-relatedemissionsasiftheywerepartoftheirdirect(i.e.
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scope1)emissions.ThisisbecauseexistingSBTmethodsforscope2emissionsdonottakepurchasedheatandsteamintoaccount.
4.3 Model a Scope 3 Target Whencompaniessettargets,theyinitiallyfocusonscope1and2emissionsbecausetheyaregenerallymoreabletoinfluencetheseemissions.However,acompany’sscope3emissionsareoftenmuchgreater(Figure4-1)andambitiousscope3targetscanplayanintegralpartinacompany’sGHGreductionstrategy,allowingittodemonstrateperformanceandleadership,managesupplychainrisksandopportunities,andaddresstheneedsofstakeholders.Keystepsinsettingscope3targetsaspartofanSBTstrategyincludeconstructingascope3inventorytoassesswhetheranambitiousscope3targetshouldbesetand,ifso,whichscope3emissionssourcecategoriesshouldbetargeted.Subsequentstepsincludeidentifyingtheappropriatetypeoftargetandlevelofambitionforthesecategories.
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Figure4-1:TheRelativeMagnitudeofScope1,2and3Emissions,BySector
Notes:GraphbasedonCDPdataforS&P500firms.Source:CDP 2013.ConductaScope3Inventory
Ascope3inventoryiscriticalinidentifyingemissionshotspots,reductionopportunities,andareasofriskupanddownthevaluechain.TheGHGProtocolCorporateValueChain(Scope3)AccountingandReportingStandard(WRI&WBCSD,2011)providesdetailedguidanceonhowtocompleteascope3inventory.Itdefines15distinctcategoriesofupstreamanddownstreamemissionssources(seeBox4-
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1).TheScope3Standardrequirescompaniestoincludeallrelevantcategoriesinaninventory,basedonsuchcriteriaastheamountofemissionsorthelevelofinfluenceexertedoverthecategories(Table4-1).Ingeneral,companiesshouldprioritizeactivitiesinthevaluechainwherethereportingcompanyhasthepotentialtoinfluenceGHGreductions,butshouldnotexcludeanyactivitythatisexpectedtocontributesignificantlytothecompany’stotalscope3emissions.SeeChapter7oftheScope3Standardforfurtherdetails.Box4-1.TheScope3Categories
Upstreamscope3emissions1.Purchasedgoodsandservices2.Capitalgoods3.Fuel-andenergy-relatedactivities(notincludedinscope1orscope2)4.Upstreamtransportationanddistribution5.Wastegeneratedinoperations6.Businesstravel7.Employeecommuting8.UpstreamleasedassetsDownstreamscope3emissions
9.Downstreamtransportationanddistribution10.Processingofsoldproducts11.Useofsoldproducts12.End-of-lifetreatmentofsoldproducts13.Downstreamleasedassets14.Franchises15.InvestmentsSeeChapter5intheScope3Standard(WRI&WBCSD2011)foracompletedescriptionofthesecategories.
Table4-1:CriteriaforIdentifyingRelevantScope3CategoriestoIncludeinaScope3Inventory
Criteria DescriptionofScope3ActivitiesSize Theycontributesignificantlytothecompany’stotalanticipatedscope3emissionsInfluence Theyofferpotentialemissionsreductionsthatcouldbeundertakenorinfluencedby
thecompanyRisk Theycontributetothecompany’sriskexposure(e.g.,climatechangerelatedriskssuch
asfinancial,regulatory,supplychain,productandcustomer,litigation,andreputationalrisks)
Stakeholders Theyaredeemedcriticalbykeystakeholders(e.g.,customers,suppliers,employees,investors,orcivilsociety)
Outsourcing Theyareoutsourcedactivitiespreviouslyperformedin-houseoractivitiesoutsourcedbythereportingcompanythataretypicallyperformedin-housebyothercompaniesinthereportingcompany’ssector
Sectorguidance Theyhavebeenidentifiedassignificantbysector-specificguidanceOther Theymeetanyadditionalcriteriafordeterminingrelevancedevelopedbythecompany
orindustrysectorSource:AdaptedfromtheGHGProtocolScope3Standard(WRI&WBCSD2011),Table6.1.Thedevelopmentofaninitial,screeninginventorycanbeausefulfirststeptowardthedevelopmentofacomprehensivescope3inventory,lettingcompaniesunderstandtherelativemagnitudeofscope3
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emissionsoverallandidentifyhigh-impactcategoriesforwhichmoreaccuratedataareneeded.Box4-2describestheScope3Evaluator,atoolusefulinconstructingscreeninginventories.Scope3DataQualityCompaniesarelikelytofacechallengesincollectingdataandensuringdataqualityforscope3sources,becausethesesourcesarenotunderthereportingcompany’sownershiporcontrol.Thesechallengesinclude:•Relianceonvaluechainpartnerstoprovidedata•Lesserdegreeofinfluenceoverdatacollectionandmanagementpractices•Lesserdegreeofknowledgeaboutdatatypes,datasources,anddataquality•Broaderneedforsecondarydata(i.e.datathatarenotspecifictoacompany’svaluechain)•BroaderneedforassumptionsandmodelingIngeneral,companiesshouldselectdatathatarethemostrepresentativeintermsoftechnology,time,andgeography;mostcomplete;andmostreliable.Companiesshouldcollecthighquality(“primary”)datafromsuppliersandothervaluechainpartnersforscope3activitiesdeemedmostrelevantandtargetedforGHGreductions.Secondarydataareacceptable,butdolimitacompany’sabilitytotrackperformance.Secondarydataarethereforebettersuitedforscope3categoriesthatarenotsignificant.Chapter7oftheScope3Standardprovidesfurtherguidanceondataqualityissues.Ifscope3emissionscomposeover40%oftotalscope1,2and3emissions,companiesshoulddevelopanambitiousandquantitativescope3targetthatcoversasizeableportionofscope3emissions.Subsequentsectionsofthischapterexpandonthisrecommendation.
Box4-2:TheScope3EvaluatorToolGHGProtocolteamedupwithQuantis,aconsultancy,todevelopafreescope 3 screening tool.Thistoolprovidesuserswithasimpleinterfacetomakeafirst,roughapproximationoftheirfullscope3inventory,regardlessoftheirorganizationtypeandsize.Thetoolleadsusersthroughaseriesofquestionsabouttheirorganizationalstructureandtheiractivities,suchasthepurchaseofgoodsandservices,useoffuels,transportationofmaterials,andmore.Linkingtheseinputstoacombinationofeconomicinput-outputandprocesslifecycleinventorydata,thetoolprovidestheuserwithascope3inventorywhichcanbeusedasaninitialbasisforidentifyingreductionareas,publicreporting,andinformingfutureeffortstoproduceamoreaccurateemissionsinventory.CompaniesshouldworktocollectprimarydataforcategoriesshowntobeasignificantpercentoftheirtotalScope3inventory.Formoreinformation,seehttps://quantis-suite.com/Scope-3-Evaluator/resources/Quantis_Scope3_Evaluator_Checklist_20150325.xlsx
IdentifyWhichScope3CategoriesShouldbeIncludedintheTargetBoundary
Usingascope3inventory,companiescanidentifywhichcategoriesshouldbeincludedintheboundaryofascope3target(s).ThecriteriainTable4-1canalsobeusedtoguidethisapproach(seeBox4-3foranexample).Acrosssectors,purchasedgoodsandservicesandtheuseofsoldproductsaccountforthemajorityofscope3emissions(CDP2016).Thesecategorieswillthereforebeintegraltomanycompanies’targets.However,therelativeimportanceofdifferentscope3categorieswillvarybysector.Scope3categorieslikelytobeimportant(intermsofemissionsmagnitude)forcompaniesinspecificsectorsinclude:
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● Automotive:Useofsoldproducts● Chemicals:Endoflifetreatmentofsoldproducts● ConsumerPackagedGoods:Purchasedgoodsandservices● Electronics:Useofsoldproducts● FoodProcessing:Purchasedgoodandservices● GasDistributionandRetail:Useofsoldproducts● Logistics:Upstreamtransportationanddistribution● Oil&Gas:Useofsoldproductsxvii
Overall, the scope 3 target boundary should include the majority of value chain emissions; for example, the top 3 categories or two-thirds of total scope 3 emissions.
Box4-3:DeterminingRelevantScope3Categories
Aninternationalindustrialchemicalandgascompanyconductedascreeninginventoryofitsfullvaluechainanddeterminedthatscope3emissionscontributedalmost50%ofitstotalfootprint.
Recognizingthatscope3wasasignificantcontributortooverallemissions,thecompanytheninvestigatedwhichofthe15scope3categoriescontributedmosttoscope3emissions.Threecategorieswerenotapplicableforthecompanyandwerenotincludedintheinventory(categories10,13,and14).Conductingtheinventoryfortheremainingcategoriesledthecompanytofocusitstargetsettingactivitiesonthethreecategoriesthataccountedforthemajorityofemissions:upstreamfuelandenergy,useofsoldproducts,andinvestments.
Category
Scope3Emissions(mmtCO2e)
%ofScope3Emissions
1.Purchasedgoodsandservices 773,731 8%2.Capitalgoods 35,054 >1%3.Fuel-andenergy-relatedactivities(upstream) 5,152,751 51%4.Upstreamtransportationanddistribution 125,000 1%5.Wastegeneratedinoperations 10,667 >>1%6.Businesstravel 41,526 >1%7.Employeecommuting 39,742 >1%8.Upstreamleasedassets 32,170 >1%9.Downstreamtransportationanddistribution 221,217 2%11.Useofsoldproducts 2,150,739 21%12.End-of-lifetreatmentofsoldproducts 116,379 1%15.Investments 1,347,360 13%
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Determine Whether to Set a Single Target or Multiple Targets Companiescanchoosetosetmultiple,category-specifictargetsorasingletargetcoveringallrelevantscope3categories.Theymayalsochoosetosetasingletargetcoveringtotalscope1,2and3emissions.Eachtypeoftargetboundaryhasadvantagesanddisadvantages(seeTable4-2).Table4-2.AdvantagesandDisadvantagesofDifferentTargetBoundariesCoveringScope3Emissions.Target
Boundary
Example Advantages Disadvantages
Asingletarget
fortotalscope
1,2and3
emissions
• Autodesk:reducetotalscope1,2,and3emissions43%by2020from2008levels.
• CapgeminiUKPLC:reducetotalscope1,2,and3emissions40%by2030,from2014levels.
• GeneralMills:reducescope1,2,and3emissions28%,fromfarmtoforktolandfillby2025,usinga2010base-year.
• Ensuresmorecomprehensivemanagementofemissionsacrosstheentirevaluechain
• Offersgreaterflexibilityonwhereandhowtoachievethemostcost-effectiveGHGreductions
• Simpletocommunicatetostakeholders
• Doesnotrequirebaseyearrecalculationforshiftingactivitiesbetweenscopes(e.g.,outsourcing)
• Mayprovidelesstransparencyforeachscope3category
• Requiresthesamebaseyearforthedifferentscopes,whichmaybedifficultifscope1and2baseyearshavealreadybeenestablished
Asingletarget
fortotalscope
3emissions
• EDP:reduceabsolutescope3emissions25%by2030,from2015levels.
• KelloggCompany:reduceabsolutevaluechainemissions20%by2025,from2013levels.
• EnsuresmorecomprehensiveGHGmanagementandgreaterflexibilityonhowtoachieveGHGreductionsacrossallscope3categories(comparedtoseparatetargetsforselectedscope3categories)
• Relativelysimpletocommunicatetostakeholders
• Mayprovidelesstransparencyforeachscope3category
• Mayrequirebaseyearrecalculationforshiftingactivitiesbetweenscopes(e.g.,outsourcing)
Separate
targetsfor
individual
scope3
categories
• Dell:reducetheenergyintensityofproductportfolio80%by2020,from2011levels.
• Panalpina:reducescope3emissionsfromoutsourcedtransportationandbusinesstravel15%by2025from2013levels.
• Seebelowforfurtherexamples
• Allowscustomizationoftargetsfordifferentscope3categoriesbasedondifferentcircumstances
• Providesmoretransparencyforeachscope3category
• Providesadditionalmetricstotrackprogress
• Doesnotrequirebaseyearrecalculationsforaddingadditionalscope3categoriestotheinventory
• Easiertotrackperformanceofspecificactivities
• Morecomplicatedtocommunicatetostakeholders
• Mayrequirebaseyearrecalculationforoutsourcingorinsourcing
• Mayallowincreasesinabsoluteemissionsand/oremissionsintensityfromothercategories,unlessthosecategoriesalsohavetheirowntargets
IdentifyanAppropriateMethodandLevelofAmbition
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Acompany’sscope3targetsshouldclearlydemonstratethatitisaddressingthemainsourcesofGHGemissionswithinitsvaluechaininlinewithcurrentbestpractice.Scope3targetsshouldbeambitious,althoughtheygenerallyneednotbescience-based.WhileexistingSBTmethodscanbeusedtosetscope3targets,arangeofother,non-emissions-basedtargetscanalsobesetforspecificscope3categories,aslongastheemissionsreductionbenefitcanbequantitativelydemonstrated.OverallPreferenceHierarchyforScope3TargetsTable4-1liststheadvantagesanddisadvantagesofdifferent,generalclassesofscope3targets.Ingeneral,percentage-basedemissionsreductiontargetsarepreferredovernon-emissions-basedtargets,whichshouldonlybesetwhenacompanycannotacquiretheemissionsdataneededtosettheformer.Ifagoalissetaroundengagingacertainpercentageornumberofsuppliers,thentheengagementmustencourageemissionsreductionsthatarequantifiable(seediscussionbelow).
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Table4-1.DifferentTypesofScope3TargetsTarget Example Advantages Disadvantages
Percentage-basedemissionsreductiontargets
Percentage-basedabsoluteemissionstarget(inlinewith2oCpathwaywhenpossible)orintensitytargetbasedontheSDA
Swisscom:reducescope3emissions18%by2020from2013levels
Transparentaboutdirectionofchangeinabsoluteemissionsand/oremissionsintensityTargetambitionmoreeasytocompareacrosscompanies
Canbechallengingtosetforscope3sourcesoverwhichacompanyhaslittleinfluence
Other,percentage-basedemissionsintensitytargetresultinginambitiousreductionsinabsoluteemissions
Toprovide
Non-emissions-basedtargets
Performance-basedtargetexpressedinabsoluteorintensityterms
AMD:improvethecomputeperformanceperwattofenergyconsumedbymobileAPUprocessors2500%by2020,from2014levels
Doesnotrequireemissionsdatafromvaluechainpartners
Nottransparentaboutdirectionofchangeinabsoluteemissions
Targettoinfluencethebehaviorofsuppliersorcustomers
L’Oréal:By2020,suppliersrepresenting80%ofdirectspendwillsetanemissionsreductiontargetandreportactivitiestoreduceemissionsthroughCDPColgate-Palmolive:promotewaterconservationawarenessto100%ofitsglobalconsumers
MaybeusefulifacompanyhasyettoidentifyleversformorespecificreductionopportunitiesamongstitsvaluechainpartnersMaydrivereductionbehaviorsthatbenefitothercustomersofthesamesupplierUsefulwhencompanyhasmostlyindirectspend,suchthatitsbestreductionleveristoasksupplierstoreducetheiremissions(sincecompanydoes
May not be effective in driving ambitious reductions in the emissions from purchased goods and services if majority of emissions come from tier 2 suppliers or beyond May not foster collaboration along the value chain
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notspendenoughtowarrantcollaborations)
Note:Companiesmentionedinthetablemayhavesetmorethanonetypeofscope3targetthatarenotreflectedinthistable.
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Recommendedtargettypesforkeyscope3categoriesareprovidedbelow.
UsingExistingSBTMethodsforScope3
Twomethods-AbsoluteEmissionsContractionandtheSDA–canbeusedtosetpercentage-based
emissionsreductiontargets.Theeconomic-basedapproachesarenotrecommendedunlesstheyresult
inambitiousreductionsinabsoluteemissions.
TheSDAshouldbeusedbythemanufacturersoflight-roadpassengervehiclestosetscope3targets
fortheuseofsoldproducts.Otherwise,theSDAshouldonlybeusedforscope3targetswhen:(1)the
GHGemissionsoftier1suppliersaresignificant,relativetothoseofsuppliersfurtherremovedfrom
thecompany;and(2)scope1and2datacanbeobtainedfromthetier1suppliers.TheSDAismost
appropriateforbuildings(leasedassetsandfranchises)andupstreamordownstreamtransportation
anddistributionforthesereasons.
AfurtherdisadvantageofusingtheSDAisthatitcanlimitoptionsfortrackingreductionsincertain
categories,dependingonhowcomprehensiveacompany’soverallscope3targetis.Forexample,a
constructioncompanycouldsetanintensitytargetforpurchasedsteelusingtheironandsteel
pathwayintheSDA.BecausethispathwaydoesnotsupportmaterialswitchingtolessGHG-intensive
steelsubstitutes,thecompanycouldonlymeetthistargetbyreducingtheGHG-intensityofpurchased
steel.Thisproblemcanbecircumventedbysettingatarget(ortargets)forallpurchasedgoodsand
services.
SettingTargetsforPurchasedGoodsandServices(Category#1)
Asnotedabove,percentage-basedemissionstargetsarepreferred.Companiesmayalsosetarangeof
othertargets(Table4-3)forpurchasedgoodsandservices,aslongastheexpectedemissionsreduction
benefitcanbequantitativelyshown.Thesetargetsmayrelate,forexample,toensuringthattop
supplierssetandreportprogresstowardtheirowntargets(“topsuppliercommitments”),eliminating
theuseofGHG-intensivematerials,orincreasingtheuseofreusablematerials.
Topsuppliercommitmentsarenotrecommendedwhenthemajorityofcategory1emissionscome
fromtier2suppliersorsuppliersevenfurtherremovedfromthereportingcompany.Topsupplierscan
beidentifiedonthebasisofspendand/oremissionsimpact.Topsuppliercommitmentsmay
alternatelyfocuson“criticalsuppliers”or“strategicsuppliers”thatthecompanyhasalreadyidentified
basedonavarietyoffactors,suchasoperationalrisk.Spenddataandcriticalsupplierlistsare
advantageouswhentheycanreliablyserveasaproxyforleverageoversuppliers.However,thebiggest
suppliersbyspendarenotalwaysthebiggestGHGemitters,socompaniesshouldmakesurethat
targetsbasedonspendorcriticalsuppliersalsocoverthemajorityofcategory1emissions.Ideally,top
suppliercommitmentsshouldfocusonsupplierssettingSBTs.
Companiesshouldnotsettargetsthatbenchmarkperformanceagainstsectoraveragevalues.Thisis
becausesuchtargetsarenottransparentaboutchangesinemissionsperformance.Theymayalso
changeovertimewithchangesinsectorperformance,reducingtheabilitytotracklong-termchanges
inperformance.
Table4-3.RecommendedTypesofNon-emissionsTargetsforPurchasedGoodsandServices.
TypeofNon-
emissionsTarget
Example Conditions
Generalsourcing
commitment
Allgoodsandserviceswillbe
procuredfromsupplierswith
• Suppliersmustreportthequantitative
GHGbenefitoftheiractionsannually
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existingSBTsorwithGHG
reductionpracticesinplace
Eliminateorreduce
useofGHG-intensive
materials
Nikeandleather
Proctor&Gamble:ensurezero
deforestationinthepalmoil
supplychain
• Materialmustsignificantlycontribute
tototalemissionsfrompurchased
goodsandservices
• Emissionsreductionbenefitcanbe
quantitativelydemonstrated
Adoptsectorbest
practices
100%ofcropsuppliersreduce
fertilizerapplicationratesand
useslow-releasefertilizersor
nitrificationinhibitors
• Emissionsreductionbenefitcanbe
quantitativelydemonstrated
Increaseuseof
reusablematerials
Increaserecycledcontentin
packagingto80%by2015,from
2022levels
Topsupplier
commitment
80%ofkeysuppliers
(representing80%ofcategory1
emissions)setSBTsby2025.
• Companiesshouldpreferablycommit
togettingtheirsupplierstosetSBTs
• Topsuppliersidentifiedonbasisofemissionsimpact,spendand/or
“criticalsupplier”criteria.Targets
basedonspendorcriticalsupplier
criteriashouldcoverthemajorityof
category1emissions.
• Suppliersshouldreportonprogresstowardtargetsannually
Reduceemissions
comparedto
industrybenchmark
Emissionsintensityofpurchased
goods’productionwillstay30%
belowsectoraveragevalues
• Neverusethistypeoftargetbecauseitisnottransparentandwillchange
overtime
SettingTargetsforUseofSoldProducts(Category#11)
Productscanhavedirectuse-phaseemissions,suchaswhenanapplianceuseselectricityorwhenan
air-conditioneremitsrefrigerants.Productsmayalsohaveindirectusephaseemissions;forexample,
apparelwhenwashedwithhotwaterorfoodwhencooked.UndertheGHGProtocolScope3Standard,
directuse-phaseemissionsmustbereportedinscope3inventories,whileindirectuse-phaseemissions
areoptional.
Companiesshouldsetaquantitativetargetfordirectuse-phaseemissions.Thetargetshouldbe
emissions-based(eitherabsoluteorintensity-based)orperformance-based.ExamplefromDELL:
reducetheenergyintensityofproductportfolio80%by2020,usinga2011base-year.
Atargetaroundtheentirelifecyclemayalternativelybesetandispreferredwhentrade-offshave
beenidentifiedoraresuspectedacrosstheproductlifecycle(e.g.,amoreenergyefficientproduct
mighthavehigheremissionsintheproductionphase,comparedwithalessenergyefficientproduct).
Targetsforindirectuse-phaseemissionsareoptionalandcanbesetaroundinfluencingthebehaviorof
customers.ExamplefromColgate-Palmolive:Promotewaterconservationawarenessto100%ofits
globalconsumers.
SettingTargetsforUpstreamorDownstreamTransportationandDistribution(Categories#4and9)
Percentage-basedemissionstargets(eitherabsoluteorintensity)arepreferred.Forexample:
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• InternationalPostCorporation:Reduceemissions20%perletterandparceldeliveryby2025,
froma2013base-year(scopes1,2and3).
Goalsaroundspecificpractices(e.g.,modeorfuelswitchingandlogisticsmanagement)canbeusedto
supportthetarget,butshouldnotrepresenttheprimarytargetbecauseofpossibletrade-offsin
emissionswithdifferentsources.Forinstance,switchingfromoil-togas-poweredvehiclesmayincur
increasesintheemissionsfromupstreamfossilfuelproduction.
4.4 Adjust Targets to Ensure Continued Relevance Toensureconsistenttrackingofperformanceovertime,acompanyshouldrecalculateitsSBT,as
needed,toreflectsignificantchangesthatwouldotherwisecompromisethetarget’srelevance.
Recalculationshouldbetriggeredbysignificantxviii
changesin:
• Companystructure(e.g.acquisition,divestiture,mergers,insourcingoroutsourcing)
• Methodologyforcalculatingthebaseyearinventory(e.g.,improvedemissionsfactorsor
activitydata)
• Methodologyforcalculatingthetarget(e.g.,emissionsscenarios,growthprojectionsandother
assumptions)
• Recalculationsshouldalsobeperformedforthediscoveryofsignificanterrors
Long-termtargets,inparticular,mayrequirerecalculationtoupdatethecompanygrowthassumptions
usedtoprojectthetargetandalsotoreflectthelatestclimatescience.Forexample,targetscouldbe
recalculatedtoalignwiththelatestemissionsscenariosavailablefromtheIPCCorotherscientific
bodies,asthesescenariosarepublished.
Recalculationshouldnotbetriggeredbyorganicgrowthanddecline,whichisdefinedas“increasesor
decreasesinproductionoutput,changesinproductmix,andclosuresandopeningsofoperatingunits
thatareownedorcontrolledbythecompany”(WRI&WBCSD2011,106).
Ingeneral,companiesshouldchecktheirtargetsannuallyandnolessthaneveryfiveyears.When
targetprojectionshavechanged,companiesshouldkeeptheirshort-termtargetsandrecalibratetheir
long-termtargettrajectoryasshort-termtargetscomedueforrenewal.
4.5 Secure Third Party Review
WhilethereisnostandardagainstwhichtoassureSBTs,theemissionsinventoryitselfshouldbe
verified.Additionally,acompanycanhaveathirdpartyreviewtheprocessesanddataitusedto
calculatethetarget,aswellasensurethetargetisalignedwiththechosenSBTmethodandthis
manual’srecommendations.OneoptionforvalidatingtargetsisthroughtheSBTinitiative’sCallto
Actioncampaign,whichoffersaprocesstotechnicallyreviewandcheckthequalityofacompany’s
target.Companiescanmentionsuchathird-partyreviewintheirpubliccommunications.
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5. Building Internal Support for Science-based Targets
SBTsrepresentanewwayofsettinggoalsformanycompaniesandoftenyieldmoreambitioustargets
thantraditionaltarget-settingapproaches.Assuch,gainingbuy-inacrossbusinessunitsandupthe
chaintotheC-Suitemayrequirecarefuljustification.Thischapterexploreshowtogetcompany
stakeholdersonboardthroughallstagesofthetarget-settingprocessandhowtonavigatepotential
challengesandpush-backwhiledoingso.
KeyInsightsinThisChapter
• StaffresponsibleforsettinganSBTshouldpartnercloselywithalllevelsofthecompany
duringthetarget-settingprocesstosocializegoals,assessfeasibility,andco-createpractical
implementationplans.
• Staff should anticipate the issues that commonly create internal push-back and formulate
ready-maderesponses.
• Forscope3targets,companiesshouldworkcloselywithandsupportsuppliersduringthe
target-settingprocesstoincreasebuy-inandenableimplementation.
5.1 Get All Levels of the Company on Board
DuringtheprocessofdetermininganSBT,thesustainabilityteammustoftenbuildsupportfromboth
executiveleadershipandbusinessunitmanagersinordertoaccessresourcesfordeveloping,finalizing,
announcing,andultimatelyachievingthetarget.
Usefulstrategiesforsecuringinternalsupportinclude:
1. Partnercloselywiththebusinessunitsandsocializethetargetatthegrassroots:
• Askeachdepartmenttoofferwhatitcanfeasiblydotomeetthetargetandavoidputting
alltheresponsibilityonanysinglebusinessunit.
• Getcommitmentsfromoperationstomaketheneededreductionsandshow,through
bottom-upanalysis,howthetargetwillbeachieved.Thiswillhelpinobtainingapproval
fromseniorleadershipifithasnotalreadyaskedforanSBT.
• Findinternalchampionswithininfluentialdepartments–peoplenotonthesustainability
teambutwhowillsupportthetarget.
2. Don’tgiveabusinessunitatargetithaslittlecontrolover;doingsoisde-motivating.
3. Ifacompanyoperatesinmultiplecountries,considerhavingchampionsatthecountrylevel
whocanengagecountryoperationstoidentifyreductionopportunities.
4. Makeagoodbusinesscase,includingpointsonriskmitigationandshowingfinancialreturns
wherepossible:
• IndicatehowmuchmoneytheSBTwillhelpthecompanysave.
• Createabalancedportfolioofprojectswithshortandlong-termpay-backperiods.
• ShowhowtheSBTcontributestocorebusinessstrategyandhowthetargetcanhelp
mitigaterisk.
• Don’tdiscountthecontributionthatsmallerprojects,suchasfacilityenergyefficiency
measures,canhaveontheoveralltarget.Suchcontributionscanbecollectivelysignificant.
5. Makeiteasierandmoredesirableforbusinessunitstomeetthetarget:
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• Assistbusinessunitsinconductinganalysesandofferfeasibleideasthattheunitscan
practicallyimplement.
• Allowthebusinessunitstokeepthemoneytheysavefromtheemissionsreduction
projectstheyimplement.
• Setshort-term,interimtargetstocreateasenseofurgencyandcollectiveownership.
6. Enlistoutsidehelp:
• Whennecessary,partnerwithNGOsorconsultanciesthatunderstandthesciencebehind
SBTsandcanprovideguidanceinsettinganSBT.
• Workwiththegovernment,suppliers,customers,andotherstakeholderstobetter
understandtheavailableoptions.
• Forscope3,taketimetodescribetovaluechainpartnersthetarget(s)andgeneralbest
practicesforreducingemissions(and,ifatopsuppliercommitmenthasbeenset,best
practicesforcalculatingandreportingthesereductions).
LandSecurities:CompanyQuote
TomeByrne,EnergyManageratLandSecurities:“Anotherchallengewashowtomakethelink
betweenthemacroissueofclimatechange,whichpeopleseeonthenews,andthespecificdetails
ofascience-basedtarget.Inthissense,theinternalconsultationsandworkshopswerereally
important.Westartedwiththesustainabilityteamandmovedout,viamoreseniordirectorswhowe
knewwereinterestedintheseissues(the‘earlyadopters’),tothemostseniorrepswhoweneeded
toconvince.Byhavingothersonboardalready,andbybeingabletoshowhowthescienceinforms
thetargetandlinksbacktotheglobalsituation,itwasmucheasiertogetsignofffromthetop.We
hadareallypowerfulmessagethatempoweredpeopleandmadetheambitioustargetsmuchmore
palatable“.
Pfizer:CompanyQuote
SallyFisk,SeniorCorporateCounselandEnvironmentalSustainabilityAdvisoratPfizer:“Acrossa
largenetworkofdiversesites,ourGlobalEngineeringgrouphasworkedhardtoengageour
colleaguestoensuretheyunderstandthevalueofenergyefficiencyandrenewableenergyandfeel
empoweredtoseekoutopportunitiestomakeGHGreductionsratherthanviewingtherequestto
makereductionsasaburden.Communicationwasakeyelementtoensuringthatcolleaguesfrom
otherpartsofthebusinessunderstoodthepotentialglobalimplicationsofclimatechangeand
thereforetheneedtoact.Havinganearertermgoal(2020)withalonger-termvision(2050)
approvedattheexecutiveleadershiplevelreallyhelpedourteamtoobtainbuy-in.”xix
Definingthetargetandgettingapprovalarenotalwaysalinearprocessandcaninvolvefeedbackloops
orsomeback-and-forthwithleadershipandbusinessunitsbeforethetargetisapproved.Tohave
greaterconfidenceinsecuringsupportitisimportantto:
UnderstandtheAudience
Employeesoutsideofsustainabilityrolesdon’ttypicallyhaveabackgroundinclimatesciencebutthey
couldbeveryfamiliarwiththeconceptsofclimatechangeandsustainability.Findingtherightstarting
pointformakingthecaseforanSBTwillbecriticaltogettingthoseintheroomonboard.Forsome
audiencesthismaymeanexplainingincleartermstheIPCC’sfindingsandthenecessityforcompanies
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toreduceemissionsinlinewithscience.Othergroupsmaybereadytojumpintodiscussingthetarget
itself.TheSBTinitiativeprovidessomehelpfulresourcesforcommunicatingSBTs.
MaketheCasewithDatabutDon’tUnderestimatetheImportanceofInterpersonalSkills
Arecentsurveyofsustainabilityprofessionalsfoundthatinterpersonalskillsarethemostimportant
factorinbeingasuccessfulsustainabilityleader.BecauseachievinganSBTwilltakethecooperationof
multipledivisionswithinacompany,itisimportanttodeveloprelationshipsandbuildnetworksto
assistinthisendeavor.
Alsocriticalistheabilitytomakethecasewithdata.WhiletheSBTapproachisrelativelynew,thereis
agoodbodyofevidencetosupportthebusinessbenefitsofsettingambitiousGHGtargets(see
Chapter2).QuantifiablebenefitsfromGHGemissionreductionsincludecostsavings,energysavings,
andanimprovedbottomline.OtherimportantbenefitsofsettinganSBTshouldalsobebroughtinto
thediscussion.Theseincludedrivinginnovation,enhancingcredibilityandreputation,and
demonstratingleadership.
CommunicatetheTargetinBusinessTerms
Framingtargetsintermssuchasrisk,opportunities,revenueandreputation,ratherthaninclimateor
sustainabilityjargon,willresonatewithcorporatedecisionmakers.Andwhilegettingdecisionmakers
onboardiscriticaltosettingandachievingatarget,targetsshouldalsobeclearlycommunicatedin
businesslanguagetoallemployeeswithinanorganization.
EngageEmployeesAcrosstheCompanyEarlyOn
Internalaudiencestoconsiderincludealmosteverydepartmentinacompanyfromfacilitiesoperations
toprocurement.Inparticular,management,employee“GreenTeams”,communicationsdepartments,
anddepartmentsdirectlyinvolvedinsubstantialemissionsreductionactivitiesshouldbeinformedof
thetarget.ItisalsoimportantthattheteamsresponsiblefortheactivitiesandprojectstoreduceGHG
emissionshavehadsomeroleinvalidatingthefeasibilityoftheirportionofthetargetandarenotjust
informedofthetargetafterithasbeenannounced.Investinginemployeeawareness-raisingcan
engenderasupportivecompanycultureandmayinspireemployeesthatwerenotdirectlyinvolvedin
thetarget-settingexercisetocreateinnovativenewsolutionstocutGHGemissions.
Theearlierandmoreeffectivelytheimportanceofreachingtargetsiscommunicatedtoanemployee,
themorelikelythecompanyistogetbuy-infortargetefforts.Considerintegratingwaystodescribe
andworktowardthetargetintoemployeeorientationandtraining/handbooks.Periodic
announcementsandcompany/departmentalmeetingsarealsoapotentialavenueforcommunicating
progress.Likewise,writtenmediasuchascompanynewsletters,blogs,andsocialmediaaregood
placestohighlightachievementsandareasforimprovement.
5.2 Address Challenges and Push-back
BeforeapprovinganSBT,acommitmentthataffectsmultipledivisions,resourcesandbudgetswithina
company,leadershipwilllikelyraisesomeimportantquestions.
● Ifourtargetistiedtoourfuturegrowthrate,changeinmarketshare,orotheraspectof
businessstrategy,whatarewerequiredtodisclosepublicly?Doweneedtobeconcernedwith
confidentiality?
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Intensitytargetssetusingasector-specificmethodorusinganeconomicintensityapproachwill
generallybetiedtometricssuchasmarketshare,estimatedproductiongrowth,financialgrowthrates,
orcontributiontoGDP.However,itisnotnecessarytopubliclydisclosetheassumptionsusedto
determinethetargetandallsensitiveinformationcanremainconfidentialwhilestillannouncingthe
SBT.
● Ourinitialtargetisforjust5yearsfromnow.Howarewegoingtogetthere?
Shorter-termtargetscanbevalidatedbyputtingtogetherandsummingtheemissionsreduction
potentialofmultipleprojects,includinganticipatedrenewableenergypurchases,plansforchangesin
productdesignorsuppliers,adoptionofnewtechnologies,andplannedchangesinproductmix.Many
companiesusetypicalbusinessmetricstodeterminewhichprojectsareviable,includingIRR,ROI,and
paybackperiods.CombiningthesemeasurementswithestimatedGHGsavingswillhelptobuilda
projectportfoliothatmakesreductiontargetsachievable.Thisgroupofprojectscanthenbepresented
aspartofthetarget-settingpackage.
Alternatively,somecompaniesaresatisfiedtosetatargetinlinewithscienceandthenletthetarget
bethemotivatorfordiscoveringprojectsandfosteringinnovation.Whilethisthisisalesssystematic
approach,itcanbejustassuccessfulinsomecompanycultures.
● Whatifwedon’thitourannouncedtarget?
AlthoughtheplanforachievinganSBTmaybecarefullythoughtout,somecompaniesmaynotachieve
theirtarget(orinterimtargets)duetounexpectedcircumstances.Thesemightinclude,forexample,
strongerthanpredictedorganicgrowthordelaysinbringingrenewableenergyprojectsonline.Insuch
cases,companiescanhelpretaintheconfidenceoftheirstakeholdersbytransparentlycommunicating
theirsituation,includingprogressachievedtodateandremainingreductiongaps.Describingtheplan
formovingforwardandhowthetargetgapswillbeaddressedisequallyimportant.
TheseandothercommunicationandreportingissuesarediscussedinmoredetailinChapter6.
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6. Communicating the Target and Progress
TheeffectivecommunicationofanSBTguidesinternalmanagementdecisions,increasesbuy-infrom
employees,andenhancescorporatereputation.Furthermore,itsendspositivemessagestothe
businesscommunityandpolicymakers.Onceatargethasbeenset,communicatingitfully,simply,and
clearlyisimportanttoaccuratelyinformstakeholdersandbuildcredibility.
ThischapteroutlinethekeystepsincommunicatingSBTsandperformanceprogress,includingdefining
theaudience,decidingwheretodiscloseSBT-relatedinformation,anddeterminingwhatinformationto
disclose.
KeyInsightsinThisChapter
• CompaniesshouldfollowtheGHGProtocolaccountingandreportingprinciplestodisclose
quantitativeandqualitativeaspectsoftheSBTsothataudiencescanfullyunderstandthe
SBT’scontext,implications,andnuances.
• Companiesshouldreportannualprogressinreachingtheirtargets.
• SBTsshouldbecommunicatedinunderstandabletermsandinengagingways,suchas
throughdiagramsandinfographics,whileavoidingjargon.
Keycommunicationstepsinclude:
6.1 Define the Audience
Itisimportanttofirstdefinetheprimaryaudiencebeforedeterminingwhatandhowtocommunicate
theSBT.Customers,suppliers,competitors,partners,andinvestorsmayallhaveaninterestina
company’sGHGemissionsreductionefforts.Companiesshouldfirstidentifytheinteresttheexternal
partyhasandbesuretoemphasizeaspectsoftargetsettingthatarerelevanttotheparty.Itisalso
importanttokeepinmindthatsomeinformationusedintargetsettingmaybeconsideredconfidential
(e.g.,projectedactivitydata)andthatmessagingmayneedtobetailoredtoprotectsensitive
information.However,thisshouldnotpreventacompanyfromeffectivelycommunicatingitsSBTto
externalaudiences.Regardlessoftheaudience,SBTsshouldbecommunicatedinunderstandable
terms(seeBox1).
Box1:CommunicatingSBTsinUnderstandableTerms
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InadditiontoensuringthatsufficientdetailisincludedwhencommunicatinganSBTforatechnically-
mindedaudience,acompanyshouldalsopresentthisinformationinawaythatisjargon-freeand
understandabletothegeneralaudience.
Forexample,tothelaypersonwithalimitedenvironmentalorfinancialbackground,theintensity
metricmtCO2e/valueaddedmaybeconfusingormeaningless.Anyabsoluteorintensitymetric
shouldbedefinedeitherinaglossaryorwithinthetextofthecommunicationitself.Using“reallife”
examplesorcomparisonssuchas“thisreductionequalstaking4,000passengervehiclesofftheroad
annually”canbehelpfulforbothexternalandinternalaudiencesinunderstandingthemagnitudeof
acompany’sprogress.TheUSEPA’sGreenhouseGasEquivalenciesCalculatorxxisausefultoolfor
equatingaquantityofemissionswithreal-lifeemissionssources,suchasvehicles,powerplants,or
homeenergyuse.
Eventhosegroupswithextensivebackgroundknowledgemayalsobenefitfromclarification.For
example,theterm“valueadded”(whichcanbeusedasthedenominatorofanintensitymetric)can
bedefinedasgrossprofit,operatingprofit,EBITDAminusallpersonnelcosts,orrevenueminusthe
costofpurchasedgoodsandservices,dependingonlocalaccountingterminology.Usinglanguage
withoutclimatescienceandfinancialjargoncanprovideclarityandreduceconfusion.Forexample,
“directemissions”canbeusedinplaceoforalongsidethetermscope1emissions.
Thechallengeliesinensuringthatasimplified,layman’sdescriptionofanSBTcontinuestoreflect
scientificgroundinganddoesnotconveyinaccurateinformation.Forthisreason,theSBTinitiative
recommendsusinglinksorfootnotestoprovideaccesstothefull,technicaldescriptionofthetarget,
evenincommunicationsintendedforanon-technicalaudience.
TableB1-1.TermsthatSimplifyTechnicalJargon
TechnicalTerm Layman’sTerm
Scope1emissions Directemissions
Scope2emissions Emissionsfrompurchasedheatandelectricity
Scope3emissions Valuechainemissions
Science-basedtarget Emissionstargetsupportedbyclimatescience
6.2 Decide Where to Disclose
SettinganSBTcandifferentiateacompanyasaleaderandsoitisinthecompany’sinteresttodisclose
thetargetinaplacethatiseasytofind,suchasonthecompanysustainabilitywebpage.Company
reports(e.g.,sustainabilityreports,CSRreports,annualreports,andstrategicplans)arealsogood
platformsuponwhichtoperiodicallyreportonprogressandintegratethisinformationwiththeother
activitiesofthecompany.
TheGlobalReportingInitiative(GRI)xxiprovidesawidely-usedframeworkforreportingenvironmental,
social,andeconomicperformanceandimpacts.SBTsandreductioneffortscanbeincludedinGRI
reportsalthoughtheymaynotbehighlightedtothesamedegreethataseparatewebpageorcompany
reportwouldafford.
CDP’sClimateChangeQuestionnairexxiiisalsoawell-knownpublicresourceforreachinglargeexternal
audiences.CDPprovidesaplatformtodiscloseclimateleadershiptoinvestors,purchasers,and
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governments.CDPalsocommunicatesSBTstotheNAZCAplatformxxiii
,whichtrackssignificant
commitmentsmadeby“non-stateactors”,includingcompanies,aspartoftheUNFCCC’sAction
Agenda.
6.3 Follow Guiding Reporting Principles
Itisessentialtodiscloseallpertinentaspectsofthetargetsothattheaudiencecanfullyunderstandits
context,implications,andnuances.TheGHGProtocolCorporateStandard(WRI&WBCSD2004)
definesfiveoverarchingprinciplesthatshouldguidethedevelopmentofcorporateGHGinventories.
Thesesameprinciplesshouldalsobeusedtodescribethetargetandreportonprogress.
● Relevance:EnsurethetargetappropriatelyreflectstheGHGemissionsofthecompanyandserves
thedecision-makingneedsofusers–bothinternalandexternaltothecompany.
● Completeness:AccountforandreportonallGHGemissionsourcesandactivitieswithinthechosen
targetboundary.Discloseandjustifyanyspecificexclusions.
● Consistency:Useconsistentmethodologiestoallowformeaningfulcomparisonsofemissionsover
time.Transparentlydocumentanychangestothedata,inventoryboundary,methods,oranyother
relevantfactorsinthetimeseries.
● Transparency:Addressallrelevantissuesinafactualandcoherentmanner,basedonaclearaudit
trail.Discloseanyrelevantassumptionsandmakeappropriatereferencestotheaccountingand
calculationmethodologiesanddatasourcesused.
● Accuracy:EnsurethatthequantificationofGHGemissionsissystematicallyneitherovernorunder
actualemissions,asfarascanbejudged,andthatuncertaintiesarereducedasfaraspracticable.
Achievesufficientaccuracytoenableuserstomakedecisionswithreasonableassuranceastothe
integrityofthereportedinformation.
Specificrecommendationsfordescribingthetargetandreportingonprogressaregivenbelow.
6.4 Describe the Target
AdescriptionoftheSBTshouldincludetechnicalinformationontheboundaryandambitionofthe
target,aswellastheassumptionsandmethodsusedtosetthetarget.Companiesmaychoosetoalso
includequalitative,contextualinformationonthetarget.
TechnicalInformationontheSBT
Ataminimum,acompanyshouldprovidethefollowinginformation:
• Baseyearandtargetyear(specifycalendarorfiscalyears)
• Theemissionsscopesthatareandarenotincludedinthetarget(e.g.,whetherscope3emissions
areexcludedbecausetheydonotaccountforasignificantportionoftotalemissions)andany
futureplanstoincludethem
• Percentageofthecompany’stotalemissionscoveredbythetarget
• Whethertargetsaremeasuredonanabsoluteand/orintensitybasis
o Forintensitytargets:anexplanationofthemetric
o ItisbesttoexpressintensitytargetsonbothanabsoluteANDintensitybasis• Percentreductions,forbothfinalandintermediatetargets
• Emissionsscenario,allocationapproachandmethod(s)usedtosettarget
• Thetargettrajectoryusedforsettingintermediatetargets;i.e.annualcompoundreductions,
linearreductions,orapeakanddeclinepathway(seeAnnex1formoreinformation)
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• Whetheralocation-ormarket-basedapproachisusedtocalculatescope2emissionsinthebase
yearandtrackperformanceagainstanSBT
• Anyotherinformationrequiredbythemethod(assumingdataarenotcommerciallysensitive)
• Alinktothecompany’sannualGHGinventorythatfollowstheGHGProtocolCorporateStandard
reportingrequirements
Companiesarealsoencouragedtospecifytheactualtargetemissionslevel(MtCO2e)inadditiontothe
percentagereduction.
Scope3Targets
Therecommendationsabovealsoapplytoscope3targets.Forexample,forapercentage-based
emissionstarget,acompanyshoulddisclosethepercentagereductionandwhetherthattargetisan
intensityorabsolutetarget.However,certainoftheaboverecommendationsmaynotberelevant,
dependingonhowthescope3targethasbeenset.Forinstance,itwouldnotbenecessarytodisclose
anemissionsscenarioifanSBTmethodhasnotbeenused.
Inaddition,companiesshoulddothefollowingwhendescribingscope3targets:
• Describewhichscope3categoriesarecoveredbythetargetaswellasanythatare
specificallyexcluded.
• Contextualizethesignificanceofthetargetby,forexample,describingthepercentageof
scope3emissionscoveredbythetargetorthesizeofthescope3targetrelativetothatof
thecompany’sscope1and2emissions.
Thereisnosingle,prescribedtemplateforcommunicatingascope3target.Aswithscope1and2
targetdisclosures,itisimportanttounderstandtheaudienceandpresentthetargetinawaythatis
meaningfulandrelevanttothem.Itisalsoimportanttorecognizethatachievingascope3target
dependsoncollaborationandcooperationfromsuppliers,customersandotherexternalstakeholders,
soitmustbecommunicatedintermsthatencouragethemtobemotivatedtocontribute.
Qualitative,ContextualInformation
Explainingthecontextforatargethastwoimportantbenefits.First,stakeholderswillbetter
understandthesignificanceofthetarget,therebyrecognizingthecompany’sleadershiponclimate
change.Second,thecompanywillcontributeitsvoicetoalargernarrativeonhowcorporateclimate
actionisbothfeasibleandsmart.Contextualinformationcaninclude:
● Motivation:Whydidthecompanycommittosuchsignificantemissionsreductions?Whyis
followingclimatescienceimportanttocorporateleadership?Theanswerstothesequestionsare
illuminatingforstakeholders,journalists,andotherswhoareinterestedinbusinessmanagement
trendsand/orclimatechange.Theymightprovideanincentivetootherstocontributetothe
targetorfollowsuitbysettinganSBTattheirownorganization.
● Relationshipwithbroadercompanyobjectives:Manycompanieswillexploreradicallydifferent
businessmodels,technologies,operationalprocedures,suppliersandotherbusinesspracticesin
ordertobecomealow-carbonbusiness.Stakeholdersmayrequireafullunderstandingofthe
company’scurrentstandingandvisionforthefuturewhenconsideringanSBT.Therefore,the
companymaywishtoconnectthetargettoitsstrategic,financial,andoperationalplans.
● Howthecompanywillcutemissions:Whilemostcompanieswillnothaveafullyengineeredplan
formeetingtheirSBTattheoutset,theymaybeabletoprovidenear-termexamplesofthesteps
theywilltaketoreduceemissions.Tangibleexamplesthatareeasytovisualizearehelpful;for
example,acompanymaystate,“Weplantoputsolarpanelson20%ofourfacilitiesnextyear.”
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● Thecaseforfollowingclimatescience:SBTsarenotablebecausetheysupporttheglobaleffortto
preventthemostdangerousconsequencesofclimatechange.Itisimportantforstakeholdersto
understandthatclimatesciencecanandshouldguidedecisionsonemissionsreductions.
Suggestedtalkingpointsareprovidedintheboxbelow.
● Linkstoawards,presscoverage,andothernotablecommunicationsmaterials.
SBTTalkingPoints
• ThesciencetellsusthatwemustcutglobalGHGemissionsbyupto72%by2050toprevent
catastrophicandirreversibleclimatechange.Thiswillrequireglobaltransformationalchange.
• CompaniesmustsetGHGreductiontargetsthatalignwithbest-availableclimatescienceinorder
totransformtheirbusinessforalow-carbonfuture.
• Smartcompaniesknowthatsettingambitioustargetsisintheirownself-interest.SBTscanhelp
driveinnovationandsecurelong-termcompetitiveadvantage.
• Settinglong-term,meaningfultargetssendsaclearsignaltostakeholdersastowhereacompany
isheaded,andprovidesthecontextforstrategicinvestmentsneededtotransformbusiness
models.
• InDecember2015,nearlyeverynationonearthsignedthehistoricParisAgreement,agreeingto
limitwarmingby1.5°Cto2°Coverpre-industriallevels.Nowcompaniesmustdotheirpartto
fulfillthatpromise,andanemissionstargetthatalignswiththisglobalgoalisacriticalfirststep.
6.5 Describe Progress Toward the Target
Companiesshouldreportonprogresstowardtheirtarget(s)annually.Showingprogressoverthetarget
periodwillhelpstakeholdersbetterunderstandacompany’sprogressandeffortsbeforereachingthe
targetyear.Thefollowinginformationshouldbeincludedbyacompanyincommunicationsaboutits
progress:
● Adescriptionofthetargetitself,followingtheaboverecommendations
● Emissionschangesfromthebaseyeartothecurrentyear(yearlybreakdownsarepreferable)
o Variabilitybetweenyearsisexpected,soitisimportanttoshowtrendsovermultipleyears
● Whenacompanyhassub-targetsforaspecificscopeorscope3category:progressagainsteach
sub-target.
● Reasonsforsubstantialemissionsvariations(e.g.,emissionsreductionactivities,significant
increasesordecreasesingrowth,orchangesinproductlines)
● Ifprogressisnotontrackordeviatesawayfromthetargetpathway:explainwhyandthe
strategyforaddressingthesedeficitsinthefuture
● Whetherthetargethasbeenrevised,andifso,whatchangesweremadeandwhy(e.g.,duetoa
recalculationofthebaseyearinventoryoranupdatetotheemissionsscenario)
● Informationonsuccessfulprojectsthathavehelpedtoreduceemissions
● Novelorinnovativeeffortsorpartnershipsthathavebeenputintoplaceandcandifferentiatea
companyandhighlightitasaleader
● Investmentsorchangesthathavebeenmadethatmaynotyethavedeliveredsignificantresults
butthatareexpectedtodosointhecomingyearsorthatenablethenecessarytransformation
towardsthelong-termgoal.
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Annex 1. Components of a Science Based Target Method
AsChapter3summarized,anSBTmethodhasthreeprimarycomponents:acarbonbudget,an
emissionscenario,andanallocateapproachthatapportionsa“share”ofemissionstoaparticular
company.Thischapterdiscussesthesecomponentsinmoredetail.
KeyInsightsinThisChapter
• Theinternationalscientificcommunityestimatestheremaining“carbonbudget”tobe700
GtCO2from2017onwards.
• Avarietyofemissionsscenarioshavebeendevelopedthatapportiontheavailablecarbon
budgetovertime.
• Sector-specificemissionsscenariosareavailableforselectedhomogeneoussectors.
• Currentdatasourcesdonotsupportthegeographicdifferentiationofemissionsreduction
responsibilities.Attemptstodifferentiateonthebasisofcountryorregionarecomplicated
byequityissuesandpoliticalconsiderations,andshouldnotbeundertaken.
• ItisrecommendedtousealinearreductiontrendwhendeterminingcompanySBTs,instead
ofa“peakanddecline”scenario.
• Convergenceisappropriatetoprojectthecarbonintensityofcompaniesinsectorswhere
thesectorpathwaysassureemissionreductionsforthesectorsasawhole.Contractioncan
beappliedtobothabsoluteemissionsandcarbonintensity.
A1.1 Carbon Budget
Thecarbonbudgetistheestimatedamountofcarbon(orCO2xxiv
)theworldcanemitbeforewarming
willexceedspecifictemperaturethresholds.
Aglobalwarmingthresholdof2°Ccomparedtopre-industrialtemperatureshasbeenwidelyadopted
asaglobalgoalinnationalandinternationalclimatepolicy.TheIPCCFifthAssessmentReport(AR5)
estimatedthat,foralikelychanceoflimitingwarmingto2°C,thecarbonbudgetis1010GtCO2from
2012onwards(IPCC2013).ThespecificexplanationfromtheAR5SynthesisReportisthat“Multi-model
resultsshowthatlimitingtotalhuman-inducedwarmingtolessthan2°Crelativetotheperiod1861–
1880withaprobabilityofover66percentwouldrequirecumulativeCO2emissionsfromall
anthropogenicsourcessince1870toremainbelowabout2900GtCO2(witharangeof2550to3150
GtCO2dependingonnon-CO2drivers).About1900GtCO2hadalreadybeenemittedby2011.”(IPCC
2014b).Recentdataindicatethat,foramorethan75percentchanceoflimitingwarmingtobelow2°C,
thecarbonbudgetisonly700GtCO2from2017onwards(Rockströmetal.2017).
A1.2 Emissions Scenarios
TheIPCCdevelopedlong-termemissionsscenariosforitsthird,fourthandfifthassessmentreportsthat
modeltheemissionreductionsconsistentwiththegoalofnotexceeding2°Cofglobalwarmingxxv.In
theAR5,thesescenariosareGHGconcentration(notemissions)pathwaysandaretermed
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RepresentativeConcentrationPathways(RCPs).Moreover,theIPCChasbeenaskedbytheUNFCCCto
publishscenariosforwell-below2°Casearlyas2017.
Othertechnicalbodies,liketheInternationalEnergyAgency(IEA),havedevelopedtheirownscenarios,
largelybasedontheIPCCscenarios,toprovidemoredetailedemissiontrajectoriesattheregionaland
sectorallevel.TheIEAscenariosareincludedinitsEnergyTechnologyPerspectives(ETP)reports.
AsummaryofrecommendedscenariosforsettingcorporateSBTsisprovidedinTableA1-1.Someof
theSBTmethodsdescribedinAnnex2canaccommodatevariousemissionsscenarios,whereasothers
aredesignedforaspecificscenario.
TheemissionsscenariosinTableA1-1varyintermsoftheemissionsreductionsrequiredandmayalso
specifyarangeofvalues,reflectiveoftheuncertaintyinemissionsprojections.Forexample,one
scenariointheAR5(“Overshoot<0.4W/m2”)specifiesarangeofbetween49%and72percent
reductions.The49percentvalueistheminimumvaluecompatiblewiththescenario’sassumptionthat
globalnetnegativeemissionswillberequired(-103to-118%)inthesecondhalfofthecenturytostay
underthe2oCthreshold.(Clarkeetal.2014).Giventheexpenseandtechnicalchallengesrelatedto
negativeemissionstechnologydeployment,theSBTinitiativerecommendscompanieschoosethemost
aggressivemitigationscenariopossible.
Manyofthe2°Ccompatibleemissionscenariosfollowa“peak-and-decline”pathway,inwhich
emissionspeakatsomedate(e.g.,between2010and2020inRCP2.6)beforedecliningxxvi
.Forthe
purposesofsettingacorporateSBT,itisrecommendedthatreductionsfollowacompoundingorlinear
pathwayfromthebaseyeartothetargetyear(i.e.thatemissionsbereducedbythesameamountor
bythesamerateeachyear).SeeBoxA1-1forfurtherdiscussion.
TableA1-1.EmissionScenariosCompatiblewith2oCCarbonBudget
Source Base
year
Targetyear Percentagereductions
required
Sourceswithwhichscenario
isconcerned
IPCC–FifthAssessment
Report(5AR):Overshoot<
0.4W/m2
2010 2050 -49%to72% Allglobalanthropogenic
emissions
IPCC–FifthAssessment
Report:RCP2.6
2010 2050
-41to72% Allglobalanthropogenic
emissions
IEA2°CScenario(ETP
2016)
2013 2050 -56% Globalenergysources
Sources:Clarkeetal.2014,IEA2016,IPCC2014a.
BoxA1-1:SettingCompanyTargetPathwaysBasedonEmissionsScenarios
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Companiesshouldensurethatinterimtargetsarealignedwiththeambitionofthefinaltargetand
thegeneralpathwayforkeepingglobalwarmingtowithin2oC.Aswithemissionsscenarios,the
individualcompanytargetpathwaysconnectingbaseyearsandtargetyearscanhavedifferent
shapes,determinedbywhethercompaniesassumeannualcompoundorlinearreductions,ora
peak-and-declinescenario.Theareaunderacompany’stargetpathwayrepresentscumulative
emissions,suchthatdifferentpathwayswillyielddifferentamountsofcumulativeemissions,with
differenttotalimpactsontheclimate.Whichpathwayismostappropriateforsettinginterim
targets?
Ingeneral,acompanyshoulduseanannualcompoundedpathwayoralinearreductionpathway.
Forexample,RCP2.6intheIPCC’s5ARfollowsapeak-and-declinepathwayandrequiresa66%
reductionbetween2010and2050.Tousethisscenario,acompanycouldassumeaconstantamount
ofemissionsisreducedeachyear,equalto1.7%ofthebaseyearemissions(=66/[2050-2010]).This
scenarioresultsinthelinearpathway(A)inFigureA1-1.Alternatively,thecompanycouldusea
compoundannualreductionrateof2.7%,resultinginthecurvedpathway(B).Eachpathwayresults
ina66%reductionby2050,butalsoindifferentcumulativeemissions.PathwayBrequireshigher
initialreductions,butdelivers17%morecumulativeemissionsreduction,demonstratingthe
advantageofearlyaction.Itispreferredthatcompaniesuseacompoundedpathwayforthisreason.
FigureA1-1.ACompoundedReductionPathwayYieldsGreaterCumulativeReductionsThanDoesa
LinearReductionPathway
LevelofDisaggregationinEmissionsScenarios
Someemissionscenariosoffermoreresolutionthanothersintermsofgeographicandsectoral
disaggregation.Forinstance,RCP2.6disaggregatesCO2eemissionsacrossfiveworldregionsandtwo
broadsectors(energysystemsandland-usechange).Incontrast,theIEA2DSscenariodisaggregates
CO2emissionsacrossnineworldregions,fivebroadsectorsandanumberofsub-sectors(seebelow).
Generally,theuseofdisaggregatedemissionsscenariosrepresentsamorespecificandpotentially
moreequitabletrajectorythatacompanywouldhavetofollowtobeinlinewitha2°Cpathway.For
instance,anemissionsscenariothatdisaggregatesGHGemissionsforthepowersectorwouldbemore
informativeforanelectricpowercompanythananaggregatedemissionsscenario.
DisaggregatingCompanySBTsattheSectorLevel
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Sector-specificemissionsscenariosareavailableforarangeofhomogeneoussectors.Inparticular,the
ETP2DSscenarioidentifiesacarbonbudgetfortheenergy,industry,transportandbuildingssectors
consistentwitha2°Cscenario.Thereportalsoidentifiesdetaileddecarbonizationpathwaysforhigh-
emittingindustrialsectors,suchascement,aluminum,pulpandpaper,etc.Thesedatacanhelpguide
companieswithinhomogenoussectorsindevelopingphysicalintensitytargetsbasedonconvergence
(usingtheSDA).
Incontrast,thereislimitedinformationonemissionsscenariosandactivitymetricsforheterogeneous
sectors,whichlimitscompanieswithinheterogeneoussectorstocontractionallocationapproaches.For
example,theSDAprovidesadecarbonizationpathwayforan“OtherIndustry”sector,which
encompassessectorsthattendtobelesshomogeneous.Thispathwaywasderivedbysubtractingthe
carbonbudgetsofdetailedindustrypathwaysfromtheoverallindustrybudget.TheSDAthenusesan
absolutecontractionallocationapproachforOtherIndustry.
Itisexpectedthatemissionsscenarioswillevolveovertime,providingmoredisaggregationnotonlyfor
industrialsectors,butalsoforothersectorsintheeconomy.
DisaggregatingCompanySBTsattheCountryLevel
TheParis Agreementspecifiesrolesfordeveloped,developing,andleast-developedpartiestotheagreement.Theagreementdoesnotdefinetheboundariesofthesecategoriesandleavesittocountry
partiestopresenttheirownnationally-determinedcontributionstoaddressclimatechange.Rather
thanagreeonparticularemissionsallocationprocesses,countriesagreedontheprincipleofequityand
commonbutdifferentiatedresponsibilities(CBDR)andrespectivecapabilities,inlightofdifferent
nationalcircumstances.
TheIPCCandacademicliteraturehasextensivediscussionoftherangeoftechniquesavailablefor
geographicaldisaggregationxxvii
.BeyondtheprincipleofCBDR,countrieshavenotagreedtoany
particulartechnique.Lackofinternationalconsensuslimitscompanyoptionsforgeographical
disaggregation.Likewise,whilesomeinternationalmodelingeffortssuchastheIEA’sETPseries
disaggregateOrganisationforEconomicCo-operationandDevelopment(OECD)andNon-OECD
emissionspathways,thesedataarenotcomprehensiveorgranularenoughtoaddresscompany
requirements.
Asaresult,currentlyavailableSBTmethodsusetwosimplifyingapproachesforaddressing
performancedifferencesamongcountries:contractionandconvergence(seeAnnex1.3fordetails).For
example,theSDAassumesglobalconvergenceofkeysectors’emissionsintensityby2050;inother
words,theemissionsintensityofsteelproductioninChina,theU.S.,andBrazilisassumedtoreachthe
samelevel,regardlessofitscurrentdiversity.Theseapproacheshaveshortcomingsoftheirown,
especiallyfromequityperspectives(e.g.,mitigationcostsmaybegreaterinthesteelsectorina
particularcountry).Additionalscenarioswithgeographicaldisaggregationconsideringequityissues
couldbeusefultoinformSBTmethods.Inthemeantime,companiesshoulduseglobalSBTscenariosto
aligntheiremissionreductiontargetswitha2-degreepathway.
A1.3 Allocation Approaches
Anallocationapproachreferstothewaythecarbonbudgetunderlyingagivenemissionsscenariois
allocatedamongstcompanieswiththesamelevelofdisaggregation(e.g.inaregion,inasector,or
globally).
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TheSBTmethodsreferencedinthismanualusetwomainapproachestoallocateemissionsata
companylevel:
- Convergence,wheretheemissionsintensityofasectorconvergestothatrequiredbyaglobal
2°Cpathwayby2050(e.g.,29gCO2eperkWhofelectricity).
- Contraction,whereallcurrentsourcesofemissionsreduceatthesamerateindependentlyof
cost,equity,orgrowthfactors.
Convergenceisappropriatetoprojectthecarbonintensityofcompaniesinsectorswith2°Cpathways.
Contractioncanbeappliedmorebroadlytocompanies’absoluteemissionsorcarbonintensity.
ConvergenceofCarbonIntensity:Thisapproachassumesthatthecarbonintensityofallcompanies
withinagivensectorconvergestowardsthe2°Ccarbonintensityofthatsectorataratethatensures
thesectoral2°Ccarbonbudgetisnotexceeded.Therateofconvergenceofanindividualcompanyisa
functionoftheinitialcarbonintensityofthatcompany,the2°Ccarbonintensityofthesector,andthe
growthofthecompanyrelativetothegrowthofthesector.Forexample,ifacompanyhasahigher-
than-averagegrowthrateitmustreduceitsemissionsintensitymorerapidly,comparedwith
companieswithlower-than-averagegrowthrates.Thismethodcanonlybeusedwithemissions
scenariosthatdisaggregateemissionsatthesectorlevel.
ContractionofCarbonIntensity:Thisapproachassumesthatallcompanieswithinthesamelevelof
disaggregation(i.e.sector,regionorglobally)reducetheircarbonintensityataparallelratethat
ensurestherespective2°Ccarbonbudget(sector,regionorglobal)isnotexceeded.Companiesdonot
convergeuponacommoncarbonintensity,butendupwithdifferentintensities.Therateof
contractionisafunctionofthecarbonbudgetandtheexpectedlevelofactivityforthesectororregion
concerned.Forexample,therequiredrateofcontractionincreasesasthecarbonbudgetgetssmaller
orasactivitylevelsincrease.Activitycanbeexpressedusingeconomic(e.g.valueadded)orphysical
(e.g.tonofproduct)indicators.
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ContractionofAbsoluteEmissions:Thisapproachassumesthatallcompanieswithinthesamelevelof
disaggregation(i.e.sector,regionorglobally)reduceemissionsatthesamerate.Therateof
contractionispurelyafunctionoftheoverallreductionsimpliedinthecorrespondingemissions
scenario.Forinstance,theIPCCAR5’sRCP2.6scenariorequiresglobalemissionstocomedownby66%
between2010and2050.Usingthisscenario,allcompanieswouldhavetoreducetheirGHGemissions
bythissameamount,regardlessofsector.
Thechallengewithintensityapproachesiseffectivemodelingofthedenominator(e.g.dollarsGDP)to
ensurethecarbonbudgetisnotexceeded.Anadvantageoftheabsolutecontractionapproachisthat
suchmodellingisnotrequired.
Contraction
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Annex 2. Overview of available SBT methods
Themethodsdescribedinthismanualarefreeandpubliclyavailable,andapplicabletomultiple
sectors.Thischaptercharacterizeseachmethodwithrespecttoasetofkeydescriptors.
KeyInsightsinThisChapter
• SBTmethodsvaryintheemissionsscenarioandallocationmechanismused,conditions
underwhichthecarbonbudgetismaintained,extenttowhichsupportingtechnical
documentationisavailable,andtypesoftargetoutput.
• Itisexpectedthatnewscenariosandmethodswillbedevelopedforarangeofspecific
sectors.InformationonthesewillbepostedtotheSBTinitiative’swebsiteasthemethods
aremadepubliclyavailableand/orvalidatedbytheSBTinitiative.
A2.1 Method Descriptions
Thefollowingmethodsaredescribedinthischapterinsequence:
• Absoluteemissionscontraction
• SectoralDecarbonizationApproach(SDA)
• GreenhouseGasEmissionsperValueAdded(GEVA)
• ClimateStabilizationIntensityTargets(CSI)
• Context-basedCarbonMetric(CSO)
• CorporateFinanceApproachtoClimate-stabilizingTargets(C-FACT)
Eachmethodisdescribedwithrespecttoeightfactors,detailedbelow.TableA2-1summarizesthe
methods.
1.Emissionsscenarios.Emissionsscenariosaredescribedintermsoftheir:
• Identity:theemissionscenariousedandtheextenttowhichthatscenarioisup-to-date.
• Coverage:includingtheGHGsconsidered(onlyCO2orbothCO2andotherGHGs)andthesectors
oractivitiesconsidered(e.g.,energysectors,landusechange,oragricultureemissions).
• Granularity:whetherthescenarioisanaggregatedglobalscenario,aglobalscenariowith
sectoraldisaggregation,oraglobalscenariowithregionalandsectoraldisaggregation.
• Assumptions:thestringencyofthescenarioanditssuitabilityforsettingSBTs.
• Data:whetherdataonthescenarioarepubliclyavailable,includingjusttheemissionsdataor
alsoothervariablesthatareeitherprojectedorusedasinputforthescenario(e.g.GDPgrowth,
electricityproduction,cementproduction,etc.).Thelattermaybeneededtousecertain
methodsandcanprovidefurthertransparencyastoscenarioassumptions.
2. Allocationmechanism:whetheramethodusescontractionorconvergence,andofabsolute
emissions,physicalemissionsintensityoreconomicintensity.
3. Carbonbudget:theextenttowhichcompanies’useofthemethodmaintainsthecarbonbudgetand
whatmechanismsareusedtoensurethis.
4. Validation:theextenttowhichthemethodbeenvalidated(oriscapableofbeingvalidated).For
example,hasthemethodbeenpublishedinpeer-reviewedscientificjournals?Otherwise,isclear
documentationavailableonthemethod,includingonunderlyingprinciplesandamathematical
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formulationofthemethod;andhasthemethodbeenreviewedbyexternalexpertpanelsorvia
publicconsultation?
5. Usability:whetheracalculationtoolisavailableandanyknownplansforupdatingthemethod.
6. Targets:includingwhetherabsoluteand/orintensitytargetsareoutput,therangeofpermissible
baseyearsandtargetyears,thepathwayconnectingbaseyearsandtargetyears(none,linear,as
peremissionsscenario,orcompoundannualgrowthrate(CAGR)),andapplicabilitytodifferent
scopes.
7. Miscellaneousnotes
Absolute Emissions Contraction
Scenario:GenerallyproposedwithAR5rangeofscenarioresults,requiring49-72%reductionfrom2010
to2050,butanysuitablescenariocanbeused.However,theuseofcertainscenariosrequiresless
emissionsreductionup-front,necessitatingthatmoreemissionsarecapturedandstoredinthefuture-
delayingactionandcreatinga“carbondebt”forfuturegenerations.TheSBTinitiativeencourages
companies,particularlythoseindevelopedcountries,toadopt72%reductiontobemorelikelytoavoid
thefuturecarbondebtissueandadjustforotherpotentialinfluencesontheglobalcarbonbudget.
Allocation:ContractionofabsoluteGHGemissions.Becausethismethodrequiresallcompaniesto
reducetheiremissionsatthesamerate,neworgrowingbusinessesmightfinditdifficulttoittogetto
their“fairshare”ofthecarbonbudgetduringthetransitiontoalowcarboneconomy.
Budget:Budgetismaintained,asallcompaniesreduceinlinewithscenario,providednonew
businessesarecreated.Asthatisnotareasonableassumption,thescenariopredictionsshouldbe
reviewedperiodically(5to10years)andtargetsadjustedaccordinglyinordertomaintainthe
emissionsbudget.
Validation:FariaandLabutong(2015)provideamathematicexpressionforthismethod.
Usability:Themethodiseasytouseandfollow.Nosupportingdocumentationexistssofaronthis
method.Noupdatesenvisaged.
Targets:Absoluteemissionreductions,withpathwaysthatarelinear,CAGRormirrorthescenario
pathway.Baseyearandtargetyearcanbespecifiedaccordingtoscenario.Methodcanbeusedforany
scope,providedsuitablescenariosexist.
Notes:ThismethodhasbeenidentifiedbytheSBTinitiativeasasimple,straightforwardapproachto
setandtrackprogresstowardtargets.
SectoralDecarbonizationApproach(SDA)
Scenario:Themethodusesthe2DSscenariodevelopedbytheIEA(IEA2016),whichiscompatiblewith
theRCP2.6scenario.The2DSscenariocomprisesanemissionsscenarioandanactivityscenario,which
areusedtocomputesectoralintensitypathways.ReferencedataforIEAETPscenariosarepublicly
available(IEA2016).
Allocation:Twoallocationprinciplesareused:physicalintensityconvergence,forhomogeneous
sectors;andcontractionofabsoluteemissions,forheterogeneoussectors.
Budget:Eachsectoralbudgetismaintained,totheextentthesumofsectoralactivitydoesnotgo
beyondthatprojectedforthescenario(forhomogeneoussectors)andthatnonewbusinessesare
created(fortheheterogeneous“OtherIndustry”sector).Periodicrevisionofthescenariosandof
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targetsisrecommended,toincorporatenewinformationrelatedtohistoricalemissions,technological
developmentsandthenecessaryreductioneffortsbysector.
Validation:Publishedinpeerreviewjournal(Krabbeetal.2015).Adescriptionofthemethodandmost
ofthescenariosusedhasalsobeenpublished(CDPetal.2015).Themethodismathematically
formulatedandpubliclyavailable.Itwasdevelopedthroughastakeholderprocess,includingreviewby
aTechnicalAdvisoryGroupandapublicopencommentperiod.
Usability:Themethodismorecomplexthanotherexistingmethodstotheextentthatitrequires
physicaldatathatmightnotbepubliclyavailable(butshouldexistincompanies)anditusesa
sector/activityapproachwhichmightrequirecompaniestosetmultipletargets.Itismoreorientedto
energyandcarbonintensiveindustries,althoughfornon-carbonintensiveitfallsbacktoanabsolute
emissionscontractionmethod.Atoolisavailable,whichwillbeperiodicallyupdatedxxviii
.
Targets:Absoluteorintensity(physicalorvalueadded,dependingonsector)targets.Allowsdifferent
baseyearsstartingfrom2010anddifferenttargetyearsupto2050.Targetpathwaysfollowthe
contourofthesectorscenariopathway.Requirescompaniestogatherbothemissionsandactivitydata
andtoforecastactivity.Coversscopes1and2,withdistincttargetsforboth.“ProductUse”forLight
roadvehiclesmanufacturingistheonlyscope3sectorinthetool.
Notes:Themethodtakessectoraldifferencesandabatementpotentialsintoaccount,totheextent
theseareconsideredinthemakingofthedifferentsectorscenarios.Italsohasdefinedspecificscope2
scenarios,whichbettertranslateintocorporateGHGaccountingpractices,anditcanbeusedtoset
validscope3targetsforcertainscope3categories(seeChapter4.3).Forhomogeneoussectors,italso
accommodatestheissueofhistoricalaction,asitrequiresGHGemissionsintensivecompaniesto
reducetheiremissionsfaster.Newcompaniesinhomogeneoussectorscanalsobeaccommodatedand
allocatedportionsofthebudget.Asitcurrentlystands,themethoddoesnotcoverseveralactivity
sectors(Agriculture,forestry,andotherlanduse;Oilandgasproduction;Residentialbuildings).
Greenhouse Gas Emissions per Value Added (GEVA)
Scenario:Theoriginalscenariouses50%reductionby2050(IPCCFourthAssessmentReport)and
economicgrowthof3%p.a.,butcanbeusedwithdifferentscenarios.
Allocation:ContractionofGHGintensitypervalueadded.
Budget:Budgetismaintainedtotheextentthatthegrowthinvalueaddedofcompaniesisequaltoor
smallerthantheprojectionusedtocalculatetheintensitytarget.
Validation:DescribedinRanders(2012).FariaandLabutong(2015)provideamathematicexpressionof
thismethod.
Usability:Themethodiseasytouseandfollow.Documentationisonlyavailableforothermethods
basedonGEVA(seeCSI,CSOandC-FACTmethod).Toolsareavailablethatimplementvariationsof
thesemethods(seeCSOandC-FACT).Onlyrequirestrackingofemissionsandvalueaddedtosetand
tracktarget.Noupdatesenvisaged.
Targets:IntensitytargetsintheformoftCO2e/$valueadded.Baseyearandtargetyearcanbe
specifiedaccordingtoscenario.TargetsfollowaCAGRtrajectorytotargetyear.Methodisintendedfor
scope1emissions.
Notes:TheGEVAmethodformsthebasisofseveralothermethodsthatbaseallocationonvalue
added.Therearedifferentwaysofconstructingtheallocationofemissionsbasedonvalueadded,as
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wellasdifferentscenariosthatcanbeusedtoformthebasisoftheallocation.Thesewillcausesome
degreeofvariationinthefinalresultsfromGEVAandrelatedmethods.
Climate Stabilization Intensity Targets (CSI)
Scenario:IPCCFourthAssessmentReport.80%reductioninGHGemissionsby2050,froma2007base
year.Economicgrowthof5.9%perannum(currentprices)from2007to2050.
Allocation:ContractionofGHGintensitypervalueadded.
Budget:SeecommentsforGEVA.
Validation:BasedonGEVA,whichhasbeenpeerreviewedandpublishedinascientificjournal.This
applicationhasbeendocumentedbyTuppen(2009).Nodetailedgeneralmathematicalformulationof
themethodbeyondvalueaddeddefinitionandGHGintensitypervalueadded.
Usability:Themethodiseasytouseandfollowandisdocumented.Notoolisavailable.Onlyrequires
trackingofemissionsandvalueaddedtosetandtracktarget.Noupdatesenvisaged.
Targets:IntensitytargetsintheformoftCO2e/$valueadded.Baseyearandtargetyearcanbe
specifiedaccordingtoscenario.TargetsfollowaCAGRtrajectorytotargetyear.Methodaggregates
scope1+2anddoesnotcoverscope3.
Notes:CSIisaspecificationofGEVAtothecaseofaparticularcompany(BT)usingaparticularscenario
(describedabove).Thisresultsinalong-termtargetprescribingareductioninscope1+2GHGintensity
(tCO2e/millionGDP)of9.6%p.a.forcompaniesindevelopedcountries.Itfollowstheprinciplethatall
companieswithinagivengeography(inthiscase,developedcountries)willdecreasetheirGHG
intensitypervalueaddedatthesamerate.
Context-based Carbon Metric (CSO)
Scenario:Multiplescenarioscanbeusedwiththismethodthatcanleadtomethodcoveringdifferent
geographies,targetyearsorsectors.
Allocation:ContractionofGHGintensitypervalueadded.
Budget:SeecommentsforGEVA.
Validation:BasedonGEVA,whichhasbeenpeerreviewedandpublishedinascientificjournal.No
generalmathematicalformulationofthemethodpubliclyavailable.UpdatedasneededbytheCenter
forSustainableOrganizations(CSO).
Usability:Documentationisavailable(McElroy2017).Atoolisavailable,specifyingthemethodforone
scenario(SSP1-2.6)xxix
.Onlyrequirestrackingofemissionsandvalueaddedtosetandtracktarget.The
toolcanbeusedalsofortargettrackingbythecompany.
Targets:IntensitytargetsintheformoftCO2e/$valueadded(pertheimplementationavailableonline).
Baseyearandtargetyearcanbespecifiedaccordingtoscenario.TargetsfollowaCAGRtrajectoryto
targetyear.Dealswithscope1and2targets,and,optionally,scope3targets.
Notes:OriginallydevelopedandpilotedforthesettingofBen&Jerry´stargetsin2006(currentversion,
v5.5wasreleasedin2015).Performanceisreportedannuallyandcumulativelyinthreeways:intensity,
absolute,and“context-based”(aratingevaluatingtheratioofactualemissionstotargetedemissions).
Methodisflexibleandcanaccommodatevariationsinemissionsscenarioandintensitymetric.
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Corporate Finance Approach to Climate-stabilizing Targets (C-FACT)
Scenario:IPCCFourthAssessmentReport.Fordevelopedcountries:85%reductioninGHGemissionsby
2050comparedwith2007baseyear;fordevelopingcountries:50%reductioninGHGemissionsby
2050.Companiesspecifytheirownfuturevalueaddedprojection(basedoncontributiontoGDP).As
withprevioustools,differentscenarioscanbeaccommodated.
Allocation:Contractionofabsoluteemissions,althoughtargetsalsocommunicatedasintensity(value
added)targets.
Budget:Budgetismaintainedtotheextentgrowthofcompaniesisequaltoorissmallerthantheir
projectionusedinthescenario.Companieshavereductionssimilartothatofthescenario.
Validation:Notpublishedinpeerreviewedjournal,butadescriptionofmethodisavailableFariaand
Labutong(2015)provideamathematicexpressionofthismethod.DevelopedbyAutodeskin
consultationwiththeU.S.EnvironmentalProtectionAgency(EPA),theClimateGroup,WRI,and
ClearCarbon(nowDeloitte).
Usability:Themethodiseasytouseandfollow.Documentationisavailable(StewartandDeodhar
2009).Atoolisavailablethatallowssettingtargetsforcompaniesindevelopedcountriesandthatcan
easilybespecifiedfordevelopingcountries.Onlyrequirestrackingofemissionsandvalueaddedtoset
andtracktarget.
Targets:IntensitytargetintheformoftCO2e/$valueaddedbasedoncontractionofabsolute
emissions.Baseyearandtargetyearcanbespecifiedaccordingtoscenario.TargetsfollowaCAGR
trajectorytotargetyear.Methodproposescoverageofscope1,2,and3emissions.
Notes:Themethodhasafive-yearslidingwindowcompaniescanusetoevaluateoverallshort-term
progresstowardsthetarget.Themethodprojectsanabsoluteemissionsreductiontarget,uponwhich
theintensitytargetisconstructedbasedonthegrowthprojectionofcompany.Methodproposesthat
companiestracktheirintensitytarget.
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TableA2-1.SummaryofSBTMethodsInformation Absolute
EmissionsContraction
CSI Context-BasedMetric(CSO) C-FACT GEVA SDA
BaseYear Flexible Flexible 2005 Flexible,prefers2009
Flexible,prefers2010
Flexible,from2010onward
TargetYear Flexible Flexiblethrough2050
Flexiblethrough2050 Flexiblethrough2050
Flexiblethrough2050
Flexiblethrough2050
Emissionsscenario
Flexible Flexible,althoughIPCCFourthAssessmentReportusedincurrentimplementation
Flexible Flexible,althoughIPCCFourthAssessmentReportusedincurrentimplementation
IEA2DS
Levelofsectordifferentiation
None None None None None Sectoral
AllocationMechanism
Contraction(absolute)
Contraction(intensity)
Contraction(intensity) Contraction(absolute)
Contraction(intensity)
Convergence(forhomogeneoussectors)Contraction(forheterogeneoussectors)
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Information AbsoluteEmissionsContraction
CSI Context-BasedMetric(CSO) C-FACT GEVA SDA
InputData
Baseyear
• Absoluteemissions,scope1+2+3ifdesired
• Combinedscope1and2intensity
• Grossprofit
• Scope1and2absoluteandintensityemissions(separately)
• Grossprofit,revenue,physicalactivity
• Absolutescope1,scope2,orscope1+2+3ifdesired
• Grossprofit,revenue
• Eitherintensityorabsolutescope1,scope2,orscope1+2• Grossprofit
• Scope1and2absoluteemissions(separately)• Physicalactivity;grossprofit
Targetyear
• Growthprojection(specifiedbymethodscenario)
• Growthprojection(asprojectedbycompany)
• Grossprofit/margin
• Growthprojection(asprojectedbycompany)
• Grossprofit/margintarget(asdeterminedbycompany)
• Growthprojection(asprojectedbycompany)
• Grossprofit/margintarget
• GrowthProjection(specifiedbymethodscenario)
• Growthprojection(asprojectedbycompanyandonlyforhomogeneoussectors)
TargetYearOutputs
Absolutereduction,scope1+2+3ifdesired
Combinedscope1and2intensity
Scope1and2absoluteandintensityemissions(separately)
Presentsintensityandabsolutereductions
Intensitytargetorabsolutetarget
Scope1and2absoluteemissionsandintensity(separately)
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Acknowledgments
CDP, UN Global Compact, WRI, and WWF are grateful for the advice and inputs received from various experts during the development of the manual.
Our Technical Advisory Group includes experts from companies, non-governmental organizations, and other organizations listed below:
Andreas Horn, BASF Arunavo Mukerjee, Tata Steel Bill Baue, Sustainability Context Bryan Jacob, Climate Coach Chris Tuppen, Advancing Sustainability Colin Parry, Diageo Cristian Mosella, Colbun Edward Butt, Tate & Lyle Emma Stewart, Autodesk Eric Christensen, WSP Geoff Lye, SustainAbility Giel Linthorst, Ecofys Guy Rickard, Carbon Trust Jed Davis, Cabot Creamery Jeff Gowdy, J. Gowdy Consulting Kevin Rabinovitch, Mars Mario Abreu, Tetra Pak Mark Didden, WBCSD Mark McElroy, Center Sustainable Org Michel Bande, Solvay Michel Cornet, CLIMACT Philippe Le Gall, Nestlé Roger Fernandez, EPA Sanjib Bezbaroa, ITC Tasso Azevedo, Fórum Clima Thomas Gourdon, ADEME Tim Juliani, C2ES
Comments on various drafts of the manual were also provided by:
Amy Barry, Diga Communications Betty Cremmins, CDP Kevin Moss, WRI Internal reviewers at WRI
We are indebted to XXX for their generous financial support.
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About the partner organizations in the Science Based Target initiative
CDP
CDP is an international not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage, and share vital environmental information. These insights enable investors, companies, and governments to mitigate risks from the use of energy and natural resources, and to identify opportunities from taking a responsible approach to the environment. (https://www.cdp.net)
UN Global Compact:
The UN Global Compact believes it’s possible to create a sustainable and inclusive global economy that delivers lasting benefits to people, communities and markets. To make this happen, the UN Global Compact supports companies to: do business responsibly by aligning their strategies and operations with Ten Principles on human rights, labor, environment and anti-corruption; and take strategic actions to advance broader societal goals, such as the forthcoming UN Sustainable Development Goals, with an emphasis on collaboration and innovation. (www.unglobalcompact.org)
World Resources Institute (WRI)
WRI focuses on the intersection of the environment and socioeconomic development. We go beyond research to put ideas into action, working globally with governments, business, and civil society to build transformative solutions that protect the earth and improve people’s lives. (www.wri.org)
WWF
WWF is one of the world’s largest and most experienced independent conservation organizations, with over 5 million supporters and a global network active in more than 100 countries.
WWF’s mission is to stop the degradation of the planet’s natural environment and to build a future in which humans live in harmony with nature, by conserving the world’s biological diversity, ensuring that the use of renewable natural resources is sustainable, and promoting the reduction of pollution and wasteful consumption. (http://wwf.panda.org)
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Endnotes
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iTheIPCCisascientificandintergovernmentalbodyestablishedundertheauspicesoftheUnited
Nations“toprovidetheworldwithaclearscientificviewonthecurrentstateofknowledgeinclimate
changeanditspotentialenvironmentalandsocio-economicimpacts.”https://www.ipcc.ch/.iiTherangeofvaluesforthepercentdecreaseinemissionsisduetouncertaintyinemissionsmodeling
projections.Thevaluesaretakenfromaspecificpathway(Overshoot<0.4W/m2)detailedonp431of
Clarkeetal(2014).iiiSomemethodsforsettingSBTscanbeadaptedtomeetmorestringenttemperaturetargets.See
Annex2formoredetails.ivTheLCPTiisacollaborationbetweenWBCSD(WorldBusinessCouncilforSustainableDevelopment),
SDSN(SustainableDevelopmentSolutionsNetwork)andIEA(InternationalEnergyAgency)that
presentsaseriesofconcreteactionplansonninesectorsforthelarge-scaledevelopmentand
deploymentoflow-carbontechnologies.http://lctpi.wbcsdservers.org/.vFormoreinformationonP&G’swindfarm,seehttp://cdn.pg.com/en-us/-
/media/PGCOMUS/Documents/PDF/Sustanability_PDF/sustainability_reports/PG2015SustainabilityRep
ort.pdf?la=en-US&v=1-201605111505.viFormoreinformationonDell’sSBT,seehttp://sciencebasedtargets.org/case-studies/case-study-dell/.
viiFormoreinformationonKellogg’sSBT,seehttp://sciencebasedtargets.org/case-studies/case-study-
kellogg/viiiToreadthefullstatement,seehttp://investorsonclimatechange.org/portfolio/global-investor-
statement-climate-change/.ix Formore information onNRG Energy’s SBT, see http://sciencebasedtargets.org/case-studies/case-
study-nrg/. x FormoreinformationonLandSecurities’SBT,seehttp://sciencebasedtargets.org/case-studies/case-
study-land-securities/. xi FormoreinformationonCoca-ColaEnterprises’SBT,seehttp://sciencebasedtargets.org/case-
studies/case-study-coca-cola-enterprises/. xiiTheIEA“examinesthefullspectrumofenergyissuesandadvocatespoliciesthatwillenhancethe
reliability,affordabilityandsustainabilityofenergyinits29membercountriesandbeyond.”
http://www.iea.org/about/.xiiiAnothermethodusesthecontractionofabsoluteemissionsapproach–the“3%Solution”:
http://www.worldwildlife.org/projects/the-3-solution.Thismanualdoesnotrecommendthe3%
Solutionbecauseitcalculatestargetsonlythrough2020.Asdescribedinthemanual,companiesshould
settargetyearsthatarebetweenfiveandfifteenyearsoutfromthecurrentyear.xivForthecurrentlistoftheSBTinitiative’scriteriaandrecommendations,see
http://sciencebasedtargets.org/wp-content/uploads/2017/02/SBTi-criteria.pdfxvFormoreinformationonThalys’target,seehttp://sciencebasedtargets.org/case-studies/case-study-
thalys/.xvi ThesecriteriaareexplainedinChapter7oftheGHGProtocolScope2Guidance. xviiTheScienceBasedTargetinitiative’sCalltoActioncampaignrequiresthatallelectricity-generating
companiesthatdistributenaturalgasorotherfossilfuelproductssetscope3targetsfortheuseofsold
products.xviii
Todeterminewhetherthecumulativeimpactofsuchchangeswarrantsrecalculations,companies
shouldadoptasignificancethreshold.TheGHGProtocoldoesnotspecifyathresholdvalue,althougha
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5percentvalueisgenerallyrecommended.Usinga5percentthreshold,changeswouldbeconsidered
significantif,intheaggregate,theyaffecttheSBTbymorethan5percent.Oncedefined,asignificance
thresholdshouldbeappliedconsistentlyovertime.xix FormoreinformationonPfizer’sSBT,seehttp://sciencebasedtargets.org/case-studies/case-study-
pfizer/. xxTheEPAcalculatortranslatesemissionsdataintoestimatesoftheannualemissionsfromcars,
households,andpowerplants.https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator.xxiFortheGRIstandardsonsustainabilityreporting,seehttps://www.globalreporting.org/standards/.
xxiiInadditiontocollectingemissionsdata,theCDPClimateChangeQuestionnairecollectsinformation
oncorporaterisksandopportunitiesconnectedtoclimatechange.https://www.cdp.net/en/climate.xxiii
TheNAZCAplatformcurrentlyreportsthecommitmentsofatleasttwothousandcompanies.
http://climateaction.unfccc.int/.xxiv
ThemassofCO2canbeestimatedbymultiplyingthemassofcarbonbytheratioofthemolecular
weightofCO2tothatofcarbon.Thisratiois44/12orabout3.67.xxvThethirdandfourthassessmentreportsoftheIPCCassessGHGconcentrationsratherthan
temperaturethresholds.xxvi
BecauseGHGscanhaveamulti-yearlifespanandaccumulateintheatmosphere,theradiative
forcinglevelsinRCP2.6alsofollowa“peakanddecline”pathway,butoneinwhichforcinglevelspeak
ataround3.1W/m2bymid-century,andreturnto2.6W/m2by2100(Clarkeetal.2014).xxvii
Foradiscussionofinstrumentsandagreementsforinternationalclimatecooperation,seeStavinset
al.(2014).xxviii
TheSDAandsupportingdocumentationcanbedownloadedfrom
http://sciencebasedtargets.org/sda-tool/.xxix
TheCSOtoolcanbedownloadedfromhttp://www.sustainableorganizations.org/context-based-
metrics-in-public-domain.html.