Sometime around finalising your first Corporate Carbon Footprint (i.e. calculating emissions for one full year) is typically when you start thinking and talking about setting a target to reduce your emissions.
When you get to this stage, it is important to know that decarbonisation targets come in different forms, each being more or less suited to different organisations based on several factors.
The first categorisation relates to the timespan of the target, where 'near-term' and 'long-term' targets are differentiated. The second categorisation is whether a target is a 'science-based' target or not. 'Science-based' is a descriptor attached to the different target types based on criteria set by the Science Based Targets initiative (SBTi).
Near-term and long-term targets
The science from the Paris Climate Agreement showed that companies need to essentially halve emissions by 2030 to avoid the worst impacts of global warming. More specifically, climate scientists have determined that emissions from the private sector must be reduced by 42% by 2030 to avoid global warming of 1.5°C above pre-industrial levels. So, for near-term targets, 2030 is used as the target year.
Long-term targets, on the other hand, reflect the emissions reductions required to achieve net-zero by 2050 and remain in line with keeping global temperatures within the 1.5°C boundary. Achieving net-zero means reducing scope 1, 2, and 3 greenhouse gas emissions to as close to zero as possible, with any remaining emissions being neutralised.
Whilst net-zero targets are a much longer-term pathway than near-term targets, developing net-zero targets for 2050 should also involve developing near-term targets for 2030. Plan A offers a detailed resource on the net-zero journey here.
Absolute Reduction Targets
Absolute Reduction Targets use overall emissions as their key metric. In this regard, they reflect a percentage reduction in emissions by a target year.
For example:
Company A's overall scope 1, 2 and 3 emissions in 2021 are 87 tonnes of CO2e.
They follow the scientific recommendation to cut these emissions by 50% by 2030, meaning their target emissions for 2030 are 43.5 tonnes of CO2e.
As such, setting an absolute reduction target involves a commitment to reducing your organisation's climate impact by reducing your total emissions, either overall or for specific scopes. This differs from intensity targets (below), which aim to increase efficiency by reducing emissions per employee or per yearly revenue and carry a risk of greenwashing.
Absolute Reduction Targets can fall under the categories of both 'science-based' and 'non-science-based' targets, depending on their level of ambition.
Science-Based Targets
Science-based targets (SBTs) provide a clear pathway for companies to reduce greenhouse gas emissions. Targets are science-based when they align with the climate science from the Paris Climate Agreement, which states the need to limit global warming to 1.5°C above pre-industrial levels. Additionally, science-based targets are a solid foundation for companies’ climate-related strategies, governance, and actions in transitioning to a low-carbon economy.
The Science Based Targets Initiative (SBTi)
The Science Based Targets Initiative (SBTi) created sector-specific guidance for companies to reduce emissions in alignment with the guidelines from the Paris Climate Agreement. The SBTi a) guides the development of science-based targets and b) validates the targets of companies who wish to disclose targets to the SBTi.
This means you can set a science-based target by following the STBTi's guidelines and optionally choose to register this as an extra step. The SBTi’s five-step process for commitment and validation is described in Should I Validate my Target with SBTi?
Minimum ambition thresholds for Science-Based Targets
Across all business sectors, the SBTi sets minimum ambition thresholds. These thresholds are the emissions companies must reduce to limit global warming to 1.5°C above pre-industrial levels and are what makes targets 'science-based'.
According to the SBTi, a science-based target must cover company-wide Scope 1 and 2 emissions as defined by the GHG Protocol. A Scope 3 target is required if a company’s relevant Scope 3 emissions account for 40% or more of the overall emissions. Special requirements apply to specific industries, such as the sale or distribution of natural gas and/or other fossil fuels.
The SBTi recognises that Scope 3 emissions are typically the most difficult to reduce, so minimum ambition thresholds for Scope 3 are lower than for Scope 1 and 2. For Scope 1 and 2 near-term targets, the minimum ambition is a 42% reduction by 2030 for the baseline years of 2020 and later. For Scope 3, the minimum ambition is a 25% reduction by 2030 for the base years of 2020 and later.
Science-based targets are typically the most ambitious type of target. There are sometimes exceptions, but generally, SBTs reduce the highest emissions over time.
Timeframes for Science-Based Targets
A science-based target must cover a minimum of 5 and a maximum of 10 years from the date the target is submitted to the SBTi for validation. The base year must be no earlier than 2015.
Science-Based Targets for Small and Medium Enterprises (SMEs)
Responding to concerns regarding SMEs' lack of skills or capacity, the SBTi introduced the “SME Route” for setting science-based targets. The SBTi defines an SME as:
A non-subsidiary, independent company
With fewer than 500 employees
Not a financial institution, and
Not an Oil & Gas company / does not belong to the Fossil Fuel sector
The SME Route does not require SMEs to set targets for Scope 3 emissions but to commit to measuring and reducing them.
Science-Based Targets types
The SBTi describes three different methods to set a target. Their applicability varies with the respective business context and the scopes of emissions that targets should be set for. The three methods are called:
Absolute Emissions Contraction
Sectoral Decarbonisation Approach
Economic Intensity Contraction (for Scope 3 only)
Absolute Emissions Contraction
Absolute Emissions Contraction refers to the Absolute Emissions Reduction pathway mentioned above. This is the primary science-based target type and what most organisations should use. The main exceptions are companies in sectors to which the Sectoral Decarbonisation Approach (below) applies.
For an Absolute Reduction Target to be considered science-based, a minimum annual emissions reduction of 4.2% is required and the target should cover a minimum of 5 years and a maximum of 10 years (previously 15 years; V5 valid since July 15 2022) from the date the target is publicly announced.
Example for an absolute target set (taken from page 18 of the SBTi Corporate Manual):
CVS commits to reducing absolute scope 1 and 2 GHG emissions by 47% by 2030 from a 2019 base year. CVS also commits to reduce absolute scope 3 GHG emissions from purchased goods and services by 47% by 2030 from a 2019 base year.
Sectoral Decarbonisation Approach
The Sectoral Decarbonisation Approach (SDA) is a method for setting physical intensity targets. These define reductions in emissions relative to a specific business metric (e.g. tonnes of CO2e per tonne of product or tonne of MWh produced). The SDA assumes a convergence of key sectors’ emission intensity by 2050 meaning that emissions will align to the same level across all companies of a specific sector.
The SDA is applicable to the following sectors:
Power Generation
Iron & Steel
Aluminium
Cement
Pulp & Paper
Services/Commercial Buildings
Transport
Passenger and Freight Road Transport
Road Vehicle Manufacturers
Aviation
To use the SDA, a company needs its base year emissions intensity, the projected activity growth and an insight into the overall carbon budget available to its sector. The carbon budgets for each applicable sector are depicted below (source: Sectoral Decarbonisation Approach (SDA), 2015; note that “other industry” is not applicable anymore).
Please note that this target type is currently not available on the Plan A Sustainability Platform; however, if your company falls under one of the SDA sectors, please contact us to see how we can help.
Economic Intensity Contraction / GHG Emissions per Value Added (GEVA) (Scope 3 only)
Other than physical intensity targets, economic intensity targets are formulated by an intensity reduction of tonnes of CO2e per $ value added. The GEVA method is a specific economic intensity reduction method that requires reducing a company’s GEVA by 7% per year.
Economic Intensity Targets are generally considered less robust than absolute and physical intensity methods. According to the SBTi, GEVA is, therefore, an option for Scope 3 target-setting only. Absolute Emissions Contraction or Sectoral Decarbonisation Approach targets are therefore preferable.
The GEVA method is currently not supported on the Plan A Sustainability Platform, however, if you are interested in finding out about how we can assist with developing a GEVA target, please get in touch.
Non-Science-Based Target approaches
Absolute emissions reduction may often be extremely hard to achieve, especially when the company is young and in a high-growth phase. Whilst setting science-based targets is preferable, we believe that setting a less ambitious Absolute Reduction Target is better than no target at all.
Non-Science-Based Absolute Reduction Targets
As described above, Absolute Reduction Targets are a commitment to reducing your organisation's climate impact by reducing your total emissions - either overall, or per scope - by a given percentage within a certain timeframe.
These can still be set even if they don't meet the ambition levels of science-based targets (42% reduction by 2030 for Scopes 1 and 2 and 25% for Scope 3).
Intensity targets
Intensity targets involve a commitment to reduce emissions relative to an economic or operational variable such as number of full-time equivalent (FTE) employees, revenue, or per product produced.
For example, an intensity target might look like one of the following:
Reduce emission intensity per Full-time equivalent (FTE) employee by 10% by 2025 compared to 2021 levels
Reduce emission intensity per $1m in revenue by 15% by 2025 compared to 2021 levels.
Reduce the emission intensity per product produced by 10% by 2025 compared to 2021 levels.
Adopting only intensity targets is often associated with greenwashing, especially when done by large companies with a significant carbon footprint because it means a commitment to become more efficient from the GHG emissions perspective while leaving room for emissions to keep rising indefinitely.
Example
If we take the target 'Reduce emission intensity per Full-time equivalent (FTE) employee by 10% by 2025 compared to 2021 levels', we can see how intensity reductions compare to absolute reductions.
Assuming that Company A starts with overall emissions of 58 tonnes of CO2e in 2021 and 100 employees and, therefore, an emissions intensity per employee of 0.58 tonnes of CO2e/employee. Based on the expected 15% growth rate in employee numbers, Company A expects a total number of employees in 2025 of 175.
If Company A continues business as usual, meaning their emissions intensity per employee remains the same over the following years, company A is expected to have a corporate carbon footprint of approximately 175 * 0.58 = 101 tonnes CO2e. The graph below illustrates this development:
The emissions intensity target, however, for 2025 is 0.522 tonnes CO2e/employee. With projected employee growth, the overall Corporate Carbon Footprint that Company A is therefore aiming for in 2025 is 91 tonnes CO2e.
The annual reduction rate in emission intensity is approximately -2.6%. Accordingly, the emissions intensity reduction pathway for Company A until 2025 looks like this:
As the graph shows, although Company A pledged to reduce the intensity of all its emissions, it is still expected to face an absolute increase of ~ 57% of its overall emissions.