Establishing science-based emissions reduction targets for insight, innovation, risk management, and competitiveness
Leverage publicly available methodologies using current climate science
More companies are committed to broad action on climate change than ever before. But what does leadership look like? As sustainability pledges have increased, so has the need for more accurate measurement and management of greenhouse gas (GHG) emissions alongside truly impactful reduction goals. A science-based method removes the arbitrary approach to setting GHG reduction targets and replaces it with a global benchmark to enable companies to set aggressive yet reasonable goals.
Defining science-based targets
Companies are accelerating their climate change agendas because such action offers myriad opportunities to realize tangible business benefits such as cost savings, risk resilience, employee recruitment and retention, customer or consumer attraction, and more. Yet while many companies continue to set absolute or intensity GHG emissions reduction target, these targets are usually arbitrary and typically conservative.
A science-based target has the objective of keeping the rise in global temperature below two degrees Celsius from preindustrial levels, a level widely accepted. Rather than allowing individual companies to determine baseline year, target year, and the ultimate reduction target, setting a science-based target leverages publicly available methodologies that are based on the latest climate science. This involves establishing targets in the context of the 2-degrees Celsius goal, and, depending on the approach selected, in the context of a company’s individual industry sector and market share as well.
Should my company set a science-based target?
The science-based method can help remove the arbitrary approach to setting GHG reduction targets. The method replaces it with an approach governed by an agreed-upon global target that can enable companies to set aggressive yet reasonable goals, considering their standing in the global economy.
Core benefits of science-based targets
For many companies, the GHG emissions reduction target setting process is still arbitrary and based on projects already planned. But this tends to limit company ambition and drive for innovation, and as a result, the potential of a business to reduce emissions and associated costs may never be realized. On the other hand, science-based targets challenge a business to see how much it can improve. Setting a target tied to science can:
- Promote bolder business solutions that fit within company DNA to advance execution against science-based targets, and
- Enhance revenue and lower operational costs by developing new business models and low-carbon processes, technologies, services, products and other sources of value.
Guidelines for setting science-based targets are adaptable, meaning a company can choose to set a scope 1 (i.e., direct emissions) and/or scope 2 (i.e., energy indirect emissions) target, as well as separate scope 3 (i.e., indirect emissions upstream and downstream in the supply chain) target or targets. Such an approach can help a company to:
- Identify science-based emission reduction trajectories for carbon “hot spots” in value chains, driving improved insight and ability to manage scope 3 emissions, and
- Uncover opportunities to engage with suppliers and customers, strengthen partnerships, and reduce emissions across supply chains.
While still an emergent occurrence, more and more policies are trending towards mandatory GHG emissions limits and/or reporting, with 40 countries and more than 20 provinces, states, and cities having already implemented carbon taxes or emissions trading systems that collectively cover 20 percent of global GHG emissions.6 Proactively measuring and managing energy and emissions data across an organization is a necessary step for executing against an emission reduction goal and can help a company better prepare for:
- Potential shifts in regulation and policy, thus the reducing potential cost and reputational impacts of such changes, and
- Inherent risk in commodity price volatility, by reducing energy demand through energy efficiency measures and shifting the energy supply base through measures such as a renewable energy and longer-term contracts.
Establishing a science-based target demonstrates a company’s advanced ambition and corporate responsibility agenda to various stakeholders. And it is a clear statement of a company’s recognition of the severity of the climate challenge and in taking proportional efforts to mitigate it. Such activity can:
- Boost employee retention and recruitment and correspondingly reduce replacement costs, and
- Deepen credibility with and the confidence of investors, customers, employees, policymakers, and community members alike.
How we can help
If your company decides to advance its corporate sustainability agenda and commits to setting a science-based target, then step one is complete. But additional steps are necessary for realizing the full benefits of such an action. For more information about our climate change and sustainability consulting services, please contact us.