May 19, 2023

A Guide to Setting Credible Net Zero Targets for Companies

Companies must start setting ambitious yet credible emissions reduction goals in order to mitigate climate change. These goals must be science-based, transparent, encompass Scope 3 emissions, and include both near- and long-term strategies to reach net zero.

Isabel Loh
A Guide to Setting Credible Net Zero Targets for Companies

The urgency to combat climate change requires immediate and ambitious action. The global scientific consensus for limiting the impacts of climate change state that we must aim for a 1.5 C temperature increase limit. Hoesung Lee, Chair of the Intergovernmental Panel on Climate Change,  has expressed “we are walking when we should be sprinting” when it comes to emissions reductions and climate action.

Other environmental movements are also aiming to raise awareness about the urgency and immediacy of the carbon problem. The recently popularized carbon budget and carbon clock conceptual models demonstrate that the time before we reach the atmosphere’s maximum carbon dioxide capacity is running out, and achieving net zero emissions is essential to prevent the worst outcomes of climate change. 

Companies must set ambitious carbon reduction goals to reach net zero emissions as soon as possible. Focusing on this initiative now will allow companies to preemptively address future pressures from the public and from the government to disclose emissions. Taking climate action also helps corporations mitigate physical and financial climate risks, optimize operations, and build a positive reputation among consumers by reducing their own contribution to atmospheric carbon. 

However, with consumers, investors, and employees becoming more cognizant of greenwashing, businesses face a high reputational risk in making net zero claims without setting credible decarbonization targets. Setting credible emissions goals can help to reduce the risks of greenwashing by providing a clear and transparent framework for measuring and reporting a company's environmental impact. 

To do this, they’ll need to set credible net zero targets that consist of measurable and attainable carbon reduction benchmarks. Excellent goals encourage accountability and action. In this blog post, we’ll explore science-based net-zero targets and the best practices for creating them. 

This post is part 3 of a series on a company's decarbonization journey. Read part 1 on the challenges of measuring Scope 3 emissions and part 2 on getting started with Scope 3 measurement. Follow us on LinkedIn to be notified when new posts are out, or subscribe using the form at the bottom of the post.

Setting science-based net-zero targets

Credible net-zero targets must be science-based, meaning they are aligned with the goal of limiting global warming to 2°C above pre-industrial levels, and preferably to 1.5°C. Credible carbon targets should be ambitious, achievable, and consistent with the latest scientific knowledge and industry best practices. They should also be transparent, measurable, and verifiable, with clear timeframes and milestones. 

Credible carbon targets also require comprehensive and reliable data on a company's greenhouse gas emissions, including all relevant sources and scopes. To ensure accountability and encourage progress, credible carbon targets should also be regularly reviewed, reported, and independently verified.

Request a demo to find out how Unravel Carbon can help you get a comprehensive and reliable view of your company's emissions.

The Science-Based Targets Initiative (SBTi), a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF), enables organizations to set science-based emissions reduction targets. These targets drive ambitious climate action among corporations.

The SBTi Net-Zero Standard, launched in 2021, provides the world's first framework for corporate net-zero target setting. According to the SBTi, the private sector will need to reduce Scope 1, 2, and 3 emissions to zero or residual level in 1.5°C-aligned pathways. Any residual emissions and greenhouse gas emissions after the net-zero target year should be neutralized with carbon offsets. 

Setting near-term and long-term net zero targets

It is not uncommon to see companies setting 2050 net zero goals without any interim goals or disclosing how they plan to achieve this. For companies to claim to have credible net zero strategies, it is crucial to set both near- and long-term goals.

Long-term goals provide a clear vision of the future to work toward, while near-term goals ensure progress is being made in the interim period. Companies should establish emissions reduction targets while taking into account their business objectives, sectoral benchmarks, and the latest science-based guidance on climate action.

According to the SBTi’s Net-Zero Standard framework, near-term goals refer to targets set for the next 5 to 10 years from the base year. These goals should be based on accurate and verifiable data from scopes 1 through 3. The base year should be no earlier than 2015 and should be used for both near-term and long-term science-based targets.

Source: Science Based Targets initiative

The disclosure of a company's emissions and goals, both short-term and long-term, enables stakeholders to evaluate whether the company is making strides toward achieving its objectives. This transparency allows for an assessment of progress made by the company.

Covering Scope 3 emissions in net zero targets

When setting targets, special attention should be paid to Scope 3 emissions in order to ensure their credibility. We’ve discussed the differences between Scope 1, 2, and 3 emissions in a previous blog post. Scope 1 and 2 emissions cover emissions from a company's operations and energy use. Scope 3 emissions cover emissions from the value chain, including things like purchased goods and services, transportation, and waste disposal. While companies tend to focus on just Scopes 1 and 2, the SBTi Net Zero Standard demands that Scope 3 emissions also be included in long term net zero targets. For near-term targets, Scope 3 emissions should be included in the boundary if they encompass >40% of the company's total Scope 1-3 emissions.

Scope 3 emissions can represent a significant portion of a company’s carbon footprint, sometimes making up more than 75% of a company’s total emissions. Companies tend to face challenges in measuring those indirect emissions that occur in their value chain. Although some Scope 3 emissions are out of a company’s realm of control, collaborating with suppliers and other partners can foster innovation and new business opportunities that ultimately reduce the carbon in the atmosphere.

Request a demo to find out  how Unravel Carbon can help your company overcome the challenges of measuring Scope 3 emissions and accurately measure emissions across all scopes.

Reduce emissions first, offset last

Another key requirement of the SBTi’s Net Zero Standard requires companies to reduce their value chain emissions before relying on offsets, which essentially means investing in mitigating emissions in their value chain before purchasing carbon credits (beyond value chain mitigation). This aligns with the carbon mitigation hierarchy– an approach to prioritizing actions related to reducing greenhouse gases. 

In essence, carbon credits should only be used to balance the hardest-to-abate emissions, such as emissions from biological processes in agriculture, industrial processes like steel and cement production, and fossil fuel combustion for aviation. The first and primary focus of climate action efforts should be on carbon reduction, as much as possible.

The SBTi’s Net Zero Standard states that a company can be considered as having attained net zero status only after having fulfilled its long-term and science-based objectives. In addition, the company must have also offset any remaining emissions. To achieve this, it is necessary to employ permanent carbon removal and storage methods to offset the last <10% of emissions that are nearly impossible to eliminate. It is important to consider that any climate finance beyond the value chain should be done in conjunction with serious emission reductions, and not as a replacement for them. 

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In order to set credible emissions reduction targets, companies must ensure their goals are science-based, include near- and long-term benchmarks, and encompass scope 3 emissions. Companies must also remember that reducing carbon emissions should be the first priority in reaching net zero, with carbon offsets only being used as a last resort where necessary. 

Unravel Carbon is here to help you set ambitious and credible emissions reduction targets, monitor progress, and engage with stakeholders to reduce your impact. Get in touch with us.

Stay tuned for our upcoming posts, where we will dive deeper into decarbonization solutions, providing practical guidance and real-world examples to help companies like yours develop a comprehensive and effective decarbonization strategy.

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