The Science Based Targets initiative (SBTi) is an organization that supports companies in developing their own science-based climate targets and Transition plans to create. It is a joint initiative of several leading organizations, including the Carbon Disclosure Project (CDP), the UN Global Compact, the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF).
The SBTi was launched to provide the private sector with a Framework in bringing its greenhouse gas emissions in line with the goals of the Paris Climate Agreement. This agreement aims to limit the increase in the global average temperature to well below 2°C above pre-industrial levels and to make efforts to limit the temperature increase to 1.5°C. The SBTi validation of the climate targets is one of the first building blocks for establishing a ESG strategy in companies.
As of May 2024, there are around 8,200 companies at the SBTi. Of these, 5,200 are already working with validated climate targets and a further 3,000 have signed the commitment letter. In Germany, this includes around 510 companies, such as Telekom, BMW, Deutsche Bahn, Bayer, Siemens, Mercedes Benz and RWE, and 4,400 companies across Europe have so far committed to the SBTi standards.
Objectives of the SBTi
The SBTi provides a comprehensive framework and guidelines for developing climate targets that are consistent with the latest climate science. Its main objective is to increase the transparency and accountability of companies with regard to their greenhouse gas emissions and climate action and to motivate the private sector to take a leading role in combating climate change. The overall aim is to accelerate the transformation to a low-carbon economy.
Why are science-based targets important?
Science Based Targets (SBTs) are important for companies for several key reasons. They make it possible to set emission reduction targets in line with the latest climate science in order to reduce the global temperature rise. This helps to combat climate change effectively. SBTs also contribute to this, Minimize risksclimate change entails for companies, such as physical risks from extreme weather events, regulatory risks from stricter emissions regulations and reputational risks such as CSRD or taxonomy.
In addition, companies that proactively take climate protection measures gain a competitive advantage through Increased efficiency, Cost savings and Innovation benefits. As more and more consumers and investors are taking sustainability seriously, these companies are also benefiting from a increased market attractiveness. In addition, companies with SBTs are better prepared for legal and regulatory changes, as governments around the world are increasingly implementing regulations to reduce greenhouse gas emissions. This makes it easier to comply with legal requirements.
Another important aspect is that Investors pay greater attention to the sustainability performance of companies. Companies with clearly defined SBTs strengthen investor confidence and improve their access to capital, as financial institutions are increasingly favoring companies that actively manage climate-related risks. The integration of SBTs into corporate strategy also promotes long-term sustainability. Planning and Stabilitywhich leads to long-term Profitability contributes to this. Ultimately, by setting and achieving SBTs, companies can strengthen their reputation as responsible and sustainable players, which can Customer loyalty increased and the Attractiveness as an employer increases.
SBTi benefits for companies at a glance:
- Identification of effective savings measures
- Reduction in operating costs
- Strengthening competitiveness
- Improved positioning vis-à-vis stakeholders
- Improvement of the brand image - increased customer loyalty and acquisition
- Increasing the attractiveness for talents
- Minimization of regulatory risks
- Promotion of innovations
- Better access to funding and financial resources from investors
How do companies become part of the SBTi?
As a first step, companies should use the so-called commitment letter sign the declaration. With the declaration, they commit to setting a science-based target within a maximum of 24 months after registration. The SBTi provides comprehensive and industry-specific technical guidance and resources to support this target development. Companies can then submit their emissions targets to the SBTi for review and validation. This is the only area where the initiative charges costs.
A validated corporate objective receives the Science-based" label. The Climate Roadmap focuses on the entire value chain, which means that companies must reduce their emissions in Scope 1, 2 and 3. External CO₂ certificates and avoided emissions are not counted, but are considered additional voluntary measures. In the following years, the companies that have joined the SBTi report publicly, transparently and regularly on their progress.
Development of climate targets according to SBTi
In general, the SBTi distinguishes between a simplified process and a standard process, as well as between short-term and long-term targets. The respective elaboration is based on the GHG scopes with which CO₂ balances are created.
- According to Scope 1 = direct emissions of the reporting company (heat generation, production processes, vehicle fleet, etc.)
- According to Scope 2 = indirect emissions in upstream activities in relation to purchased goods, raw materials or services and the type of energy used
- According to Scope 3 = indirect emissions in all upstream, downstream and accompanying processes or the entire value chain
Scope 1 and 2 come into play in the short-term target: here, 80% must come from renewable energies by 2025 and 100% by 2030 and 4.2 % CO₂ must be saved annually. All calculations are based on the CO₂ balance of a financial year not too far in the past and the calculations relate to a target year to be defined. Companies are free to choose whether they calculate their electricity according to a location-based or marked-based approach. The SBTi then calculates an individual CO₂ reduction roadmap. Scope 3 only comes into play in the long-term target definition for large companies if this area accounts for more than 40 % of total emissions. As this applies to most groups or large companies, these individual emissions targets should be defined in detail. In two thirds of the scope 3 criteria, at least 2.5 % must be saved annually. The simplified procedure for SMEs with up to 500 employees only provides for Scope 1 and 2 targets.
SBTi validation of a company's own climate targets in a simplified procedure costs around 1,000 dollars for SMEs and is considered an internationally recognized standard. For independent companies with more than 500 employees, validation of the climate protection target is available for just under 15,000 dollars.
Challenges in implementing the SBTi standards
Although SBTi offers many advantages for companies, there are also some challenges when it comes to implementation:
- Complexity of target development: Creating science-based emissions targets can be a major challenge for companies as it requires extensive data collection and analysis.
- Financial resources: The implementation of measures to reduce emissions can require high levels of investment.
- Organizational changes: In order to achieve climate targets, companies often have to adapt their internal processes and structures.
- Lack of industry standards: The SBTi does not yet have clearly defined guidelines and methods for target development for all sectors. For the first CO₂ balances in Scope 3 in particular, it is currently necessary to fall back on guideline tables.
- Lack of transparency: Some companies are concerned that disclosing their emissions data and progress could jeopardize their competitive advantage.
Despite these challenges, the growing number of companies joining the SBTi initiative shows that the advantages outweigh the disadvantages.
Conclusion
The SBTi plays a critical role in mobilizing the private sector in the fight against climate change by supporting businesses and providing them with a clear, science-based pathway to reduce their greenhouse gas emissions. By participating in the SBTi, companies can not only contribute to global climate stability, but also strengthen their own resilience and competitiveness.