SBTi Overview
The SBTi (Science Based Targets initiative) was established in 2014 through collaboration among CDP (Carbon Disclosure Project), the United Nations Global Compact, WRI (World Resources Institute), WWF (the World Wide Fund for Nature), and the We Mean Business Coalition. Its objective is to empower companies globally to align with climate science mandates for the global economy: cutting emissions by half by 2030 and achieving net-zero by 2050.
SBTi formulates criteria and offers tools and guidance for businesses and financial institutions to set GHG emissions reduction targets, aligning with scientific recommendations to limit global heating below 1.5°C. The SBTi operates on the diffusion of innovation theory, aiming to reach a critical mass of 20% of businesses in a specific territory or sector by 2025:
- Covering $20 trillion of the global economy with approved 1.5°C targets.
- Including 5GT of corporate emissions under science-based targets or commitments.
- Encouraging 10,000 companies to commit to or set science-based targets.
Currently, SBTi does not assess targets for cities, local governments, public sector institutions, nonprofit organizations, or companies in the Oil & Gas sector.
Joining the SBTi offers several advantages:
- Ensuring future growth sustainability
- Cost savings
- Regulatory resilience
- Enhanced investor trust
- Fostering innovation and competitiveness
- Demonstrating tangible sustainability commitments to conscientious consumers.
- Businesses undergoing target validation through SBTi receive detailed feedback and technical support.
- Companies signing the SBTi commitment letter gain immediate recognition as “Committed” on the SBTi website.
The process to establish science-based targets involves:
- Simultaneously setting a science-based target while conducting a comprehensive inventory of Scope 1, 2, and 3 emissions.
- Submitting a letter to SBTi declaring the intent to set a science-based target.
- Developing an emissions reduction target meeting SBTi’s criteria.
- Presenting the target to SBTi for validation.
- SBTi announcing the validated target on their website.
- Informing stakeholders about the target.
- Reporting company-wide emissions and tracking target progress annually.
Science-based targets
Near-term targets
Near-term targets must align with the most recent criteria. Scope 1+2 targets should be 1.5°C-aligned, while scope 3 targets need to be well-below 2°C aligned, and the target year must fall within 5-10 years from submission. All companies, except Forestry, Land and Agriculture, Power, and Maritime sectors (which must follow sector guidance), must reduce emissions by a minimum of 4.2% annually. This reduction can be achieved through absolute reduction or intensity convergence, depending on the sector. Companies must also procure renewable electricity at a rate consistent with 1.5°C scenarios, aiming for 80% renewable electricity procurement by 2025 and 100% by 2030 as thresholds.
When Scope 3 emissions (activities outside a company’s direct control but related to its operations) constitute less than 40% of overall emissions, no Scope 3 target is required, although it is encouraged as best practice.
However, when Scope 3 emissions make up 40% or more of overall emissions, companies must set one or more emission reduction targets and/or supplier/customer engagement targets covering at least 67% of total scope 3 emissions. These Scope 3 targets must align with well-below 2°C pathways and must be achieved within 5-10 years from the date the target is submitted to the SBTi for validation.
For sector-specific guidance, refer to the sector-specific requirements table in the Corporate Near-term criteria.
Near-term targets are a prerequisite for companies wishing to set net-zero targets.
Long-term targets
Long-term targets indicate the degree of emission reductions organizations need to reach to achieve net-zero according to the SBTi’s Corporate Net-Zero Standard criteria. Most organizations will need to reduce emissions by at least 90% to reach net-zero no later than 2050 (or 2040 for the power sector) (72% for Forestry, Land, and agriculture – FLAG) in SCOPE 1, 2, 3, using 100% renewable electricity by 2030. Long-term targets can only be set by companies that have committed to net-zero under the SBTi’s Net-Zero Standard. There are specific sector guidelines to follow.
Net-zero target
Setting a corporate net-zero target means:
- Reducing scope 1, 2, and 3 emissions to zero or a residual level consistent with reaching net-zero emissions at the global or sector level in eligible 1.5°C scenarios or sector pathways.
- Neutralizing any residual emissions at the net-zero target date and any GHG emissions released into the atmosphere thereafter.
The possible SBTi impact on the carbon credit market
SBTi stimulates the neutralization of residual emissions
According to C11 of SBTi Corporate Near-term criteria, “the use of carbon credits must not be counted as emission reductions toward the progress of companies’ near-term science-based targets. Carbon credits may only be considered to be an option for neutralizing residual emissions (see the SBTi
Corporate Net-Zero Standard Criteria C28).
Companies shall remove carbon from the atmosphere and permanently store it to counterbalance the impact of any unabated emissions that remain once companies have achieved their long-term
science-based target, and for subsequent years thereafter. The neutralization of unabated
emissions applies to both the emissions reduction target boundary and to any unabated
emissions that have been excluded from the GHG inventory.
SBTi promotes beyond value chain mitigation
According to R9 of SBTi corporate net-zero standard, “companies should take action or make
investments outside their own value chains to mitigate GHG emissions in addition to their
near-term and long-term science-based targets. For example, a company could provide
annual support to projects, programs and solutions providing quantifiable benefits to climate,
especially those that generate additional co-benefits for people and nature. Companies
should report annually on the nature and scale of those actions.” You can read more about this initiative in this article.
Conclusion
The number of companies in the SBTi is increasing significantly. Specific information about the participants can be obtained by clicking on the link on the official website. At the Net-Zero target date, they will need to compensate for 10% of residual emissions, creating demand for carbon credits. Further procedures for buying carbon credits in the form of Claims Code of Practice and Core Carbon Principles are already in place.
Also, it is important to be aware of the development of Beyond value chain mitigation as a potential tool to attract investment in the carbon market.
At the time of writing this post, Moldovan companies have not committed to setting targets within the SBTi initiative.
Since the editor of this portal simultaneously administers the portal on climate regulation in the Russian Federation, in some cases information relevant to the Republic of Moldova may be partially borrowed from there.
An article on this topic was published on the CarbonUnits.RU portal by link.
