Set target

Scope 1 and 2 targets

For Scope 1 and 2 short and long-term targets, companies can set absolute emissions reduction targets or physical intensity targets:

Absolute emissions reduction targets require companies to reduce annual emissions by an amount (e.g. 'reduce absolute scope 1 and 2 GHG emissions by 60% by 2030 from 2015 base year’). The main method used to develop absolute emissions reduction targets is the Absolute Contraction Approach.

Physical intensity targets require companies to reduce emissions relative to a specific metric (e.g. ‘Reduce Scope 1 GHG emissions 30% per kWh 2025 from 2015 baseline year’). The main method to calculate physical intensity targets is the Sectoral Decarbonization Approach (SDA).

As an alternative to Scope 2 emissions reduction targets, companies can set renewable electricity targets. These require companies to actively source renewable electricity at a rate that is consistent with 1.5°C scenarios: 80% renewable electricity procurement by 2025 and 100% by 2030.

Scope 3 targets

Scope 3 short and long-term targets can be framed as absolute emissions reduction targets, physical intensity targets, economic intensity targets, or supplier or customer engagement targets (short-term only).

Economic intensity targets require companies to reduce emissions relative to the financial performance of a company (e.g. ‘reduce Scope 3 GHG emissions 40% per unit of value added by 2020 from 2015 base year’). GHG Emissions per Value Added (GEVA) is a method for setting economic intensity targets.

Supplier or customer engagement targets are short-term targets intended to drive reduction behaviors with suppliers or customers. Along with other Scope 3 targets, these types of targets must cover at least two-thirds of total Scope 3 emissions.

SBTi target setting approach:

SBTi recommends the following steps for setting net zero targets:

Image: Steps for setting net zero targets

Source: SBTi

1. Select base year

Identify the year you will use as the baseline year when charting your emissions trajectory to net zero. Consider the following when selecting a base year:

• Emission data for Scope 1, 2 and 3 is accurate and verifiable

• Year is representative of company’s typical GHG profile

• Year should be chosen so targets have sufficient forward-looking ambition

• Must be 2015 or later

2. Calculate your company’s emissions

Develop a full GHG emissions inventory that covers at least 95% of Scope 1 & 2 emissions and a complete Scope 3 screening. Note the following points that should be considered when developing your inventory:

• Define Boundaries: Use a defined GHG protocol method to clarify emissions who should be responsible for which elements (e.g., operational control, financial control), covering the seven GHG types covered by UNFCCC. Be consistent with this method for baseline inventory and targets

• Consider subsidiaries: Parent companies must include subsidiaries in their inventory and target setting figures in alignment with their GHG protocol method

• Exclusion of carbon credits: Carbon credits are excluded from the inventory assessment

• Exclusion of avoided emissions: Avoided emissions are excluded from the inventory assessment

• Sufficient detail on scope 3: Scope 3 screening must assess 15 distinct categories of upstream and downstream emission sources and include all relevant categories in the inventory based on magnitude or level of influence. Further guidance on how to calculate Scope 3 emissions in Measure & Verify

• Sector specific guidance: Review any sector specific guidance from SBTI that may provide further direction or best practice relevant to your company’s industry

• Inclusion of separately reported emissions: If your company uses bioenergy, transports or distributes fossil fuel without selling fossil fuel, or is involved in land-use conversion, it should account for the associate emissions separately from the GHG inventory

3. Set target boundaries

Target boundaries should be defined similarly to how your inventory was defined to ensure targets can be fairly compared to your baseline. SBTI requires targets to account for nearly all scope 1 & 2 emissions in near-term and long-term targets. Scope 3 near-term targets are currently less strict to account for the challenges in measuring emissions external to companies’ supply chains, but long-term Scope 3 targets are more aligned with Scope 1 & 2.

• Short and long-term targets have different thresholds for emission that must be covered in setting targets for scope 1 & 2, and 3 emissions:

• Companies that use bioenergy, transport or distribute fossil fuel without selling fossil fuel, or are involved in land-use conversion may have to report use-phase emissions even though these emissions may not usually be included in a company’s GHG inventory. Refer to SBTi for further guidance if this applies to your company

4. Choose a target year

Set near-term and long-term target years that will be used as milestones for tracking your net zero trajectory.

• Near-term targets must be set for 5-10 years from the date of submission

• Long-term targets must be set for 2050 or sooner (2040 for companies in the power generation)

5. Calculate targets

Target setting uses the outputs from the preceding steps to calculate a decarbonization trajectory, using set annual reduction rates that align to differing warming scenarios. SBTI provides specific guidance on calculations and templates through the SBTi corporate manual. As further input for this final step your team will need to decide on the following points to determine the target specifics:

• Type of target: Agree to the type of contraction or convergence target you will pursue. Options vary between short-term, long-term and emission scope type, and include absolute as well as intensity targets

• Level of ambition: SBTi provides the option for companies to select a well-below 2°C target for Scope 3 emissions in the near-term, otherwise all SBTi science-based targets now must commit to 1.5°C

• Target wording: Compose a clear and succinct written summary of your target as well as any underlying targets

For more information on SBTi net zero target setting refer to SBTi.

Target benchmarking

Assessing the net zero ambitions of your industry peers, suppliers, or comparable sectors is the recommended approach for stress testing your target. A common approach for this is through benchmarking focused on net zero or other climate-related commitments.

Follow these steps to assess your drafted target against peers:

1. Select peer group: choose a selection of relevant businesses to include in the analysis (e.g. direct competitors, tier 1 suppliers, key customers, leaders in comparable industries)

2. Identify key categories for comparison: criteria should be data that is publicly available through sustainability disclosures or open reporting databases, and relevant to evaluating maturity of climate ambitions (e.g. scope of emissions included, 1.5 vs. 2°C pathway, timeframe, target type, third party validation)

3. Collect data and conduct side-by-side analysis: collect data from publicly available sources and compare your company’s ambition across peers

Case study: How a pharmaceutical company used benchmarking to assess its target against industry peers.