New Metrics Circular Economy Organizational Governance

SBTi Launches World-First Net-Zero Corporate Standard

The Standard clarifies that rapid action to halve emissions before 2030 and long-term deep emissions cuts of 90-95% before 2050 are crucial for net-zero targets to align with science.

Published 2 years ago | About a 7 minute read

Image: Pixabay/Pexels

The Science Based Targets initiative (SBTi), the global body enabling businesses to set emissions-reduction targets in line with science, today launches the world-first Net-Zero Corporate Standard — and seven companies have already had their net-zero targets certified according to the new guidelines.

The SBTi’s Net-Zero Standard is the world’s first science-based certification of companies’ net-zero targets in line with the Paris Agreement’s goal of keeping planetary warming to 1.5°C.

“Companies are currently self-defining net-zero targets without credible and independent assessment of their ambition and integrity,” says Alberto Carrillo Pineda, co-founder and Managing Director of the SBTi. “For the first time, the SBTi Net-Zero Standard offers companies robust certification to demonstrate to consumers, investors and regulators that their net-zero targets are reducing emissions at the pace and scale required to keep global warming to 1.5°C. We’re now inviting all companies with net-zero targets and ambitions to show stakeholders that their decarbonization pathway is aligned with science. And the rest of the business sector — we call on you to join the Race to Zero.”

The first seven firms to have their net-zero targets certified as part of the SBTi’s pilot scheme are AstraZeneca (UK), CVS Health (US), Dentsu International (UK), Holcim (Switzerland), JLL (US), Ørsted (Denmark), and Wipro (India). More companies are now invited to commit to set net-zero targets, which the SBTi will begin validating from January 2022.

90%+ decarbonization by 2050 is the only route to science-based net zero

Companies adopting the Net-Zero Standard will be required to set both near- and long-term science- based targets across their entire value chains — meaning all 3 scopes. Near-term targets cover immediate emissions reductions for the next 5-10 years, while long-term science-based targets determine the total level of decarbonization by 2050 or before.

While our feeds are flush with new corporate net-zero commitments every week and the attention to the need for decisive climate-action policies is commendable, the devil is definitely in the details. Many companies’ plans hinge on reaching net zero by 2050, with a vague path to get there — or if it’s detailed, it’s heavily reliant on steep cuts in the last decade to decade-and-a-half before 2050. ‘Net zero’ risks giving us the concept of ‘time’ that we don’t actually have. To follow the latest climate science, plans must focus on achieving as much reduction as possible, as soon as possible — including, very specifically, the equivalent of a reduction of 45 percent from 2010 levels by 2030. If a majority of organizations are still working out how to eliminate a significant chunk of their emissions by 2045 or so, that’s likely too late.

Through the standard, the SBTi clarifies that science-based net zero requires companies to achieve deep decarbonization of 90-95 percent before 2050.^1^ At that point, a company must neutralize any limited residual emissions that are not yet possible to cut. However, the SBTi sets clear parameters that these residual emissions — which must be neutralized through carbon removals — cannot exceed 5- 10 percent of a company’s emissions depending on its sector. Neutralization activities can take the form of technological removals (eg. Direct Air Capture [DAC] with geological storage) and nature-based solutions (eg. reforestation).

“Ørsted is proud to join the SBTi in the launch of the new Standard and to become the first energy company in the world with a science- based net-zero target,” said CEO Mads Nipper. “We recognise that the only route to a climate-safe future is one that prioritises emissions reductions, both in the near and long term. That’s why we’re set to reduce our carbon intensity by at least 98 percent by 2025 compared to 2006 in our energy generation and operations, and target net-zero emissions across our entire value chain by 2040. We need bold but credible net-zero plans from companies. If you are a business leader who wants to walk the talk, I encourage you to align your company's climate strategy with what is required by science.”

The principle at the heart of the SBTi Net-Zero Standard is the “mitigation hierarchy.” This means companies should address value chain emissions and implement strategies to achieve these targets as the main strategy to reach net-zero emissions.

"The Net-Zero Standard gives companies a clear blueprint on how to bring their net-zero plans in line with the science, which is non-negotiable in this decisive decade for climate action. Because we are running out of time — we have to create a net-zero world economy in just one generation,” says Johan Rockström, Director of the Potsdam Institute for Climate Impact Research and Professor in Earth System Science at the University of Potsdam. “There is only one pathway forward that involves rapid and deep emission cuts and investment in nature-based solutions — which are absolutely fundamental."

The SBTi recognizes the urgent need to scale up near-term finance to help address the nature and biodiversity crisis and increase the likelihood that the global economy limits warming to 1.5°C. Given that, the Standard recommends companies make investments to reduce emissions outside their value chains — but these investments should be in addition to, not a substitute for, rapid and deep reductions of a company’s own emissions.

Investors have become increasingly vocal about the need for corporates to back up their words with substantive action — last month, 220 global financiers holding over $29 trillion in assets called on world’s highest-impact companies to set science-based emissions-reduction targets ahead of COP26. And the role of finance in corporate decarbonization is vital for the world to reach net-zero emissions — so, the SBTi is working to define and develop metrics around what net-zero looks like for financial institutions to decarbonize the real economy and is launching its Net-Zero Foundations for Financial Institutions: Draft for Public Consultation on 10 November 2021.

Developing the first-ever science-based net-zero target standard

The Net-Zero Standard was developed in consultation with an independent Expert Advisory Group, made up of experts from academia, civil society, science and business. More than 80 companies took part in a road-test of the Standard in August 2021.

The Advisory Group will continue to refine and develop the Standard in early 2022, specifically looking at best practice in beyond-value-chain mitigation and how to further support companies in reducing scope 3 emissions.

“Without a common, science-based definition of what constitutes a net-zero target, companies and their stakeholders can’t be sure that their long-term climate targets are credible or ambitious enough,” says Richard Batten, Chief Sustainability Officer at JLL. “The SBTi Net-Zero Standard applies the latest climate science to the target setting process, providing organisations with a rigorous, consistent and highly credible methodology to determine their net zero goals.

“From a JLL perspective, the Net-Zero Standard has helped create the discipline and focus to be truly ambitious in setting our own net-zero target: to reduce absolute emissions across all scopes by 51 percent by 2030, and 95 percent by 2040 from a 2018 base year.”

To date, more than 300 companies have made a commitment to reach science-based net-zero before 2050 through the SBTi’s Business Ambition for 1.5°C campaign. Companies can commit to setting a science-based net-zero target in line with the Standard via this campaign and Race to Zero.

1 With the exception of the forestry, land-use and agricultural (FLAG) sector, in which 20% of carbon removal is permitted after deep decarbonization of 80% by 2050. The GHG Protocol is developing new guidance for corporate land use and removals accounting; and, in parallel, the SBTi is developing specific science-based target setting methods for companies with land sector emissions which will provide FLAG companies with the opportunity to factor in land sector emissions and reduction opportunities into their net-zero strategies. This will become mandatory for companies setting SBTs in land-intensive sectors starting in September 2022.