Science Based Targets

The SBTi was formed in 2014 as a partnership between Carbon Disclosure Project (CDP), a not-for-profit charity that provides a global disclosure system for managing environmental impacts, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). Towards the end of 2022, about 4,000 institutions covering over one-third of the global economy’s market capitalisation were committed to setting targets via the SBTi. The SBTN builds on the SBTi and consists of a network of 45+ organisations - including the same organisations mentioned above. The network develops methods and resources for science-based targets to help institutions define a clear pathway to ensure they are assessing their value chain and addressing their impacts and dependencies on nature.

How do science-based targets work? The process of setting science-based targets involves five steps:

1. Commit: Submit a letter formalising your
   intent to set a target that is science-based
2. Develop: Work on a Green House Gas (GHG) reduction target aligned with the SBTi’s criteria
3. Submit: Present your target to the SBTi for validation
4. Communicate: Announce your target publicly and inform your stakeholders
5. Disclose: Report company-wide emissions and track target progress annually

The SBTi framework related to emissions requires addressing scopes 1 (own operations) and 2 (from purchased energy). For companies whose scope 3 (from suppliers, customers, end users) emissions cover more than 40% of their combined scope 1, 2, and 3 emissions, targets must cover scope 3 as well. On the other hand, the SBTN framework, scheduled to be released later this month (03/2023), creates technical guidance for setting nature-related targets concerning the conservation of biodiversity and oceans, land, and freshwater use. Each of the mentioned resources has a designated hub for developing the SBTs.

From the EU regulatory perspective, the SBTi are referenced in the draft European Sustainability Reporting Standards (ESRS) set by the European Financial Reporting Advisory Group (EFRAG). The objective of the ESRS is to set out the requirements that institutions shall comply with when preparing and presenting sustainability-related information under the Corporate Sustainability Reporting Directive (CSRD). The SBTs and SBTN are referenced as suggested benchmarks and guidelines in the ESRS drafts covering climate change, pollution prevention, conservation of water and marine resources, resource use and circular economy, and biodiversity and ecosystems.

Besides providing benefits to institutions’ operations, the SBTi assesses the climate risk of financial investments. Financial institutions integrating science-based targets into their investment decisions can reduce their exposure to climate-related risks and align their investments with transitioning to a low-carbon economy. In conclusion, the Science Based Targets initiative is vital for promoting corporate climate action and reducing greenhouse gas emissions.