In 2018, the Intergovernmental Panel on Climate Change (IPCC) issued a dire warning that it is critical to prevent global temperatures from rising beyond 1.5 degrees Celsius above pre-industrial levels, to avert the most devastating consequences of climate change. While everyone has a role in reducing their daily carbon footprint, businesses and industries have a vital role in reducing their greenhouse gas (GHG) emissions and transforming into zero-carbon economies.
The Science-Based Targets Initiative (SBTi) has been established with the primary objective of catalysing ambitious climate action within the corporate sector, by equipping businesses and financial institutions with the necessary tools and guidance to develop GHG emissions targets that align with scientific principles. This collaborative effort emerged through a partnership between influential organisations, including the Carbon Disclosure Project (CDP), the United Nations Global Compact, the World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the We Mean Business Coalition. The SBTi has emerged as a leading global initiative, driving companies to align their actions with what climate science requires of the global economy: to halve emissions by 2030 and achieve net zero by 2050 to limit global warming to 1.5°C above pre-industrial levels.
Why would businesses ask for trouble? Reducing GHG to save our mother planet may seem to be a noble aim, yet this can also benefit companies. Yes, money. Setting targets will drive technology improvements as businesses seek ways to improve energy efficiency, leading to higher productivity. Moreover, in a world increasingly focused on advocating ESG initiatives, the SBTi is a powerful means for businesses to demonstrate their unwavering dedication to social and environmental impact. This commitment, in turn, enhances their attractiveness to investors, opening a wealth of investment opportunities. The benefit of setting Science-based targets (SBT) is also expected to spur more businesses to adopt them to stay competitive, consequently leading to greater environmental impact.
Setting an SBT is not an easy task; most companies will have to follow this five-step process:
1. Making a commitment: companies have to submit a letter establishing their intent to set an SBT; they will then have 24 months to submit their planning to the SBTi
2. Developing a target: companies will need to work on an emissions reduction target for their corporate boundaries or value-chain, in line with the SBTi’s criteria. This includes setting Scope 1 to 3 interim targets (usually 5 to 10 years) and long-term net-zero targets. Furthermore, they will also have to align with industry-specific requirements.
3. Submit: companies will then present their target to the SBTi for a complete validation
4. Communicating with stakeholders to inform about the target
5. Disclosing annually for stakeholders to monitor the reduction progress
In 2022, SBTi witnessed significant growth in the number of organisations setting SBTs. This includes 1097 companies that had their targets approved by the committee, which has exceeded the sum of the previous seven years combined. For the first time, the committee has observed growth in every continent, especially in developing countries such as Myanmar. A significant growth in the number of SMEs setting targets was also observed, representing more than 50% of organisations setting targets in 2022.
Businesses hold the key to deciding the climate change catastrophe- they can either shut the door or keep it open. While it is delightful to learn that more organisations are joining the path of committing climate change action, it is never enough. Every company and financial institution must act now.
Author: Thomas Chan
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