‘Infinite scenarios’ for how targets will be impacted: Experts explain SBTi’s latest update

When an email arrived in the inboxes of some Science Based Targets initiative (SBTi) members on Wednesday, it was unclear how much attention it deserved. 

Sent only to companies in the advanced stages of setting near-term climate targets, it informed them of a “non substantive” change to SBTi’s Absolute Contraction Approach – the methodology used to set absolute emissions reduction targets. 

But it turns out the update is bigger than it might seem at first. 

‘2020 out of the window’

“It’s ‘non substantive’ because the criteria itself hasn’t changed: you’ve still got to align with a 1.5 degree reduction for Scope 1 and 2, or not more than 2 degrees for Scope 3,” explains Caroline Johnstone, an SBTi-certified managing director from Rawstone Consulting.  

“But there are significant changes to the way the underlying targets are calculated.”

When it was originally set up, SBTi took a linear approach to its near-term target rules, meaning a 1.5c target, for example, required a 4.2% cut in emissions every year.

Zara Plummer, who co-leads GHG accounting and net zero for Anthesis Group, says that, in 2021, SBTi recognised that this wasn’t incentivising companies to set targets early, because the decarbonisation requirement was the same no matter when you started. 

“So they changed it to require all companies with a base year of 2020 or later to reduce their emissions by at least 42% by 2030, meaning the ambition was ultimately the same if you set your target in 2020 or 2025, but the curve was much steeper [under the latter scenario],” she tells Real Economy Progress. 

This created really steep reduction curves until 2030, and then flatter pathways to 2050.

“But SBTi has realised that firms setting targets after 2025 will have to commit to such high levels of annual decarbonisation by 2030 that it could become too disruptive,” Plummer points out.  

In response, the initiative has now essentially stopped requiring all decarbonisation thresholds to be calculated as if they commenced in 2020. 

“Now, 2020 is out of the window,” says Johnstone, “and the calculation is just the time between your base year and target.” 

Overall, she adds, this will make targets easier to achieve – including for supply-chain goals. 

“A Scope 3 target that used to be 25% is now 15% in a few cases that I’ve calculated using this new update.”

A spokesperson for SBTi told Real Economy Progress the change “maintains alignment with net-zero by 2050 and does not change the overall level of ambition”. 

“The minimum annual reduction rate for near-term targets remains 4.2%,” he said.

Historic decarbonisation 

There are other changes to the rules that may make targets more ambitious for some companies, rather than less. 

Johnstone says that SBTi has updated the way it deals with carbon reductions that happen just before a target is set.  

“Previously, a company would have to have seen their Scope 1 and 2 emissions drop by more than 30% [compared with the base year] in the run-up to setting a target before SBTi tinkered with the thresholds.” 

That’s because such a big drop in emissions would put the company very close to achieving the default target before it was even agreed, so SBTi would give it a more aggressive one.   

“Now, almost any reduction will affect your target threshold,” says Johnstone. 

“So even if it’s just a 10% cut, you won’t get away with the basic target anymore – they’ll make it a bit harder.” 

“But, on the flip side, if your emissions have gone up, your target will actually become easier to account for that, too.”

There is a risk that unscrupulous companies will now be incentivised to drive up their emissions ahead of setting their target, Johnstone points out, to ensure they get an optimal one. 

Scope 1, 2 and 3 

And then there are the changes to the scopes. 

“The tool now defaults to a 2050 target year for Scope 1 and 3, and 2040 for Scope 2,” observes Plummer. 

For the time being, SBTi still allows combined Scope 1 and 2 targets, but it now calculates them based on two individual numbers with different target years.

Next steps

“It’s very hard to summarise what this will mean for every company because there are infinite different scenarios for how their emissions will be impacted, dependent on base year and historic progress in emissions from base year to most recent year,” she says. 

The separation of Scope 1 and 2 targets has been tested in the drafts for SBTi’s next corporate net-zero standard (CNZS V2), which is currently under development. 

A spokesperson for the initiative said its latest amendments “introduce a similar approach to the linear contraction methodology proposed in CNZS V2 to ensure greater alignment for those companies setting targets under V1 in 2026 and 2027”. 

“It addresses an issue that targets in V1 designed to be achieved through the 2020s were becoming prohibitive for those setting targets now, given the compressed period this implies to achieve emissions reductions,” he said, insisting that “companies can continue using SBTi tools and resources as usual”.

SBTi will communicate this week’s update more widely “as part of a package in the coming weeks” he added.