Breaking Down the Requirements of SBTi’s Net-Zero Standard

 

In previous posts, we analyzed the different nuances, scopes, and meaning of the term “net-zero,” used in corporate statements, pledges, and reports. Since then the Science Based Targets Initiative (SBTi) has released a standard on net-zero. In this standard, the SBTi sets out guidance on the timeline and necessary actions to achieve net-zero. We welcome this new standard, as it helps eliminate some of the ambiguities around the term, ‘net-zero’.  The objective of this follow-up post is to provide an update focusing on the key requirements set by the Net Zero Standard. 

The Net-Zero Standard lays out a clear blueprint for companies that have, or are planning on setting, net-zero targets. Global emissions must be halved by 2030, and cumulative emissions must reach net-zero by 2050 to avoid catastrophic climate change. The focus must shift away from ambiguous claims to concrete actions to reduce emissions quickly and cost-effectively. This is emphasized by the separate requirements for near and long-term targets in the Net-Zero Standard. 

There are four main requirements in the Net-Zero Standard to limit global mean temperature increase to 1.5℃. The first and most time-sensitive requirement is to set near-term targets that focus on deep, rapid cuts to emissions. These targets are set for 5-10 years and must align with the 1.5℃ pathways. Global emissions must be cut in half by 2030, which means companies must focus on cutting emissions fast. These reductions need to come from a company’s entire value chain, which includes a company’s direct emissions (Scope 1), indirect emissions (Scope 2), and those from the value chain, including end-users (Scope 3). Near-term reductions vary based on the target set and timeframe, but all companies must account for 95% of Scope 1 and 2 emissions at least. In addition, a company must include 67% of Scope 3 emissions in their near-term target if Scope 3 makes up more than 40% of total emissions. With less than a decade to halve the emissions, meeting these near-term goals would be crucial for the globe to stay within the planetary carbon budget. 

The second requirement is to set long-term targets to reduce greenhouse gas emissions by 90% or higher by 2050. For many organizations, especially those at the stage of rapid growth, this is a very ambitious target, commitment to which may require substantial changes to its operation, investment, and management plans. Under the SBTi’s standard, which is voluntary in nature, companies can claim to be net-zero only after long-term targets have been met, reducing the ambiguity around net-zero claims. By doing so, SBTi hopes the focus will shift to actual emission reductions, from mere claims with no reduction plans or efforts in place. 

The neutralization of residual emissions using carbon removal solutions is the third requirement. Those emissions that can not be reduced must be neutralized through carbon removal solutions such as high-quality carbon capture and sequestration, Direct Air Capture (DAC), or geological storage. This requirement is in line with our previous posting, in which the requirements for carbon neutrality by the British Standard Institute (BSI)’s PAS 2060 and those for net-zero are distinguished. In PAS 2060, residual emissions can be neutralized using high-quality carbon offsets, which do not need to be carbon removal technologies. Offsets from carbon removal technologies are traded at a much higher price in the market, which poses additional financial implications to net-zero pledges compared to carbon neutrality pledges. 

The final requirement, and possibly the most influential one, is to go beyond the value chain. Net-zero is a collective movement in which individual companies can not succeed in isolation. The goal of preventing temperature rise to 1.5℃ involves the planet as a whole, not just one company’s reaching of net-zero. Therefore, there is a great need for financial support from larger organizations to help make deep near-term sector-wide emissions reductions. Using the financial power and influence that the private sector has, immediate emission reductions can happen at the pace needed. However, going beyond the value chain should only come after committing to reducing value chain emissions. Companies will help accelerate decarbonization by reducing their emissions and funding projects outside their direct influence.

The SBTi’s Net-Zero Standard is an excellent step towards the implementation of the necessary emission reductions that need to happen over the next 30 years. With a clear path and timeline setting for companies, the stalemate of where to start will cease. Organizations now have the framework, guidance, and support to take actionable steps to reduce emissions and successfully work towards net-zero. 

How can VitalMetrics help with achieving net-zero?

At VitalMetrics, we help organizations set, communicate, and achieve climate goals cost-effectively taking the unique circumstances that organizations are facing into account.  With our Carbon360 tool and analytical team on call, VitalMetrics can help your organization set actionable targets that meet SBTi’s Net-Zero Standard. VitalMetrics can help:

Written By:

Shelby Walsh

Shelby Walsh

 
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What Does "Net-Zero" Mean?: Unraveling Corporate Climate Pledges