For decades, forward-thinking companies have been increasingly committed to doing their part to create a more sustainable business and future for our world. But as the realities of climate change have revealed themselves more and more in recent years, and the pressure for companies to respond has escalated, taking more strategic action to future-proof business growth and ensure global prosperity is becoming business-critical—enter science-based targets.
The Paris Agreement of 2015 saw nearly 200 countries commit to preventing climate change by limiting global warming to “well below” 2 degrees Celsius. For the world’s businesses, this signaled the need to move swiftly toward a low-carbon economy, and the Science Based Targets Initiative (SBTi) was formed to ensure companies had the guidance to create climate-science-aligned targets to drive decarbonization and business transformation.
Today, nearly 500 companies from around the globe such as Brown-Forman, Compass Group USA, Cummins, Salesforce, and The Kraft Heinz Company have committed to science-based targets, with 149 companies having approved targets, according to SBTi. And for thousands of other companies, the desire to commit to SBTs and make meaningful change is there.
But before publicly declaring a commitment to SBTs, it’s critical for every company to understand and define the time, effort, and resources needed to meet targets and drive business ROI. You need to build your business case.
The Business Case for Science-Based Targets
The impacts of climate change know no bounds. Every sector in every market is being touched—look no further than the water quality, access, and scarcity issues around the globe; every business runs on water. So, at the most fundamental level, taking steps to combat climate change reduces business risk and increases resiliency—and SBTs can provide your roadmap.
Going deeper, SBTi outlines four core reasons setting science-based targets are good for business:
Increases innovation: As SBTi puts it: “The transition to a low-carbon economy will catalyze the development of new technologies and operational practices. The companies that set ambitious targets now will lead innovation and transformation tomorrow.”
Reduces regulatory uncertainty: The regulatory environment is in constant flux as governing bodies and organizations at multiple influence levels work to promote sustainable change. By taking action now, companies can stay ahead of the regulatory curve and even help shape future policies.
Strengthens stakeholder confidence and credibility: According to SBTi, 52% of executives say they’ve seen investor confidence boosted by science-based targets. Furthermore, with more than half of consumers worldwide believing that climate change negatively impacts their lives, taking the lead on climate change can bolster your reputation and authority among stakeholders.
Improves profitability and competitiveness: Rising prices of raw materials and resource scarcity is and will continue to have a major impact on a company’s bottom line. But by setting ambitious targets now, companies can transform operations to run leaner and more efficiently, as well as ensure durability into the future.
There’s no denying that science-based targets offer key business advantages; protecting our world protects your business. But before you publicly declare your science-based target commitment, you need to do a reality check.
The Business Reality of Science-Based Targets
Until recently, targets to reduce greenhouse gas emissions were typically short-term, low-ambition, or arbitrarily set. While the efforts to reach those targets have yielded important improvements, they haven’t led to the kind of transformative improvements and investments that mitigate climate change.
“The time commitment is immeasurable,” Nick Martin, Sustainability Practice Leader at Antea Group, states. “The ultimate goal is to future-proof your business, so it’s an ongoing commitment.”
“When it comes to the financial aspect, it’s a multi-million-dollar investment,” he continues. “On average, we see a cost of $2,000 per tonne of CO2e reduction. However, we also see a 10-15% average return on investment.”
But investment isn’t limited to time, money, and resources. Companies also need to think critically about their entire operation and the implications on their business short- and long-term.
“When you commit to science-based targets, you commit to business transformation,” Charlie Quann, Sustainability Consultant at Antea Group, says. “Deep operational changes are needed; you’re not just capitalizing on surface-level or low-hanging fruit opportunities. Aspiring to SBTs requires a major shift in culture and decision-making mindset, which is easier said than done and the analogy of turning a large ship applies.”
“Additionally, supply chain engagement and performance, stakeholder attitudes and perceptions, and overall ROI are among other critical considerations,” he adds.
The Reality Kicker
Science-based goal setting is a new and evolving space. A new special report from the Intergovernmental Panel on Climate Change (IPCC) states limiting global warming to 1.5 degrees Celsius, rather than 2 degrees, should be the new minimum to avoid the worst impacts of climate change—and that also means accelerating the decarbonization timeline by decades.
“Limiting warming to 1.5 [degrees Celsius] is possible within the laws of chemistry and physics but doing so would require unprecedented changes,” Jim Skea, Co-Chair of IPCC Working Group III, said in an IPCC press release.
As a result, SBTi plans to review its resources and target validation protocols to help businesses align with 1.5-degree-pathways. As you can imagine, this is a business game changer.
So, how do you determine whether science-based targets are the right path for your business? Read on.
Making Sense of Your Science-Based Target Reality
Our global team of sustainability consultants has been working with companies across an array of industries to analyze business costs, risks, and rewards, and build viable business cases and roadmaps for science-based targets.
Every business is unique, which means there’s no one-size-fits-all approach. However, that means each company has the flexibility to chart a course for SBTs that aligns with their business.
“Climate change challenges are of international character, but with local impacts,” Marijke Frielink, Sustainability Consultant within Antea Group’s The Netherlands division, explains. “This calls for tailor-made approaches—not only across different industries, but also within multinational companies who are facing different sustainability challenges in each region of operation.”
Your industry, market position, company size, sustainability history, and cash reserve impact SBT viability. As a result, there are several questions that need thoughtful answers as you explore feasibility and build a business case. Some of those include:
Are SBTs material to the business? To what extent does your company contribute to climate change and to what degree does climate change impact your business?
What tangible actions can be taken to make progress towards an ambitious target (e.g. energy efficiency projects, aggressive pursuit of renewables, product and packaging redesign)?
Do you have business planning processes that accommodate long-horizon commitments?
Do you have enough insights and knowledge to assess all short- and long-term investment options?
Do you have a culture that can embrace such commitments while simultaneously managing current priorities and operational tasks?
Is your company agile enough to commit to a long-term vision while accepting the road will need regular adjusting?
Will SBTs resonate with stakeholders and result in positive brand building?
How significant are your Scope 3 emissions and will you be required to set an associated target?
If so, what degree of influence do you have on your suppliers to pursue carbon reductions and how ambitious can you be? Are key suppliers also pursuing SBTs?
What SBT methodology (e.g. sector-based, absolute-based, or economic-based) is most suitable?
The Good News
While you need to come to terms with the realities of your business and what it really means to commit to SBTs, flexible options do exist.
“No company has a crystal ball that predicts the future and the pace by which technology, incentives, and mass adoption of aggressive carbon strategies will evolve,” Nick says. “Penciling out an exact ROI on SBTs is unrealistic today. But with multiple target setting approaches on the table, you can put an informed strategy in place to maximize business ROI.”
“The business implications of climate change are real and require unprecedented, transformative commitments,” Nick adds. “Businesses that deny the need for aggressive strategies and targets are risking more than they might realize.”
So, with the right focus and right understanding of the business implications, it’s very likely that you can find the flexibility you need to bolster your business and craft a roadmap to SBT success.
What do we see as four core levers for GHG reduction and achieving science-based targets? Find out here.