Setting Science-Based Targets for Companies

As climate change accelerates, pressure is mounting on companies to set science-based targets that align with global climate goals. Setting Science-Based Targets (SBTs) helps businesses develop credible net-zero targets and measurable emissions reduction targets.

Our article provides a comprehensive overview of SBTs, the main types between long-term, shorter-term and sector-specific, plus the crucial role of the Science-Based Targets Initiative (SBTi) in shaping meaningful carbon reductions across companies worldwide. Moreover, we cover the 5 steps a company must take to begin their SBT commitment, and delve into the most common methodologies and tools used to do so.

We then cover the main challenges of SBTs, from Scope 3’s granularity to advancing frameworks, then provide case studies from Tesco, Nike and PepsiCo demonstrating successful science-based carbon reduction strategies.

What Are Science-Based Targets?

Science-based targets are quantified, time-bound goals set internally to reduce a company’s greenhouse gas (GHG) emissions.

For example, a tech company hitting net-zero using 100% renewable energy by 2030 or a manufacturing company achieving a 50% reduction in Scope 1 & 2 emissions across all operations by 2035.

One of the first companies to utilise the SBTi (Science-Based Targets initiative) was Ørsted. By 2021, they cut carbon intensity by 87% against their 2006 baseline, largely by changing fossil fuel operations to renewable energy.

Since then, there are now over 10,000 companies committed to different types of science-based targets, ranging from simply setting near-term reduction targets to company-wide emission neutrality by mid-century.

SBTs (Science-Based Targets) typically span 5-15 years and are entirely voluntary. Companies of all sizes and industries are setting targets to get ahead of future regulations, grow business, future-proof, optimise operations, and win at marketing.

The Role of the Science-Based Targets Initiative (SBTi)

The Science-Based Targets initiative is a partnership between WRI (World Resources Institute), UN Global Compact, CDP (Carbon Disclosure Project) and WWF.

Based in London with a global team, the non-profit organisation was founded in 2015 to mobilise corporate climate action on a major scale with standards backed by climate science.

Their framework was curated in line with the Paris Agreement’s goal of getting global warming well below 2°C, aiming for 1.5°C.

Most work takes place online, with companies submitting science-based targets for which the SBTi validates (for a fee of around £8,000). After this, the initiative reviews targets by internal technical experts and external advisors, and ensures that they align with the latest climate science and SBTi criteria.

After validating the target, the company is publicly listed and must publicly self-report on their milestones such as through annual reports. Re-validation is required every 5 years, meaning that the targets are re-checked by the SBTi to ensure compliance with fast-moving regulations.

Why Science-Based Targets Matter

Science-based targets matter by adding crucial value in a multitude of ways.

Well-backed, certified sustainability claims are an excellent form of company branding, allowing businesses to stand out from the crowd as forward-thinking, climate-conscious operators.

This means companies with SBTs are more likely to secure long-term customer loyalty.

Sustainable business also strengthens investor relationships, encourages funding, and can lead to tax incentives and governmental grants for successful carbon reduction.

They then easily meet investor demands and continuously demonstrate long-term viability.

Many science-based targets call for supply chain optimisation by cutting inefficiencies like unnecessary travel, wasteful processes, excessive water use or inefficient packaging.

SBTs can instead call for local suppliers, virtual meetings, reduce water consumption, or switch to sustainable packaging companies, lowering emissions and saving money in the long run.

When businesses operate sustainably, such as with verified SBTs, they future-proof the company for thriving in the long term.

More important than all combined, SBTs matter as they strive to save the future of the planet, and allow essential economies to thrive in a way that leads us towards a safer, greener world.

Types of Science-Based Targets

Near-Term Targets

One of the 3 main types of science-based targets is near-term targets: those that must be achieved within around 5-10 years.

A decade might not seem ‘near-term’, however meaningful reductions and targets can take years to achieve the significant systemic changes across entire supply chains, operations, and infrastructure.

For instance, a common near-term target could be reducing Scope 1 and 2 GHG emissions by 50% from a 2023 baseline and then using methods like switching to renewable energy, improving energy efficiency and optimising logistics.

While net-zero targets achieve carbon neutrality over a much longer period (i.e. by 2050), near-term targets align with the global carbon budget to limit warming to 1.5°C by 2030. In line with the Paris Agreement, near-term targets are being adopted by thousands of companies globally taking the form of everything from emissions reduction pledges to investment in new sustainable tech.

Net-Zero Targets

On the other hand, net-zero targets are set to achieve full decarbonisation across a company, country or region.

These long-term commitments typically span decades, commonly around 30 years, but can also be as far into the future as 2050, such as the UK’s Net Zero by 2050 target.

Decades of time crucially allow for transformative, systemic changes to be made.

Their structure usually involves near-term SBTs to slash emissions within 5-10 years, a long-term goal to reach 90-95% across the 3 scopes by 2050, then 5-10% remaining emissions are neutralised through carbon removal.

SBTi crucially emphasises that the residual 5-10% can only be removed if they are genuinely unavoidable.

They further exclude the term ‘carbon offsetting’ as it can muddy things, shifting the net-zero standard from meaningful decarbonisation to paying off someone else. Think of a project that prevents deforestation critically important, but not actually pulling any carbon out of the atmosphere.

Sector-Specific Targets

Sector-specific targets encompass both near-term targets and long-term targets, but focus on just one sector. They operate under SBTi’s Sectoral Decarbonisation Approach (SDA), niche methodologies for companies in specific sectors to set targets aligned with climate science.

Sector-specific targets are set by companies in emission-intensive industries, such as transport, energy, financial institutions, or heavy industries. They gain from sector-specific frameworks, as their emission models aren’t as simple as a single, absolute reduction across all emissions.

Financial institutions, for instance, have significant Scope 3 emissions from their lending and investment activities. A sector-specific SBTi would offer tailored guidance and metrics to measure and reduce this, allowing meaningful reductions to be made over time.

Scope 1, 2, and 3 Emissions in SBTs

The 3 emissions scopes are defined by the GHG Protocol, the most widely used framework for managing greenhouse gas emissions.

Scope 1 includes direct emissions from sources owned or controlled by a company. These emissions, often stemming from fossil fuel combustion, are generally easier to identify, measure, and manage, making them prime targets for carbon removal.

In contrast, Scope 2 emissions encompass the indirect emissions released by generating a business area’s electricity, steam, heating or cooling. Instead of direct control over the source, this tends to lie in the hands of the providers who may choose greener energy sources to help reduce emissions indirectly linked to the company.

Scope 3 encompasses all other indirect emission sources.

Upstream emissions occur before a service or product reaches the company (such as the mining of metals for architecture) and downstream emissions occur after the product or service leaves the company (such as the emissions from a product’s use or disposal by the end consumer).

Science-based targets must cover Scope 1, 2 and 3 to achieve reductions across all operations and every level of the value chain.

Steps to Set a Science-Based Target

Young male manager looking at one of colleagues at working meeting during discussion of details of new business project

Commitment

To start the process, companies must commit by submitting an official commitment letter in the SBTi’s online portal, saying that they would like to set an SBT within 2 years.

This adds their name and target to the SBTi’s public list, with a running update of their target. Labels are committed / set / met, plus also highlight when a company’s target has been removed.

Submission

Next, the company must use the SBTi Target Submission Form to upload a full inventory of GHG emissions data alongside their recent emissions baseline year.

This covers the 3 scopes, target boundaries (i.e. the proportion of emissions covered within each scope) and reduction levels (i.e. the percentage decrease and target year). They must also state the methodology used.

Validation

Next, the SBTi’s technical team will review both submissions, contrasted against the most up-to-date guidance. It takes around a month.

If the criteria aren’t met, the company can resubmit once for free, aided with suggested feedback and revisions. If they fail a second time, they must pay a resubmission fee (e.g., around £2,000 GBP) for a third attempt.

When approved, they get a Validation Report that confirms their target. This costs a validation fee (e.g., around £9,000 GBP for corporates).

Communication

Penultimately, validated companies can then publicly announce their targets using provided press release templates and branding guidelines.

This is immense for marketing, appealing in the eyes of investors, stakeholders, customers, the public and more.

It can look like media outlets, ESG reports, corporate websites or LinkedIn.

Disclosure

Finally, companies must disclose their annual progress publicly on the date that they committed to when setting their target. This is in the form of ESG reports or through platforms like the Carbon Disclosure Project (CDP).

The annual data should be thorough and cover target updates, emission progress and re-baselining if applicable.

If a company misses their annual reporting deadline, it risks removal from the SBTi list and nullifying its target as a whole.

Common Methodologies and Tools

Companies must use a range of methodologies and tools to achieve the targets set out by SBTi.

A primary framework that must be equipped is the Greenhouse Gas Protocol. It’s the most-used framework for carbon accounting, recognised as the global standard. It involves Scope 1 (direct), Scope 2 (indirect) and Scope 3 (value chain emissions).

The tool applies across a range of sectors, allowing for comprehensive data collection that leads to effective sustainability reporting and that can merge with SBTi, CDP (Carbon Disclosure Project), and other standards. It sets targets and methods of tracking the business-wide progress.

A further methodology employed by companies setting SBTs is the Absolute Contraction Approach a framework for reducing total absolute emissions by a percentage over time. E.g., removing 35% of emissions by 2025.

This framework is needed here as it calculates base year emissions across all scopes and determines the percentage of reduction required every year to achieve the target by the target year.

As for tools, the SBTi’s Target Setting Tool is an Excel-based calculator that companies can download. They use it to set and check targets themself, by inputting their company’s emissions data and utilising the calculator’s built-in formulas.

Moreover, FLAG Guidance is used by companies in Forest, Land use, and AGriculture. If they choose to set an SBT target and their emissions or revenue from land-use sectors exceed 20%, they must use this tool.

It’s a detailed PDF alongside Excel tools, allowing users to calculate FLAG-related emissions and set targets. It excludes carbon credits and avoided deforestation, ensuring emissions are removed, not just prevented.

Challenges and Considerations

A prominent challenge of SBTs is accurately capturing Scope 3 emissions. To gauge a full picture of a value chain, data can come from thousands of different points. Not only does Scope 3 make up the most significant portion, but it’s also the hardest to track.

Secondary data, such as industry estimates and average,s are used to fill gaps, risking errors and insignificant or misplaced reduction efforts.

Beyond Scope 3, all scopes require extensive data collection and clear boundaries. Challenges arise with low data quality, manual data entry, missing data, time lags and more.

Moreover, identifying emission factors is challenging because they can be outdated and heavily variable. Emission factors are the numerical values that convert activity data into carbon emissions.

To account for advances in technology, shifts in sources of energy, or new methods of data collection, the factors change quickly over time, making them hard to work with.

Another challenge is the need for industry-specific precision, making it harder for people to benchmark their environmental performance, track progress over time, identify leaders in the space, and inform stakeholders of consistent data.

Finally, due to differences in regulatory and disclosure expectations across regions, reporting requirements vary.

For instance, there are mandatory reporting in the UK, voluntary guidelines in the US, creating challenges for multinational companies, as their operations in one region may be exposed to higher compliance risks than another.

Case Studies

Publicly listed on the SBTI website, Tesco were SBTi-validated in 2017.

With 4,942 stores worldwide, a significant portion of their emissions stems from energy use in stores, offices, and distribution centres. Additional emissions arise from their supply chain including the production, processing, and transportation of goods as well as logistics operations.

In 2009, Tesco became the first business globally to declare a goal of becoming a zero-carbon business by 2050. In 2017, they committed to sourcing 100% of electricity from renewable sources by 2030.

As of 2023, Tesco reported a 61% reduction in absolute emissions from operations compared to 2015, surpassing their 2025 target of 60%, and achieved their goal of sourcing 100% renewable electricity.

Nike were SBTi-validated in 2020.

Around 70% of their overall emissions come from the production of their raw materials, followed by manufacturing, then shipping and distribution.

They set Science-Based Targets to lower Scope 1 and 2 by 65% and Scope 3 by 30% by 2030. In 2023, they reported a 69% reduction in emissions from owned and operated facilities and implemented initiatives to lower Scope 3.

Their sustainable manufacturing initiative aims to reduce environmental impact by using recycled materials.

PepsiCo was SBTi-validated in 2021. They sell products such as Pepsi, Mountain Dew, and Doritos, with significant emission contributions from their agricultural practices (around 37%), packaging (26%) and transport and distribution (11%).

In 2015, they established a GHG emissions baseline and announced their ambitions to become net-zero by 2040 using science-based targets. By 2021 they had achieved a 25% reduction in value chain emissions, and in 2023, the company had achieved a 4% decrease in all scopes of emissions.