Businesses are understanding the role they must play to support the global race against climate change. Many companies have made great strides in adopting environmental, social and governance (ESG) frameworks and investing into decarbonising business operations.
However, reporting on the climate impact these business initiatives are making remains somewhat of a grey area. The leading strategy that is taking precedence is the adoption of science-based targets (SBTs) in line with the Paris Agreement of 2015. As of the end of 2023, over 4,000 businesses around the world have adopted SBTs as part of their environmental frameworks.
In this article, we’ll explore:
- Science-based targets and how they work
- How to approach SBTs for your own business
- Future approaches to business nature investment
What are science-based targets?
The Paris Agreement is a legally binding treaty on climate change signed by 196 parties at the UN Climate Change Conference in 2015. Its overarching goal is to limit global warming to less than 1.5 degrees above pre-industrial levels. The Agreement highlighted the importance of more broad cooperation between public and private bodies in mitigating the climate crisis. This is outlined under article 6.8 of the Paris Agreement as non-market approaches.
And thus, science-based targets were developed. SBTs provide businesses an environmental framework that allows them to reduce greenhouse gas emissions in line with the terms of the Paris Agreement. The Science-Based Targets initiative (SBTi) takes the Paris Agreement requirements and articulates them into emission-reduction goals for companies.
With over 4,000 companies around the world adopting SBTs including Salesforce and Nike, this approach appears to be the gold standard for business environmental tracking as of today. In Ireland, over 80% of the 67 businesses who signed the Low Carbon Pledge are on track to adopt SBTs in the coming years.
How can a business adopt science-based targets?
The private sector will play a fundamental role in the global reduction of GHG emissions. SBTs provide a science-backed framework that aligns corporate objectives with efforts to curb global warming. According to the SBTi, setting a science-based target is a five-step process:
1. Commit to adopting an SBT
The first step in formalising an SBT for a business is to register online with the SBTi. Following that, a letter must be submitted outlining the company’s commitment to setting one or more SBTs.
2. Develop your SBT
The next step is to develop the SBT and ensure it is in line with current science-based criteria. The SBTi website offers comprehensive online resources to assist in this process.
3. Submit your SBT
Once the SBT is defined and has met the submission criteria, it can be submitted for validation on the SBT website.
4. Communicate your SBT
Once there is an approved SBT, the business can start to communicate it to their various business stakeholders. The target is also published by the SBTi on their website.
5. Disclose your SBT
As progress is made towards a target, a business should disclose that information and continually monitor progress. Companies who have adopted an approved SBT are required to disclose their emissions on an annual basis.
A vision for the future of nature related business disclosures
SBTs provide an excellent framework that businesses can adopt now to reach environmental targets. However, there’s a new vision for approaching business nature investment that is gaining traction in the environmental and scientific communities: biodiversity credits. While the framework of how these credits will work is very much being defined, they attach an economic value to the preservation or restoration of biodiverse ecosystems.
A natural progression from the carbon credit, the World Economic Forum defines biodiversity credits as: “an economic instrument that can be used to finance actions that result in measurable positive outcomes for biodiversity through the creation and sale of biodiversity units.â€
Biodiversity credits expand on SBTs by widening the scope of environmental targets. While SBTs focus on the reduction of greenhouse gas emissions only, biodiversity credits encompass the preservation and restoration of natural habitats and the ecosystem services they provide. Therefore, biodiversity credits can refer to anything from strategies to reduce water consumption across a businesses’ supply chain to investing in biodiversity projects that also support local communities.
Biodiversity credits offer businesses a valuable opportunity to invest in and benefit from the preservation of biodiversity. By contributing to conservation efforts, companies can enhance their environmental stewardship, mitigate risks, and strengthen their corporate reputation.
Businesses and SBTs against climate change
Embracing science-based targets is a crucial move for businesses and there are significant benefits to their adoption. SBTs enhance credibility and position companies as environmental leaders. They drive innovation, create economic opportunities, and boost competitiveness. Financially, SBTs help companies to navigate regulatory landscapes, satisfy consumer demands, and yield cost savings through energy efficiency.
While we may see biodiversity credits as a bonus to SBTs in the future, for now, SBTs are a great blueprint for a sustainable business future that benefits everyone.
Dulra is developing a cutting-edge AI data management platform designed to help nature-based solution projects secure funding by converting raw ecological, climate and socio-economic data into actionable reports for funders. Learn more.
