Background to the Corporate Net-Zero Standard

he Intergovernmental Panel on Climate Change (IPCC)’s Special Report on Global Warming of 1.5°C (SR15, 2018), was widely accepted as a warning that we must limit global temperature rise to 1.5°C above pre-industrial levels and reach net-zero CO2 emissions by 2050 for the best chance of avoiding catastrophic climate breakdown. More recently, the IPCC’s Sixth Assessment Report (2021) has confirmed that climate change is already affecting every region on Earth, its impacts increasingly visible in the form of extreme weather, worsened droughts and heightened risk of forest fires.

Against this backdrop, companies are increasingly adopting net-zero targets. The number of businesses committing to reach net-zero emissions has grown rapidly, but not all net-zero targets are equal. Without adhering to a common definition, net-zero targets can be inconsistent, and their collective impact is strongly limited.

While the growing interest in net-zero targets represents an unparalleled opportunity to drive corporate climate action, it has also created a pressing need for a common understanding of ‘net- zero’ in a corporate context. Business leaders need a robust, science-based framework for setting net-zero targets. Otherwise, they risk continuing to invest in business models that are inconsistent with the goals of the Paris Agreement.

Through a transparent multi-stakeholder process, the Science Based Targets initiative (SBTi) has developed the first global science-based standard for companies to set net-zero targets. The Net- Zero Standard gives business leaders confidence that their targets are aligned with what is needed for a habitable planet, and it provides clarity on business climate action to a wide range of stakeholders.

1. The Science Based Targets initiative

The SBTi is a global body enabling businesses and financial institutions to set ambitious emissions reductions targets in line with climate science. It is focused on accelerating companies across the world to halve emissions before 2030 and achieve net-zero emissions before 2050.

The initiative is a collaboration between four of the world’s most respected environmental organizations: CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), and is one of the We Mean Business coalition commitments.

The SBTi defines and promotes best practice in science-based target setting, offers resources and guidance to reduce barriers to adoption, and independently assesses and approves companies’ targets.

2. Purpose of the Net-Zero Standard

The SBTi’s Corporate Net-Zero Standard (also referred to as the ‘Net-Zero Standard’) contains guidance, criteria, and recommendations to support corporates in setting net-zero targets to be validated by the SBTi. The main objective of this standard is to provide a standardized and robust approach for corporates to set net-zero targets aligned with climate science.

It is important to note that while the SBTi does provide some supplementary guidance on greenhouse gas (GHG) accounting, companies should refer to the suite of corporate Greenhouse Gas Protocolstandards on this topic.

3. Who should use the Net-Zero Standard?

The intended audience for this document is corporates with more than 500 employees that wish to commit to setting and submitting science-based net-zero targets through the SBTi.

Although not directly intended for small and medium-sized enterprises (SMEs), these organizations should use this document to understand the key elements of a science-based net-zero target and the SBTi’s recommended target-setting process. The SBTi offers a simplified route for SMEs to set net- zero targets, meaning that some of the detail contained within this document will not be applicable. SMEs should refer to the SME FAQ for more information.

This document does not cover net-zero targets for financial institutions. The SBTi is developing a separate Net-Zero Standard for Financial Institutions.

4. The Net-Zero Standard Development process

The SBTi initiated a scoping phase of work in 2019 to develop a framework enabling companies to set robust and credible net-zero targets in line with a 1.5°C future. The standard development process formally began after the SBTi’s publication of Foundations for net-zero target setting in the corporatesector in September 2020. After publication, the SBTi convened a dedicated Net-Zero Expert AdvisoryGroup (EAG), which was to be the main consensus building body for the project.

The SBTi then developed detailed criteria and guidance in regular consultation with the EAG, as well as the SBTi’s Scientific and Technical Advisory Groups. The SBTi requested feedback from stakeholders to improve the standard through two public consultations and a company road test. The standard was launched on 28 October 2021.

Figure 1: An outline of key milestones in Net-Zero Standard development process.

5. How the Standard relates to other key SBTi documents

The table below describes some of the key SBTi resources companies may find useful when going through the target setting process. All resources, including translations, can be found on the Resources and Net-Zero sections of the SBTi website.

Table 1: A mapping of key SBTi resources that companies should refer to when setting science- based net-zero targets.