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What You Need to Know About the First Net-Zero Standard

In late October, after more than a year of anticipation, the Science Based Targets Initiative (SBTi) released the world’s first net-zero standard (the SBTi Net-Zero Standard). This is exciting news for many organizations who have been awaiting additional guidance as they consider their own climate action plans, and we applaud SBTi for this publication. In this blog, we’ll provide a brief summary of the SBTi Net-Zero Standard’s key components, discuss the significance of its publication, and highlight a few areas where there is remaining work ahead in the broader net-zero space. 

Key Components of the SBTi Net-Zero Standard

The SBTi Net-Zero Standard offers stakeholder-driven consensus on key pillars of a net-zero goal, which are outlined in the table below.

Component SBTi Net-Zero Standard Details 
Definition of net-zero Reducing Scope 1, 2, and 3 emissions to zero or to a residual level that is consistent with reaching net-zero emissions at the global or sector level in eligible 1.5°C-aligned pathways, then neutralizing any residual emissions in the net-zero target year and any greenhouse gas (GHG) emissions released into the atmosphere thereafter.
Required targets Organizations must set and meet the following targets as part of an SBTi-validated net-zero goal: 

  • Near-term targets, which must be achieved within five to ten years and encompass 95% of an organization’s Scope 1 and 2 emissions. At least 67% of Scope 3 emissions must be included, as well, if an organization’s Scope 3 emissions are greater than 40% of total emissions. Depending on the timeframe and level of ambition selected, emissions must be reduced by 2.5 to 4.2% per year. 
  • Long-term targets, which must be achieved by 2050 or earlier and encompass 95% of an organization’s Scopes 1, 2, and 3 emissions. Most organizations will need to reduce 90% of their total base year emissions.

It’s important to note that SBTi’s Net-Zero Standard does not permit the use of carbon credits (also known as offsets) in any form to meet either near-term or long-term targets. See below for further information about the recommended uses of carbon credits. 

Required neutralization After an organization meets its long-term target, to be considered “net-zero” it must neutralize remaining carbon emissions (also called “residual emissions”) with permanent carbon removals, including in the form of carbon credits.
Recommended actions beyond value chain mitigation  SBTi recommends that organizations: 

  • Invest in emissions reductions and removals outside of an organization’s direct and indirect footprint (which SBTi terms “beyond value chain mitigation”). SBTi will be developing further guidance throughout 2022 but advises priority focus on securing and enhancing carbon sinks in the near term. 
  • Disclose neutralization milestones such as near-term investments in removals technologies that show commitments towards neutralizing unabated emissions once long-term targets are achieved. 

 

Significance of the SBTi Net-Zero Standard

Publication of the SBTi Net-Zero Standard is a significant step forward in the comprehensive effort to limit global temperature rise to 1.5oC for three reasons. 

First, the standard provides a much-needed unifying definition of the term “net-zero” for the private sector. As a global collaboration between CDP, the United Nations Global Compact, the World Resources Institute, and the World Wide Fund for Nature, the SBTi has strong authority in the climate space to put forward a definition that will directly impact how organizations approach their climate and sustainability strategies. By providing a definition that offers needed goalposts for the journey to net-zero, SBTi begins to alleviate the painful “open to interpretation” definition that presided over the private sector. 

Second, the standard clearly outlines the level of ambition needed from organizations to align with global net-zero. Developing plans to meet a 2050 goal is unprecedented for many organizations, and ensuring those plans enable emission reductions in line with limiting global temperature rise to 1.5oC will require thoughtful leadership and tactical action. While SBTi does not provide a playbook for how organizations can achieve these emission reductions, the SBTi Net-Zero Standard is clear on the magnitude of emission reductions that are required through near-term and long-term targets. SBTi seems to purposefully delegate the creative and strategic implementation planning required to achieve these targets to the sectors and organizations themselves. 

Finally, the SBTi Net-Zero Standard sends the clear message that the first priority for any organization looking to meet a net-zero goal is absolute emissions reduction. SBTi provides concrete guidance that most organizations will need to reduce their emissions by 90% to meet a long-term target as part of reaching net-zero. While SBTi does encourage organizations to show climate leadership by pursuing investments in emissions mitigation and climate innovation beyond their value chain, the new standard does not provide detailed guidance on technology choices, volumes, and implementation timelines. Publishing the first version of the standard while stakeholders are still assessing the role of beyond value chain interventions is further indication from SBTi that absolute emissions reductions cannot wait.

Remaining Work Ahead

While the SBTi Net-Zero Standard aligns organizations in a single direction for net-zero by mid-century, guidance for the private sector is not entirely complete as several important open questions remain. Specifically, organizations are seeking further guidance today on the appropriate role of climate investments to complement their absolute reduction targets and protocols for rapidly growing organizations to align with net-zero.

Investments in emissions reductions and removals outside of an organization’s value chain represent an impactful tool to achieve real and measurable greenhouse gas reductions. SBTi encourages organizations seeking to increase climate ambition to pursue these investments, and an SBTi co-founder has included it as a key way companies can ensure their net-zero targets are credible. However, the current standard does not offer detailed guidance on how these activities should be incorporated into a larger strategy that complements near- and long-term reduction targets.

“Decarbonizing a company’s value chain in line with science and reaching net-zero emissions by 2050 is increasingly becoming the minimum societal expectation on companies. Businesses can play a critical role in accelerating the net-zero transition and in addressing the ecological crisis by investing in mitigation actions beyond their value chains.” – SBTi Net-Zero Standard

As more organizations seek opportunities for near-term climate action, stakeholder-driven initiatives and standards can play a critical role in guiding the private sector on how best to align additional investments with net-zero goals. In the near-term, existing carbon credit protocols offer a comprehensive blueprint for how to quantify and verify greenhouse gas reductions. Additional initiatives, like the Taskforce on Scaling the Voluntary Carbon Market, are underway to ensure this market is set up to deliver continued impact over the next decades. For carbon removals, guidance on how to integrate these projects into net-zero aligned strategies–including how to vet emerging technologies and protocols, and appropriate volumes and timelines for implementing these additional investments–will go a long way in driving corporate action. 

Another key area for development within the net-zero space is accessibility for climate-conscious, high-growth organizations. Many growing organizations are eager to root their growth in climate-committed foundations, but cannot practically implement a net-zero framework that requires absolute emission reductions prior to executing their growth plans. Growing organizations require a unique approach to target-setting that recognizes the important role they play in developing the innovative approaches and technologies needed to achieve net-zero, without allowing unfettered growth in emissions. Such a framework could, among other things, recognize when an organization’s growth results in decreased market share for higher-emitting competitors. In the absence of such a framework, rapidly growing organizations are unable to receive the appropriate  level of recognition for climate action compared to steady state organizations that reduce their emissions from a clearly established baseline. 

While standard-setting organizations continue working to drive industry-wide consensus on net-zero-aligned carbon credit investments and pathways for rapidly growing organizations to meet net-zero, 3Degrees will continue to work closely with our clients to develop impactful climate solutions that fit each organization’s unique circumstances and needs.

No matter where an organization may be on its climate journey, there are critical steps that every organization can take to address its climate impact: quantify their emissions, set reduction targets, implement emission reduction projects, and pursue opportunities to maximize their climate impact beyond their value chain.

If you have questions about the SBTi Net-Zero Standard, or are interested in support to accelerate your energy and climate strategy, feel free to reach out to us. We’re happy to help.

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