In this series of articles, the team at the Carbon Trust outlines the reasons for businesses to adopt science-based targets on climate change. This is the fifth and final part of the series; find the other parts here:
Part 1: Why do we need to set science-based targets on climate change?
Part 2: What exactly is a science-based target?
Part 3: Why should companies set a science-based target?
Part 4: Making the Internal Business Case for Science-Based Targets
After having discussed many of the positive attributes of science-based targets in previous parts of this series, it is worth reflecting briefly on their limitations.
Firstly, although science-based targets can work for organisations of any size in principle, in practice it is only expected that businesses of a significant size will set science-based targets. Smaller companies typically have competing priorities and limited internal capacity to focus on emissions reductions, which means that they will be unlikely to invest the time or resources necessary to set a target. Although it is worth noting that trade bodies may be able to set cross-sector targets that can guide these businesses to set the right level of ambition.
And even if there were universal adoption of science-based targets by large corporates, we would not get near the levels of emissions reductions required across the whole economy. In the UK, just under half of private sector turnover comes from small and medium-sized enterprises, providing 60 percent of private sector employment. In other countries – especially in the developing world – this proportion can be far greater.
Different policy mechanisms will be required to drive emissions reductions in these organisations, such as carbon pricing or tax incentives. Governments may ultimately need to implement regulations directly requiring carbon emissions reductions in line with what the science says in necessary.
Secondly, it is worth highlighting that although many of the businesses that have committed to set science-based targets are leaders on climate change, just having a science-based target and taking no other action is not a good example of leadership.
It is very important to recognise that for most businesses the overwhelming majority of the greenhouse gas emissions associated with their products or services are outside of their direct operational control. There are only a few sectors where may not be the case, such as agriculture, electricity generation, cement, or some service businesses.
Although science-based targets can drive very high levels of emissions reductions from direct operations, it is by no means the highest-impact way that most businesses can take action on climate change – which is why there are some additional commitments required in order to sign up to the Science-Based Targets Initiative. Organisations with value chain emissions (Scope 3) that make up more than 40 percent of their total emissions – which also includes direct emissions (Scope 1) and indirect emissions from purchased electricity, heat and steam (Scope 2) – are required to set ambitious value chain targets on top of their science-based target.
There are two main ways in which a business can have an impact outside of its own boundaries. They can use their influence with suppliers or customers, finding ways to encourage them to reduce their own direct emissions. Or they can innovate to redesign their core products, services or business model, to find ways to make them fundamentally lower in emissions.
For example, many businesses have introduced environmental performance scoring criteria in procurement decisions, incentivising suppliers to meet certain standards. Other businesses target areas of more material impact, which may be many tiers up the supply chain, as is often the case with companies that rely on agricultural commodities produced by smallholder farmers such as cocoa, coffee or cotton.
Then on the innovation side, a lot of businesses are looking into opportunities in circular economic business models, particularly ones that involve turning a product into a managed service. Why would you buy a car if you could buy a cheaper service that gives you the use of a car whenever you need it? This sort of shift changes the rules of the game, so companies can directly benefit from redesigning their products for maximum efficiency, durability and repairability.
Ultimately, science-based targets are an important lever for raising the bar, but only as part of a wider sustainability strategy. They are a very useful tool to ensure that our actions on climate change measure up to our ambitions. But companies should also be considering what they can do outside of their own boundaries to bring their suppliers and customers alongside them in the journey towards a low-carbon economy.