Once your corporate emissions are computed, the next step is to take action and reduce them. To do so, most companies set emissions reduction targets: they decide on an objective emissions level and a deadline and build a strategy to reach it.
Yet, in a context where greenwashing accusations are becoming more and more common, the level of ambition of these targets is increasingly scrutinized.
Here are some necessary elements of context to help you navigate setting sufficiently ambitious emissions reduction levels.
1. The science
1.1: At the global level
1.1: At the global level
Climate change poses a major threat to our current livelihoods, lifespans, and activities through drastic changes in the frequency and intensity of extreme climatic events such as hurricanes, floods, and droughts. (IPCC, 2022)
Climate damage rises with each supplementary ton of CO2e in the atmosphere. In this context, any economically and socially profitable emissions reduction should be undertaken.(IPCC, 2022)
Due to the limited knowledge of the long-term and indirect consequences of climate change and uncertainty about future technologies, there’s no clear economic consensus on how much societies should invest to reduce their emissions. (Pindyck, 2013) The latest conservative models (taking into account only known, direct consequences of climate changes) nevertheless conclude societies should invest enough to limit global warming to 1.5°C/2°C. (Ueckerdt et ak, 2019)
To limit global warming to a world average of 1.5°C, Global Net Zero must be met in 2050, in 2070 for 2°C, with no or limited overshoot. Meeting global net zero requires substantial emissions reductions (circa 90% compared to 2010 levels) as nature and technology-based emissions capture and storage solutions will have a limited capacity by then. This translates into a remaining carbon budget to remain under 1.5°C and 2°C that reduces each year. (IPCC, 2018)
Yet, one should keep in mind atmospheric models entail uncertainty. Indeed, while there is a strong confidence in the warming effect of greenhouse gases, unknown loop effects generate variability when predicting the precise temperature rise resulting from higher atmospheric concentrations. Furthermore, various emissions trajectories would allow us to meet Global Net Zero (with or without overshoots, linear or exponential, etc). These various trajectories result in various total levels of carbon emissions over the period. Lastly, there’s uncertainty on the capacity of carbon capture and storage technologies by 2050 / 2070. (IPCC, 2018)
The goal of reaching Net Zero in 2050 or 2070 is thus a simplification: in reality, global net zero must be met between 2040 and 2060 for 1.5°C, and emissions reduction levels cannot be pinned down to a very specific number.
All and all, in 2018, the IPCC stated that ”global net anthropogenic CO2 emissions decline by about 45% from 2010 levels by 2030 (40–60% interquartile range), reaching net zero around 2050 (2045–2055 interquartile range) to limit average global warming to 1.5°C. For limiting global warming to below 2°C […] CO2 emissions are projected to decline by about 25% by 2030 in most pathways (10–30% interquartile range) and reach net zero around 2070 (2065–2080 interquartile range)”. Since emissions have risen since 2018, these emissions targets must likely be raised to reach our temperature targets.(IPCC, 2018)
1.2: At the corporate or product level
1.2: At the corporate or product level
The IPCC doesn’t define corporate-level or product-level emissions reduction recommendations. It lists emissions reduction potentials and costs based on preexisting research but does not recommend prioritizing certain actions over others. In particular, while it lists key sectors where emissions need to be tackled, it doesn’t define sector-specific targets. (IPCC, 2022, see sectoral chapters)
Indeed, defining sector-specific targets requires prioritizing needs and making societal decisions such as deciding acceptable inequality levels: various scenarios are compatible with meeting global or national net zero (for instance, see the ADEME’s scenarios for France or the climate game from the Financial Times). Choosing between different scenarios should be made democratically.
2. The regulation
2.1: At the global level
2.1: At the global level
In line with these elements, the Paris Agreement, signed in 2015 by the world’s largest emitters, large developing countries, and vulnerable nations, is a legally binding international treaty aimed at limiting global warming to well below 2°C, ideally 1.5°C, above pre-industrial levels.
The treaty operates on a system of voluntary, country-specific targets known as Nationally Determined Contributions (NDCs), which outline each country’s commitments to reduce greenhouse gas emissions and adapt to climate impacts. These NDCs are reviewed and updated every five years to encourage countries to increase their ambition but remain flexible, allowing countries to determine their targets based on national circumstances and capacities.
Following the Paris Agreement, several countries thus set net-zero targets for themselves and started implementing financial incentives and regulations for emissions reductions. A key example of such regulation is the European Union’s Emissions Trading Scheme (EU-ETS), which allowed emissions in its perimeter to fall by 35%. On the French level, the French Stratégie Nationale Bas-Carbone (SNBC), or National Low-Carbon Strategy, is the national long-term plan to reduce greenhouse gas emissions and achieve carbon neutrality by 2050. It sets sector-specific carbon budgets and promotes energy efficiency, renewable energy expansion, and sustainable practices across transport, industry, and agriculture.
Yet, most resulting climate regulation is specific to certain sectors or products (such as emissions targets for individual cars in the EU), or cannot be translated into corporate emissions reduction targets at all (such as coal exit plans). In most cases, regulation is thus not specific enough to define corporate emission reduction targets. Further, according to the IPCC, current global regulation and emissions reduction commitments in insufficient to uphold the Paris Agreement. (IPCC, 2022)
2.2: The voluntary framework: Science-Based Target initiative
2.2: The voluntary framework: Science-Based Target initiative
In this context, some corporations decided to anticipate regulation and take voluntary action to reduce their emissions. The SBTi initiative emerged to help them do so by certifying that the ambition level of their target is compatible with the Paris Agreement. Founded in 2015, SBTi is a collaboration between the Carbon Disclosure Project (CDP), the United Nations Global Compact (UNGC), the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). (SBTi, about us page)
The Science-Based Target initiative offers various options to set science-based targets. Companies can choose, among others, to follow sector-specific minimum reduction levels, to reduce their emissions relative to their production outputs, or to have a short-term or long-term reduction strategy. As long as the companies comply with SBTi’s criteria, companies get the SBTi label that is currently perceived as a sign of the robustness of their carbon reduction targets.
Companies with science-based targets or that committed to setting science-based targets represented 39% of global market valuation in 2023. SBTi is currently the only available label validating corporate reduction targets.
Yet, the SBTi label suffers a few limitations :
First, SBTi sector-specific reduction levels are derived on the IEA’s net zero scenario. The IEA’s scenario is a proposal of a roadmap to reach net zero by 2050 by the International Energy Agency. It includes arbitrary decisions that have not been subjected to democratic debate. (Tilsted et al, 2023)
Second, if all companies set SBTi-approved targets and reduced their emissions accordingly, global warming still wouldn’t be limited to 1.5°C. This is because SBTi offers a lot of options to companies, including some that allow their absolute emissions to grow. If all companies choose the least ambitious targets available to them in the SBT framework, we would exceed our remaining carbon budget. (Bjorn et al, 2021)
Third, major corporations often fall short of their targets, and it's unclear whether all SBTi-approved companies actually have a reduction strategy to meet their objectives. (Gieskam et al, 2021; Carbon Market Watch, Corporate responsibility monitor)
Conclusion
While the science concludes it is in our own interest to limit global warming to 1.5°C or 2°C and most countries accepted this as an objective by signing the Paris Agreement, implemented policies and policy promises fall short of meeting the necessary reduction levels. These policies are nevertheless necessary to ensure a just and democratic transition. In their absence, voluntary corporate initiatives such as the SBTi fill the void, but they can be insufficient and are somewhat arbitrary. In the absence of an alternative, following SBTi recommendations can help set Paris Agreement compatible targets, but keep in mind its limitations!
The upcoming CSRD might help diversify the targets available for companies. It states “The undertaking shall state whether the GHG emission reduction targets are science-based and compatible with limiting global warming to 1.5°C. The undertaking shall state which framework and methodology has been used to determine these targets including whether they are derived using a sectoral decarbonization pathway what the underlying climate and policy scenarios are and whether the targets have been externally assured.”, suggesting other scenarios than the one picked by SBTi might be used by companies to justify their emissions targets. However, it remains unclear how this will be audited.