There are several science-based target setting methods.
The methods available fall under three main approaches. These are summarised below. The first two are related to the ‘carbon budget’ – the remaining amount of carbon that can be emitted into the atmosphere to limit global temperature rises to well below 2 degrees celsius.
Sector-based approach: This divides the carbon budget by sector and then allocates it to companies in that sector.
Absolute-based approach: This assigns to companies the same percentage of absolute emission reductions as is required globally – ie. 49% by 2050 from 2010 levels.
Economic-based approach: The carbon budget is equated to global GDP and a company’s share is determined by its gross profit.
The method a company chooses to use depends on its particular circumstances. Some methods are better suited for certain sectors, or for companies that are growing. There is not one ‘best’ method but there will be one that will work best for your company. Find out more about the different methods below.
The Sectoral Decarbonization Approach
The Sectoral Decarbonisation Approach (SDA) is a freely available open-source methodology that allows companies to set emission reduction targets in line with a 2°C decarbonisation scenario. It is based on the 2°C scenario (2DS) developed by the International Energy Agency (IEA) as part of its publication, Energy Technology Perspectives 2014 (IEA, 2014). The methodology was developed by CDP, WRI and WWF with the technical support of Ecofys, the consultancy partner. The methodology includes input from a group of technical advisors, two public stakeholder workshops and one online workshop, and aims to provide businesses with a convenient and research-backed way to set their emissions goals.
Find out more about the Sectoral Decarbonization Approach and Tool
The 3% Solution
The 3% Solution identifies how US-based corporations can set GHG reduction targets that lead to a collective cost-savings of $780 Billion USD between 2010 and 2020, while aligning targets with IPCC’s 2-Degree Celsius pathway. Developed by WWF with CDP, McKinsey & Company, and Point380, these savings are achieved by boosting energy-efficiency measures and transitioning to low-carbon energy sources. The US corporate sector would cut carbon emissions by 3% annually on average though the methodology caters that overall target to each company using a simple tool called the The Carbon Target Profit Calculator.
The Carbon Target and Profit Calculator is a tool to help individual companies set a 2020 carbon reduction target and determine potential cost savings if those reductions are achieved. The calculator translates The 3% Solution report’s U.S. economy-wide savings down to an individual company level, taking into account sector-specific opportunities. This tool is not intended to replace customized target assessments for each company, but can serve as an indicator of approximate potential financial savings and carbon reductions that a company like yours could achieve by following the guidance outlined in the report.
Large corporations can produce long lists of great environmental initiatives and large claims of reduced emissions - absolute or intensity based. Smaller companies have shorter such lists and fewer reduced emissions, but maybe their efforts are proportionately greater. How does one really know?
What really counts is how much our actions contribute towards solving the problem. And the test? What would the outcome be if every company did likewise?
In 2008, BT supported a study by CDP, The Carbon Chasm, which identified a significant gap between what is needed from the corporate sector to avert catastrophic climate change and what was being offered in the form of carbon reduction targets. Then and now, what is on offer is not nearly enough.
The desired outcome is climate stabilisation. From the 2007 Bali Climate Declaration by Scientists, there is pretty good consensus over the maximum allowable level of carbon in the atmosphere and the 50% reduction in absolute emission levels that needs to be achieved to get there.
It is fairly straightforward to calculate what that looks like in relation to anticipated GDP growth. A 9.6% pa reduction in global emissions per unit of GDP by 2050 is required – slightly higher for developed countries, slightly lower for developing countries. So, if companies can work out our contribution to GDP, they should be in a position to work out what it really means for business to do its part.
BT proceeded down this path with its Carbon Stabilization Intensity (CSI) target in 2008. The intensity is calculated in relation to our “value-added” as a company. Value-added is a measure of a corporation’s contribution to GDP – a published figure in the UK. Consistent with the reduction required from developed countries, the objective was to reduce emissions per unit of value-added by 80% by 2020. If everyone were to do the same we would bridge the chasm and be well on-track for the reductions required.
This approach is an attempt to change the paradigm for sustainability from one in which we judge a company’s actions by how long their list of actions or how sizeable their emissions avoided, to one in which action can be planned and assessed within the context of solving the larger problem.
Autodesk’s innovative C-FACT (Corporate Finance Approach to Climate-Stabilizing Targets) methodology is a business- and environmentally-friendly model to help companies set targets for greenhouse gas (GHG) emissions reductions.
They encourage companies to adopt and build upon this open source approach to reducing their corporate carbon footprint in line with global scientific and economic-based goals. Autodesk recently extended the C-FACT methodology to help cities create climate-stabilizing targets.
The Intergovernmental Panel on Climate Change (IPCC) reports that for climate stabilization to occur, industrialized countries need to reduce their GHG emissions by roughly 85% by 2050. C-FACT calls for companies to reduce GHG emissions in line with these scientific climate stabilization targets, and in proportion to companies’ relative contribution to the economy. The three underlying principles that make C-FACT unique are:
1. Verifiability. C-FACT uses only publicly available financial and GHG disclosure information, enabling 100% verifiability and transparency of measurements, metrics, and performance.
2. Flexibility. C-FACT methodology adapts to changing economic conditions, changes in business, and inevitable deviations of real performance versus intended financial and GHG targets.
3. Fairness. The C-FACT approach acknowledges that corporate commitments should be proportional to their relative contribution to the economy, not to the corporation’s existing size and corporate carbon footprint. The principle recognizes that GDP growth is correlated with emissions growth, and does not penalize a company if it begins to contribute a greater proportional share of GDP (for example, capturing market share).
The C-FACT methodology simplifies the process of setting a corporate GHG target that is fair to both business and the environment through the following four steps:
1.Calculate. Divide the company’s GHG footprint by its contribution to GDP, as measured by gross profit (or EBITDA + Operating Expenditures for nonprofits or startups and other cases when a company is not generating revenue) divided by world GDP, and approximate growth rates through 2050 using analyst or internal financial forecasts to derive the Carbon Intensity Reduction Rate.
2. Commit. Select a time frame and commit to a target publicly.
3. Annualize. Translate the carbon intensity reduction goal to corporate and division-level absolute targets. Annualize the GHG reduction goals over the commitment period to reduce the short-term volatility and derive annual reduction goals.
4.Adjust. At year end, take into account new numbers for GDP, actual financial performance, and actual carbon footprint and make adjustments. Diffuse positive or negative deviations from the GHG target over a fixed number of years.
The Center for Sustainable Organization’s (CSO) context-based carbon metric was developed in 2006 with the support and involvement of Ben & Jerry’s, and was the first science-based metric for assessing the sustainability of greenhouse gas emissions by organizations ever developed. It has been in continuing use ever since with steady improvements being made as needed. And although CSO’s metric was originally designed for use by organizations, variants of the metric now also exist for higher education institutions and municipalities. Other sector-specific applications of the metric are also supported, as are country-based and/or geographical analyses. All versions of metric support the inclusion of scopes 1, 2 and 3 emissions at the user’s discretion and are freely downloadable from the link provided below.
CSO’s carbon metric functions by comparing the GHG emissions of organizations or human populations to specific targets grounded in science-based climate change mitigation scenarios. The specific scenario we use changes over time as the climate science evolves. The metric also takes organization-specific changes into account (e.g., changes in size over time) and thereby makes it possible to set targets that are both science- and (more broadly) context-based. The method also features an internal mass balance function that helps ensure that the logic used to define targets for individual organizations, if generalized to the wider population as a whole, will not result in emissions that exceed science-based thresholds at the global level. Emissions targets for individual organizations are thereby recalculated on a year over year basis in a way that is (a) sensitive to changes in an organization’s size, (b) sensitive to changes in the broader population of emitters, and (c) mindful of the need to strictly abide by steadily declining (and science-based) emissions budgets at the global level. Performance is then reported annually and cumulatively in three different ways: intensity, absolute, and context-based.
GEVA (Greenhouse gas emissions per unit of value added)
How much must I reduce my greenhouse gas (GHG) emissions if I want to do my fair share to contribute towards the global effort to keep global warming below a 2°C rise in average temperature over preindustrial times? This paper suggests an answer for nations and corporations that want to move ahead of legislation on a voluntary basis.
If all nations reduce their “GHG emissions per unit of GDP” by 5% per year, global GHG emissions will be 50% lower in 2050 than in 2010 as long as the global economy continues to grow at its historical rate of 3.5% per year. The suggested 5% per year decline can be translated into a corporate resolution to reduce corporate “GHG emissions per unit of value added” (GEVA) by 5% per year.
If all corporations cut their GEVA by 5% per year, the same global result will be achieved. The suggested 5% per year decline can be used as a guideline for responsible action on a voluntary basis. The guideline is unlikely to be made mandatory soon, but compulsory publication of the necessary emissions and productivity data by nations and corporations could help civil society highlight top performers.
Our overall strategy for environmental impacts is based on the Planetary Boundaries model and explained on that page. From that we identified GHGs as an important impact to address. From there we derive our GHG targets based on IPCC science and particularly some of the carbon budget work initially done by Meinshausen. The general audience explanation of this can be found here and I would particularly call your attention to the second diagram on the page with the thermometers in the upper right. This diagram shows our understanding of what the science says needs to happen with emissions (“One scenario for achieving this…”).
While we are working towards that sort of commitment across our supply chain, so far we have only committed against our scope 1&2 emissions (the dark blue wedge – “From a 2007 baseline, we have committed…”). We know that scope 1&2 will be easier for us to tackle because 1 – we have direct control and 2 – those emissions come from industrial processes which are easier to measure and change than agricultural process, so we have elected to “overdeliver” vs. the science on those emissions (by targeting -100% in 2040 rather than -80% in 2050). This gives us a bit more room to manuever on our scope 3 emissions – we get a bit more time to deliver reductions and don’t have to deliver quite as much because we will have zeroed out our scope 1&2. It’s still a big lift (~-77% on scope 3) but a bit lighter and we hope to find ways to move other parts of scope 3 into the -100% bucket over time.
The key concept in our target development approach was to take global GHG emissions and required reductions and scale it down linearly to our business (so the world is at ~35 GT/yr and needs to come down 80% and Mars is ~14 MT and needs to come down 80%). The merit of this approach is that if everyone followed it, the world would achieve -80% so we think of this as our “fair share”.
Also, this should be obvious but just in case, all of these numbers are absolute and not intensity metrics – if we choose to financially grow our business and do so in ways that require us to produce more tonnes of product, that’s our responsibility to deal with, not the atmosphere’s.