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Organizations reporting progress against targets
According to the UNFCCC, progress reporting is integral to the credibility of companies’ emissions reduction targets. It helps to build trust, showcases successful strategies and encourages other players to make ambitious commitments. To support accountability of science-based targets, the SBTi requires all organizations which set targets to publicly report their company-wide GHG emissions inventories and progress against published targets annually.
For the third year, the SBTi carried out an annual review and disclosure exercise of publicly available self-disclosed data on progress against approved science-based targets. The results of this review were incorporated into an online progress dashboard in both digital and downloadable spreadsheet formats, allowing stakeholders to easily explore the progress data of companies with science-based targets.
More action needed on reporting
More than three quarters (76%) of companies with science-based targets publicly reported progress against their targets in some form, compared to 72% in 2021 and 87% in 2020. For 24% of all companies, no public information on progress against their science-based targets was found or was reported in ways that were uncomparable, or lacked information and contextual data.
In 2022, of the 1,186 companies with science-based targets, more than half (53%) fully reported progress on all their near-term and long-term targets. Around one in four (23%) reported on at least one target, but information for their other targets was reported in ways that were uncomparable or lacked information and contextual data, or could not be publicly found. More information on the reporting of progress on science-based targets can be found in Appendix 3 of the full report.
Out of the 84 companies which had set net-zero targets using the SBTi’s Corporate Net-Zero Standard by December 2022, 68% (57) were found to be reporting information on their net-zero targets publicly to CDP in 2022, including plans to neutralize any unabated emissions and implement actions to mitigate emissions beyond their value chain. More detail on the disclosed data is presented in the progress dashboard.
Financial institutions reporting on portfolio and non-portfolio targets
This report includes a review of financial institutions’ near-term non-portfolio targets (for own operations and scope 3, categories 1-14) and near-term portfolio targets (investment and lending portfolios) that have been validated since October 2021. Out of 47 financial institutions with science-based targets by the end of 2022, 51% (24) reported publicly on progress of their targets via CDP.
Further research will be needed to provide more context to financial institutions’ reporting of target progress. For example, additional information for non-portfolio targets as found for ten financial institutions in publicly available sources, which suggests that financial institutions may report target progress through different platforms such as their own reports that are aligned with Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
Increase in SMEs
The number of SMEs with science-based targets increased from 142 on July 30 2021 to 845 in December 2022. Out of the 845 SMEs which were part of this analysis, target performance information was found for only 6% (51) in the 2022 CDP climate change questionnaire. For this report, the progress of SMEs using the streamlined SME route was not reviewed as part of the desk research.
Reporting rates improved but more consistent and comprehensive reporting is needed
2022 saw a small but promising improvement in progress reporting, considering the large number of organizations that set new science-based targets or updated their targets during the year, and taking into account cases where progress disclosure was not expected to be found.
Nonetheless, an enduring gap remained in climate reporting among companies with science-based targets, both in terms of disclosure and comprehensiveness of reporting against their published targets, as only half of companies reported fully in comparable ways.
To bridge this gap, the SBTi plans to strengthen reporting requirements, supported by guidance on disclosure that will enable stakeholders to assess progress against targets and performance in the reporting year. As a first step, the SBTi’s corporate manual version 2.1 (April 2023) included reporting guidance that lays out best practice in reporting and aims to provide specific and actionable recommendations for annual reporting on target progress and emissions.
In January 2023, the SBTi Financial Sector and TCFD Reporting Guidance was published to provide financial institutions with a framework for assessing, disclosing and managing the climate risks to which they are exposed, and maximizing opportunities for portfolio companies to cut emissions and reduce their climate impact. The guidance sets a path for the financial sector to effectively collect and manage a variety of data points and address data gaps, while creating internal structures that enable the implementation of science-based targets.
Trend indicates slower rate of emissions reduction – a post-Covid phenomenon?
Among companies analyzed for this report, companies with science-based targets reduced their scope 1 and 2 emissions by 25% by 2021 against a 2015 base year, compared with a reduction of 14% by 2019 against a 2015 base year.
While companies with science-based targets reported that scope 1 and 2 emissions remained below 2019 levels in 2021, collectively they exhibited a small increase (0.4%) in 2021 emissions compared with 2020. While there is currently insufficient evidence to determine whether this small increase in emissions is an anomaly or the start of a trend, it could be explained by companies increasing their outputs and activity as part of the wider recovery of the global economy following the Covid-19 pandemic.
Notably, the 2021 emissions of companies with science-based targets remained well below 2019 levels, in contrast with global emissions which rebounded in 2021 to within 1% of 2019 levels. Companies with science-based targets showed a steeper drop in emissions between 2019 and 2020 than the economy overall, and a smaller percentage emissions increase between 2020 and 2021. This could suggest that companies with science-based targets are more likely to continue emissions reductions in future years.
Typical company in sample reduced emissions at a faster rate than required
Analysis of scope 1 and 2 emissions reductions of companies since setting science-based targets was carried out for 205 companies. Of these, the typical company reduced their emissions at a linear annual rate of 5.9% between the year of setting targets and 2021. The minimum annual reduction required for meeting 1.50C-aligned science-based targets is 4.2%. Therefore, the typical company in the sample was reducing scope 1 and 2 emission at a faster rate than required.