More than 80% of the world’s emissions are created by corporate Scope 1, 2 and 3 emissions meaning companies should take the forefront of transitioning to net zero and the Science Based Targets Initiative’s new standard can help lead the way, according to a new report by Jefferies.
The Science Based Targets Initiative (STBi) Net-Zero Corporate Standard sets more ambitious near-term targets, according to the Jefferies report, while establishing the framework for further out goals while requiring companies to neutralize residual emissions by removal and storage of carbon from the atmosphere.
The implications of the new standard for businesses includes several potential benefits, according to the report. One positive is being among the first to take advantage of innovating practices regarding net zero goals.
As investors increasingly demand companies tackle these objectives, there is opportunity to reduce financial and operational risks by getting a head start on the effort, the report says. Recently, financial institutions holding more than $29 trillion in assets called on some 1,600 businesses to set SBT emissions goals, highlighting the importance the effort can have on companies.
That increasing focus on SBTi shows the importance that companies have a solid understanding of how to make reliable mitigation efforts beyond their value chains and companies can use models that may clarify and incentivize such actions, the report says.
Organizations adopting the Net-Zero Standard will be required to set both near- and long-term science-based targets across all emissions scopes. Near-term targets cover immediate emissions reductions for the next 5-10 years, while long-term targets determine the total level of decarbonization by 2050, which the standard clarifies that SBT net zero requires companies to achieve deep decarbonization of 90%-95%.
One of the more challenging aspects of moving toward net zero is tackling Scope 3 emissions. The SBTi corporate standard sets to further develop ways to make Scope 3 targets more achievable.
A recent report by EcoAct shows that while most top earning businesses are making progress in cutting Scope 1 and 2 emissions, only 22% have reported a decrease in Scope 3 emissions. That report also noted that 65% of those top companies have set SBT goals.
Companies also need to be transparent in these efforts by measuring, reporting and verifying what they have accomplished and what they are attempting regarding their SBTs, the report says.
Jefferies says the new SBTi standard can offer businesses clarity on how to embark on the net zero effort as well as confidence they can achieve the goals. It also offers questions organizations should ask when embarking on the initiative, such as what are short- and long-term goals and how can profitability be achieved in net zero industry?
More than 2,000 companies currently participate in the main SBTi program. The SBTi will begin validating the new net zero corporate goals in January 2022.
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