CEO DailyCFO DailyBroadsheetData SheetTerm Sheet

‘Science-based target’ is business’s favorite new climate change catchphrase. What does it actually mean?

October 20, 2021, 9:40 AM UTC

The term “science-based target” is something I’ve seen time and again as I rifle through the plentiful corporate climate pledges issued over the past couple of years. In some cases companies say they have set science-based targets for achieving net-zero emissions, others say they intend to do so.

Cynic that I am, I read the term as a pre-emptive excuse, offered by corporate PR to explain why it appears their business isn’t decarbonizing fast enough. Don’t blame us, the terminology says: it’s the science.

But, according to Alberto Carrillo Pineda, co-founder and managing director of the Science Based Target Initiative (SBTi), the phrase was supposed to convey a sense of rigor in a field awash with baseless claims.

“When we started in 2015, companies were setting climate targets that looked very flashy but were being designed in a very arbitrary way,” Carrillo Pineda says. “You see all sorts of net zero pledges and, when you start digging into them, some of them are talking about really decarbonizing their business models while others are basically focusing on offsetting emissions.”

The SBTi, which was founded in the run up to the COP 21 climate conference in Paris, set out to standardize decarbonization plans. The group works with industry leaders to set sector-specific guidelines for how a company should assess their current emissions and develop a plan to reduce emissions in line with a pathway set by the International Panel on Climate Change (IPCC).

The IPCC’s pathways represent the “science” a company’s “science based targets” should align with, and the IPCC says global carbon emissions must be halved by 2030 and brought to net zero by 2050 to limit global warming to 1.5C. In many cases, when a company refers to its own “science based targets,” it’s referring to work it’s completed with the SBTi. But not always.

The SBTi, considered by many as the gold standard for auditing climate pledges, has approved net zero plans from close to 1,000 companies to date. But, peculiarly, not every target is as simple as committing to achieving net-zero carbon emissions by 2050, as the IPCC recommends. Carrillo Pineda says net-zero by 2050 is an average target and that IPCC pathways depend on some sectors, like the power generation industry, decarbonizing before others.

“The power sector needs to decarbonize the fastest, because it is the sector that will help decarbonize other sectors of the economy. So, a power company committing to net-zero by 2050 is too late,” Carrillo Pineda says. But the SBTi doesn’t yet have a framework for decarbonizing the oil and gas industry, which underlies emissions in the power sector.

Carrillo Pineda says the SBTi is working with oil majors to create a framework, but the group determined it was “very high risk and very sensitive for us to actually introduce a framework for oil and gas companies” without more due diligence.

The group is concerned that approving an oil company’s emissions reduction scheme could embroil the organization in lawsuits filed by climate activists against oil companies—like the case against Shell in May, in which a Dutch court determined the group wasn’t doing enough to reduce carbon emissions.

Shell said in February it would work with the SBTi to develop a framework for emissions reductions in the oil industry, but Carrillo Pineda says “no oil company is even close to setting a science-based target yet.”

The SBTi isn’t the only group approving companies for setting “science based targets,” and almost certainly there are companies that have used the language without following the procedure. Even the SBTi, once it approves a company’s net-zero pledge, has no tools or procedure for following up and making sure the company remains on track, although companies are supposed to self-report their progress each year.

The SBTi has its critics, too. Last October, the Rainforest Action Network (RAN) said guidelines the SBTi developed to decarbonize financial institutions “failed to live up to [their] full potential to help decarbonize finance at the rapid speed that science requires.”

In February, Bill Baue, a former member of the SBTi’s technical advisory group, accused the initiative—which develops guidelines in cooperation with members of the industry it is seeking to regulate—of being “self-serving” and having an opaque operating process. The SBTi has refuted Baue’s accusations, and questions how it could be seen as “self-serving.” But, Carrillo Pineda admits the group has room for improvement.

“There’s lots of room for improvement in every single aspect of the climate architecture, from accounting standards, to reporting standards, to target setting standards. It’s a very complex topic.”

Eamon Barrett
– eamon.barrett@fortune.com
@eamonbarret49

CARBON COPY

Climate watch

Satellites are emerging as a useful tool for checking in on greenhouse gas emissions, as the orbital monitors can detect surreptitious methane leaks or the haze of carbon dioxide from a vantage point in space. Predictably, governments emphasize how this spyware can check on the emissions of other countries—making sure others are sticking to their climate pledges. The threat of being named-and-shamed by an adversary has launched some sort of space race in launching emission-sniffing-satellites, as Russia, the U.S., China and the EU are all developing their own (and sometimes collaborating, too). But, the more monitors the better. WSJ

Beefing

Members of the beef industry are rebuking science that says methane from cattle farms are a significant contributor to global warming, by offering a new method of counting GHG emissions that goes against the common scientific consensus. Methane traps more heat than carbon dioxide but dissipates faster, meaning methane’s accumulated effects on the climate are less than carbon’s. yeCattle ranchers are leaning on this discrepancy to downplay the significance of methane emissions from livestock—which contribute about 14% of all greenhouse gas emissions. Bloomberg

States in play

Slowly, public pressure—and the threat of depreciating returns—has prompted private companies to divest from oil projects. Privately-held oil majors like BP and Shell have even announced plans to transition to net-zero operations, which would suggest a near total elimination of their current oil production. But as the private sector leans back, state-owned enterprises are stepping in and increasing production to take advantage of decreased competition. New York Times

TPI

The Transition Pathway Initiative (TPI)—a service provider that measures the pace of corporate decarbonization efforts—is ramping up its efforts to measure companies’ preparedness for the energy transition. On Tuesday, TPI said it will launch an open-access database next year, that will track how well 10,000 publicly-traded companies are aligned with net-zero pathways. The group, which is backed by global asset managers including BlackRock, currently only tracks roughly 400 companies. Bloomberg

IN CASE YOU MISSED IT

Bitcoin got 50% less green over the last year, says this influential crypto analyst by Shawn Tully

‘It would be very hard to fight us’: How Ma Jun and IPE became the corporate world’s go-to pollution trackers by Vivienne Walt

‘They talk, but they don’t do’: The Queen of England is fed up with politicians’ empty words on climate action by Katherine Dunn 

Young climate activist confronts Shell CEO at pre-COP26 conference by Katherine Dunn 

Once wary of GMOs, China is now leading in gene-edited seeds by Eamon Barrett

5 hot-button issues facing Tesla as it looks to join $1 trillion club by Christiaan Hetzner

CLOSING NUMBER

4%

Carbon emissions from the G20 group of nations are set to increase 4% this year, after slumping 6% during the first year of the pandemic when airplanes and consumers were mostly grounded. The rebound in emissions from the G20—which account for 75% of global carbon emissions—is being driven by a return in fossil fuel consumption, especially coal. According to data from Climate Transparency, coal usage is on track to increase 5% across the group this year, too, with China accounting for the majority of that increase.

Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.