Science Based Targets for a Sustainable Future: How SBTi is Unlocking Business Value Across the World
In 2018, the Intergovernmental Panel on Climate Change (IPCC) reported that a global warming of 1.5 degrees Celsius above the pre-industrial revolution temperature levels could result in the most catastrophic climate impact worldwide. The report, a wakeup call on climate change, was instrumental in driving worldwide awareness and action.
Subsequently, global focus has continued to grow on the importance of curbing greenhouse gas (GHG) emissions.
Businesses worldwide have a key role to play in this direction for building a resilient, zero-emission economy. Science-based targets (SBTs) are proving to be a key enabler here, helping companies chart a clear path towards decarbonization. By providing a well-defined roadmap that specifies the speed and the quantity by which organizations need to reduce their emissions levels, Science Based Target Initiatives (SBTi) therefore helps address climate change while unlocking business benefits and future-proofing operation models during the transition to a net zero economy.
Here are some of the key benefits that companies can expect to unlock from setting SBTs:
- Deeper Innovation: An orderly transition to a low-carbon business model, with the ultimate goal of achieving Net Zero, opens up a whole new world of opportunities in the form of new and smart technology enablers. Companies now have both the prospect and the need to collaborate with new partners with a proven track record of providing sustainable technologies and solutions, driving the innovation journey throughout the ecosystem. To cite an instance, the SBT framework adopted by a Japanese conglomerate for new product development led to the adoption of a new plastic made of 99% recycled material, which resulted in an 80% reduction in CO2 emissions during manufacture.
- Robust Compliance: As national governments continue to raise the ambition levels of their country-level pledges as a part of the Paris Accord, new regulations for stringent emission curbs continue to take centerstage. By embracing SBTi, companies can not only futureproof their existing operation models, but also align themselves as early adopters of the Paris Agreement, ensuring all-round compliance with present and future regulations and enhancing the ease of doing business.
- Better Recall: With customers becoming increasingly aware and conscious of the effects of their choices on the environment, and the growing shift towards ethical consumption, a sustainability focus is increasingly becoming key for ensuring better brand recall. As result, SBTs are emerging as the preferred vehicle for driving a robust brand recognition across geographies and customer segments. Electricity operator EDP feels that setting a science-based target exhibits “robustness, confidence, and credibility,” – desirable characteristics that resonate well with customers and drives brand value.
- Enhanced Confidence: Better brand helps promote enhanced investor confidence, as the environmental policies of the business are often a key determinant for future investment decisions by potential stakeholders. As a multinational retailer recently found out, leveraging SBTi was vital in positioning itself as a forward-thinking, sustainability-minded company that was in resonance with the demands of a whole new generation of ethics- and environment-oriented investors.
- Competitive Edge: A stronger innovation framework, mature compliance mechanism, improved brand recall, and enhanced investor confidence combined together provides an unmatched competitive edge for the business. Not only are these companies ahead of the curve in their journey towards Net Zero, they are better positioned to leverage the new opportunities offered by the low carbon economy and have a march over their rivals.
- Improved Bottomline: While arguments have been put forth on the potentially high cost of embracing a green business model, experience on the ground from the companies that have adopted SBTi says otherwise. A significant number of the early adapters have already registered bottom-line savings, thanks to their commitment to the environment. The growing capability for lean and efficient operations and futureproofing for a scenario where non-renewable resource are increasingly scarce and as a result, more expensive, is therefore emerging as the key determinant between continued profitability and potential losses.
Over 330 target-setting companies have succeeded in reducing their emissions by a quarter in the five years since the Paris Agreement, with the rate of adoption of the targets doubling in 2020 as compared to the period between 2015-19. As we continue to move towards a greener world, businesses must therefore take a closer relook at their current operations to embrace the ideals and standards of sustainability, which would be crucial for ensuring continued success over the coming decades.