Setting greenhouse gas reduction targets is like setting a destination on your company’s GPS. It ensures that important issues stay top of mind for senior management, guiding them in making decisions about what products to offer, which materials to use, and which technologies to adopt to effectively manage the company’s environmental impact. Imagine you’ve just mapped out your company’s emissions—like checking the fuel gauge before a road trip. The next step is to set a reduction target, which is like choosing a destination to drive towards. This way, everyone knows where they’re headed and can make sure they’re on the right path to get there.

Target Setting Best Practices

Declaring GHG reduction targets publicly is best practice. Publicly reported GHG targets provide transparency, accountability, and credibility to the target setting process. Additional best practices for setting clear and effective targets include the following:

1. Set Clear Time Frames: Choose a starting year to measure from (base year) and a year by which you plan to achieve your goal (target year). Typically, this is within 5 to 10 years.
2. Be Ambitious: The Science-Based Targets Initiative (SBTi) requires emissions reductions of 4.2% per year for targets that cover scope 1 and 2 emissions and emissions reductions of 2.5% per year for targets that cover scope 1, 2, and 3 emissions.
3. Aim for Absolute Reduction: Targets should be a clearly defined, absolute GHG reduction to be achieved over a specified period of time (e.g., 25% reduction over 10 years).
4. Address All 3 Scopes: Targets should include all scope 1 and 2 emissions and at least a portion of scope 3 emissions. For scope 3, good practice is to start with targets for just one or two scope 3 categories and progress to additional categories over time.

Meet The Company Where It’s At

Let’s talk about meeting your company where it’s at when it comes to setting greenhouse gas (GHG) emission reduction targets. Think of it like a journey—each organization is at a different stage, and that’s okay. Trying to kill too many birds with one stone for a company just starting out will get frustrating, decrease morale, and will ultimately result in your organizational support system slowly abandoning ship. Instead, let’s find the right fit for your company’s current stage and work from there.

• No Activity: You’re just starting out and your company hasn’t yet set any GHG reduction targets for any of the three scopes. Renewable energy? Not on the radar yet. Energy efficiency? Too complicated—for now!
• Entry-Level: You’ve made some strides. Your company has set a clear goal for reducing direct emissions and has started thinking about indirect emissions too. Maybe you’ve set a small target for renewable energy use, but it’s still under 50%. You’ve packed your bags and are ready to go, but haven’t taken off just yet.
• Intermediate: Now things are getting serious. Your company’s reduction targets align with keeping global temperature rise to 1.5°C, covering all direct emissions. You’re also tackling more scope 3 emissions and aiming for at least 50% renewable energy use. You’re on your way.
• Advanced: You’re at the top of your game. Your targets not only cover all direct emissions but are also consistent with the ambitious goal of keeping the temperature rise to 1.5°C, or even achieving net zero. You’re addressing a significant chunk of scope 3 emissions and have committed to 100% renewable energy. Your targets might even have third-party approval. You’re a seasoned traveler now.

Setting Emission Reduction Targets

1. Decide on the target type. Set an absolute or intensity target?
2. Decide on the target boundary. Which GHGs and scopes to include? Which geographical operations?
3. Choose the target base year. Use a fixed or rolling approach?
4. Define the target completion date. Set a long- or short-term target?
5. Decide on the use of offsets or credits.
6. Establish a target double counting policy.
7. Track and report progress. Make regular performance checks and report progress towards goals.

Additionally, you’ll want to prepare for any industry or government regulations that your company will need to comply with. This foresight can equip companies to respond more effectively to existing and future GHG regulations. You may also choose to participate in a voluntary program. This can improve a company’s brand image and reputation with customers, employees, investors, business partners, and the public. This sends a clear message—our company cares about the planet, climate, and our contribution to keeping it thriving for future generations.

Setting Your Targets: What to Know

The Science Based Targets Initiative (SBTi) is a collaborative effort between CDP, the United Nations Global Compact, the We Mean Business Coalition, the World Resources Institute (WRI), and the World Wildlife Fund for Nature (WWF). This initiative provides companies with a clear pathway to reduce emissions in line with the latest climate science and the goals of the Paris Agreement. The initiative aims to ensure that corporate climate action is grounded in science and contributes effectively to limiting global warming to well below 2°C above pre-industrial levels, with efforts to limit warming to 1.5°C.

When it comes to reducing greenhouse gas emissions, most companies will choose between absolute and intensity targets. Absolute targets focus on cutting the total emissions over time, like reducing CO2 by 25% from a specific baseline year. Intensity targets, on the other hand, reduce emissions relative to a business metric, such as emissions per unit of production. Both approaches are valid, with many stakeholders favoring absolute targets.

Recently, the SBTi came out with a third type of target: net-zero. Net-zero targets aim to balance the total amount of GHG emissions produced with an equivalent amount of emissions removed from the atmosphere, achieving a net-zero balance. In essence, absolute targets focus on total emissions reductions, intensity targets aim for efficiency improvements per unit of output, and net-zero targets strive for a holistic balance between emissions produced and removed, ultimately aiming to nullify the impact on the climate.

Let’s break it down further.

Absolute vs. Intensity Targets

Absolute Targets

Absolute GHG targets reduce absolute emissions over time. An example absolute target is to reduce total CO2 by 25% below 2024 levels by 2030, even while growing the business.

Advantages

• Designed to achieve a specific reduction in GHG quantity emitted into the atmosphere.
• Environmentally strong commitment structured to reduce a specified quantity of emissions regardless of company growth or acquisitions.
• Transparently addresses potential stakeholder concerns about managing total emissions.

Disadvantages

• Hard to track with company changes like growth or acquisitions.
• Doesn’t show efficiency.
• Can be more difficult to achieve if the company grows quickly.

Intensity Targets

Intensity targets reduce the ratio of emissions relative to a business metric over time. It can be the output of the company (e.g. ton CO2-e per ton product, per kWh, per ton mileage) or some other metric such as sales, revenues or office space. An example intensity target is to reduce CO2 by 10% per square foot of manufacturing floor space between 2024 and 2030.

Advantages

• Shows improvement regardless of growth.
• Easier to track without frequent recalculations.
• Compares well between companies.

Disadvantages

• Doesn’t ensure total emissions drop.
• Hard to standardize for diverse businesses.
• Complex with financial metrics due to price changes and inflation.

Why Do Stakeholders Favor Absolute Over Intensity Targets?

The environmental impact of absolute targets are arguable more meaningful to the planet as a whole. Absolute targets ensure a definitive reduction in total emissions, contributing directly to mitigating climate change. They also align more closely with international climate agreements, such as the Paris Agreement, which focus on limiting total anthropogenic emissions to achieve global climate goals. Additionally, absolute targets hold companies accountable for reducing their overall emissions, regardless of changes in production levels or economic growth, thereby driving significant and systemic changes necessary for substantial environmental impact.

Intensity targets, such as metric tons of CO2e emitted per square feet of building space (MT CO2e / sq ft), give companies wiggle room to grow and expand, while absolving them of the accountability required to limit their total emissions. Think of the planet and its ability to hold carbon as a pie, with each emitting company being a piece of that pie. As a company grows, their emissions will naturally grow too. But the planet’s ability to hold carbon doesn’t change. If every piece of that pie grows without limiting their absolute emissions, eventually the planet cannot effectively sequester the increasing amount of carbon we’re emitting. So while intensity targets may seem more “fair” to growing companies, it’s less fair to the climate, which can only accommodate so many emissions before the climate as we know it changes completely and irreversibly.

Base Year

For a target to be credible, it must be transparent how target emissions are defined in relation to past emissions. The GHG Protocol outlines two general approaches: fixed or rolling target base years. Fixed targets provide a long-term goal based on a past reference year, while rolling targets continuously update based on the previous year.

Fixed Target Base Year

Fixed targets are set for a specific future year based on a fixed starting year. For example, you aim to reduce emissions by 20% from 2020 levels by 2030. You track your progress from the starting year to the target year. The goal stays the same until you reach the target year. Generally speaking, best practice is to use fixed targets with a fixed base year, unless significant structural changes (e.g., major acquisitions/divestitures) merits re-baselining (i.e. re-establishing a new base year every year).   

Rolling Target Base Year

Rolling targets are continuously updated and extended. The base year rolls forward at regular time intervals, usually one year, so that emissions are always compared against the previous year. For example, each year you aim to reduce emissions by 20% compared to the prior year. Companies anticipating significant structural changes such as mergers and acquisitions may consider this option to avoid re-baselining every year to account for the growth spurt (and all the additional emissions that come along with it!). With the rolling approach, only the GHG emissions for the last rolling base year need to be recalculated, rather than emissions for a fixed base year that may be much earlier (and much harder to retrieve data for!).

Science-Based Targets Criteria

SBTi has two main sets of guidelines for companies to reduce their greenhouse gas emissions: the Corporate Near-Term Criteria and the Corporate Net-Zero Standard Criteria. The Near-Term Criteria focus on immediate action, with targets set for the next 5-10 years. These targets aim to make significant cuts in emissions from a company’s own operations (Scopes 1 and 2) and, in many cases, some of their broader supply chain emissions (Scope 3). Companies can choose between reducing total emissions or improving efficiency per unit of production.

On the other hand, the Net-Zero Standard Criteria are about long-term goals, typically looking towards 2050 or beyond. This set of criteria guides companies to eventually balance out the emissions they produce with the emissions they remove from the atmosphere, aiming for net-zero. These targets require companies to address all types of emissions, including their entire supply chain (Scope 3), and focus more on total emission reductions. Additionally, any remaining emissions must be offset by credible projects that remove carbon from the atmosphere.

Essentially, the Near-Term Criteria prioritize making substantial emission cuts quickly, while the Net-Zero Standard Criteria are about planning for the long haul, ensuring that a company eventually produces no more emissions than it can remove.

Ultimately, setting well-defined GHG reduction targets helps companies stay on course with their sustainability goals, ensuring they contribute effectively to mitigating climate change while enhancing their operational efficiency.