[et_pb_section fb_built=”1″ admin_label=”Section” _builder_version=”4.17.6″ z_index=”0″ custom_padding=”0px|0px|5px|0px” global_colors_info=”{}”][et_pb_row _builder_version=”4.17.6″ custom_padding=”0px|0px|4px|0px” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_accordion _builder_version=”4.18.0″ z_index=”0″ min_height=”458px” custom_margin=”||-1px|||” global_colors_info=”{}”][et_pb_accordion_item open=”on” _builder_version=”4.18.0″ body_font_size=”19px” border_width_all=”0px” global_colors_info=”{}”]<\/p>\n
The latest climate science shows that drastic action is needed to curb the effects of climate change. As one of the highest emitting industries, manufacturers have a big challenge ahead of them to meet the government\u2019s 2050 Net Zero target.\u00a0<\/span><\/p>\n Since COP26, many countries have committed to reducing their carbon emissions. The Science Based Targets Initiative (SBTi) use climate science to d<\/span>efine and promote best practice in emissions reductions and net-zero targets in line with climate science.<\/span><\/p>\n <\/p>\n <\/span><\/p>\n Targets provide a public barometer on a company\u2019s climate action. Currently, Science Based Targets (SBTs) are the most comprehensive and effective way to stay accountable for your carbon emissions.\u00a0<\/span><\/strong><\/p>\n SBTs are based on a global carbon budget allocation that keeps temperature rise below 2\u00baC. But as of July 2022, the expectation is for companies to go one step further and keep temperature rise below 1.5\u00baC.\u00a0<\/span><\/strong><\/p>\n Initially, SMEs must go through a specialised streamlined route to develop and communicate targets before submitting targets for validation.\u00a0<\/span><\/strong><\/p>\n This process can take anywhere from six months and two years, as the targets are scrutinised by experts at the SBTi. The data used to develop and report on them is examined in detail, and the accuracy of assumptions made to achieve the proposed target is modelled and tested.<\/span><\/span><\/p>\n <\/span><\/p>\n <\/span><\/p>\n <\/strong><\/p>\n Companies have been setting sustainability targets for decades, but these were often somewhat arbitrary and the likelihood of creating real change was unknown. Setting SBTs means companies can work towards a goal that is proven to reduce emissions.<\/span><\/strong><\/p>\n Many companies are beginning to take action. Here are some benefits:<\/span><\/p>\n \u00a0<\/strong><\/p>\n From investors and employees to take measurable climate action. More and more investors are prioritising sustainable businesses as they can reduce costs in the long run.<\/span><\/p>\n \u00a0<\/strong><\/p>\n SBTs can help identify hotspots in every stage of the supply chain that may be vulnerable to carbon costs or disruptions from climate change. From this, companies can ensure the longevity of their business by fixing areas with sunk costs.\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n In the UK, carbon reporting standards such as ESOS, PPN 06\/21, etc, are mandatory for companies that meet the criteria. Although these standards don\u2019t currently include Scope 3 emissions, compliance criteria is likely to become more rigorous as the UK aims to meet the 2050 Net Zero target. In fact, there have already been changes to ESOS Phase 3 [LINK]. Reporting in line with SBTs will prepare you for these changes and ensure your business is prepared for a sustainable future.\u00a0<\/span><\/p>\n <\/span><\/p>\n Customers, as well as investors, are becoming increasingly interested in ethical and environmentally conscientious purchasing. According to SBT [LINK], 79% of corporate executives surveyed found a strengthened brand reputation to be one of the most significant business benefits for their company from committing to the SBTi.<\/span><\/p>\n \u00a0<\/strong><\/p>\n There are opportunities for cost savings, through energy savings and increased efficiencies. A study by Good360 [LINK] found that Effective sustainability reporting can increase market value by 4-6%<\/span><\/strong><\/p>\n <\/span><\/p>\n Mitigating climate change might sound like given, but taking responsibility for the impact of our business on the environment is a smart decision, not just for long-term growth but for everyone. It is a win-win.\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n \u00a0<\/strong><\/p>\n There are two methods of target calculation for scope 1 & 2 emissions\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n Either:\u00a0<\/span><\/p>\n Absolute-based approach-<\/b> This method requires companies to reduce absolute GHG emissions by a given percentage. This approach applies to any organisation within any sector.\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n Sector-based approach<\/b>– Appropriate for some industrial sectors, the SDA divides a global carbon budget based on the projected level of sectoral economic activity and potential for emissions reductions. The resulting target is an intensity target defined relative to a specific business metric.<\/span><\/p>\n \u00a0<\/strong><\/p>\n For Scope 3, there are four methods of calculating; absolute-based approach, physical intensity approach, economic-based approach and supplier approach. <\/span>The first two are most relevant to manufacturers<\/b>:\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n Absolute-based Approach<\/b>\u2013 applies to Scope 3 too, see above.<\/span><\/p>\n \u00a0<\/strong><\/p>\n Physical Intensity Approach<\/b>– Applicable to companies who make tangible products. This approach sets an emissions reduction target based on output carbon efficiency (e.g. per tonne of sold product).\u00a0<\/span><\/p>\n <\/strong><\/p>\n <\/p>\n \u00a0<\/strong><\/p>\n In guidance released in 2021, the SBTi adjusted its recommendations for SBT setting, with the minimum ambition of its near-term targets transitioning to 1.5\u00b0C for scope 1 and 2 targets, With \u201cwell below 2\u00b0C\u201d reserved for scope 3 targets.\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n They also introduced the net-zero science-based target. Companies who have set Net Zero SBTs can offset emissions that they can\u2019t reduce in the interim before achieving Net Zero – however, this is not the same as reaching Net Zero. Companies can achieve carbon neutrality by investing in projects that store or reduce carbon emissions. On the other hand, to achieve Net Zero, companies must abate emissions completely through efficiency, renewables, and othe rmeans.\u00a0<\/span><\/p>\n \u00a0<\/strong><\/p>\n Offsetting emissions does not count towards reduction and a company will only be considered Net Zero by the SBTi if they set specific targets. Below, Enistic founder and Lead Assessor, Darryl Mattocks, explains what a Net Zero company is.<\/span><\/p>\n [\/et_pb_accordion_item][\/et_pb_accordion][et_pb_accordion _builder_version=”4.18.0″ z_index=”0″ min_height=”458px” custom_margin=”||-1px|||” global_colors_info=”{}”][et_pb_accordion_item open=”on” _builder_version=”4.18.0″ body_font_size=”19px” border_width_all=”0px” global_colors_info=”{}”]<\/p>\n Risk has always been a fundamental aspect of business. But one of the most significant and possibly misunderstood risks that businesses face today is climate change. It is understood that continuing rise in emissions will lead to more damage to the environment with social and economic impacts, but the exact timing and severity of these effects are hard to predict. <\/span><\/p>\n As a result of this, climate consciousness and reporting has not always been a top priority for businesses, but this is starting to change. Investors and governments are increasingly expecting action from companies to monitor and reduce their carbon emissions.\u00a0<\/span><\/p>\n For many investors, climate change poses significant financial risk – the expected transition to a lower-carbon economy is estimated to require around <\/span>$1 trillion of investments a year <\/span><\/a>for the foreseeable future. At the same time, the physical risks of climate change and the transition risk of implementing new technologies may affect businesses even more. In fact, a 2015 study estimated that, of the global stock of manageable assets, the value at risk as a result of climate change ranges from <\/span>$4.2 trillion to $43 trillion between now and the end of the century<\/span><\/a>.\u00a0<\/span><\/p>\n To help identify the information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities, the Financial Stability Board established an industry-led task force: the Task Force on Climate-related Financial Disclosures (TCFD). The Task Force developed eleven recommendations around four themes: governance, strategy, risk management and metrics & targets. <\/span><\/p>\n These recommendations <\/span>are designed to solicit decision-useful, forward-looking information that can be included in mainstream financial filings. The Task Force also identified two major categories of risk: physical risks and transition risks.\u00a0<\/span><\/p>\n <\/p>\n To understand physical risk, all you need to do is look at weather-related headlines from the past year. Heat waves, floods and wildfires have been more frequent and more intense. The UK has experienced record breaking heatwaves, with temperatures breaking 40 degrees for the first time in history. The losses associated with these weather events, both social and economical – no wonder investors are demanding more accessible and transparent assessments on the physical risks that companies face.\u00a0\u00a0<\/span><\/p>\n [\/et_pb_accordion_item][\/et_pb_accordion][et_pb_accordion _builder_version=”4.18.0″ z_index=”0″ min_height=”458px” custom_margin=”||-1px|||” global_colors_info=”{}”][et_pb_accordion_item open=”on” _builder_version=”4.18.0″ body_font_size=”19px” border_width_all=”0px” global_colors_info=”{}”]<\/p>\n Risk has always been a fundamental aspect of business. But one of the most significant and possibly misunderstood risks that businesses face today is climate change. It is understood that continuing rise in emissions will lead to more damage to the environment with social and economic impacts, but the exact timing and severity of these effects are hard to predict. <\/span><\/p>\n As a result of this, climate consciousness and reporting has not always been a top priority for businesses, but this is starting to change. Investors and governments are increasingly expecting action from companies to monitor and reduce their carbon emissions.\u00a0<\/span><\/p>\n For many investors, climate change poses significant financial risk – the expected transition to a lower-carbon economy is estimated to require around <\/span>$1 trillion of investments a year <\/span><\/a>for the foreseeable future. At the same time, the physical risks of climate change and the transition risk of implementing new technologies may affect businesses even more. In fact, a 2015 study estimated that, of the global stock of manageable assets, the value at risk as a result of climate change ranges from <\/span>$4.2 trillion to $43 trillion between now and the end of the century<\/span><\/a>.\u00a0<\/span><\/p>\n To help identify the information needed by investors, lenders, and insurance underwriters to appropriately assess and price climate-related risks and opportunities, the Financial Stability Board established an industry-led task force: the Task Force on Climate-related Financial Disclosures (TCFD). The Task Force developed eleven recommendations around four themes: governance, strategy, risk management and metrics & targets. <\/span><\/p>\n These recommendations <\/span>are designed to solicit decision-useful, forward-looking information that can be included in mainstream financial filings. The Task Force also identified two major categories of risk: physical risks and transition risks.\u00a0<\/span><\/p>\n <\/p>\n To understand physical risk, all you need to do is look at weather-related headlines from the past year. Heat waves, floods and wildfires have been more frequent and more intense. The UK has experienced record breaking heatwaves, with temperatures breaking 40 degrees for the first time in history. The losses associated with these weather events, both social and economical – no wonder investors are demanding more accessible and transparent assessments on the physical risks that companies face.\u00a0\u00a0<\/span><\/p>\n [\/et_pb_accordion_item][\/et_pb_accordion][et_pb_accordion _builder_version=”4.17.6″ custom_margin=”||-47px|||” global_colors_info=”{}”][et_pb_accordion_item open=”on” _builder_version=”4.17.6″ body_font_size=”19px” border_width_all=”0px” global_colors_info=”{}”][\/et_pb_accordion_item][\/et_pb_accordion][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.17.6″ global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_image src=”https:\/\/enistic.com\/wp-content\/uploads\/2022\/08\/2-e1661356965236.png” title_text=”2″ _builder_version=”4.18.0″ _module_preset=”default” min_height=”276.3px” custom_margin=”3px|||||” custom_padding=”10px|||||” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”20px” custom_margin=”0px||||false|false” custom_padding=”20px|0px|20px|0px|true|true” global_colors_info=”{}”]<\/p>\n When we think of physical risk, we typically think of the headline weather events that end up in our news feeds – <\/span>acute risk<\/b>. Longer-term shifts in climate patterns – <\/span>chronic risk<\/b> – rarely make headlines but are just as problematic.\u00a0 For example, findings from WWF found that rising sea levels caused by climate change place \u00a312bn of the UK\u2019s economy at risk.<\/span><\/p>\n While storm surge is linked to hurricanes and tropical storms that draw media attention, the slow pace of sea-level rise relegates it to scientific journals and smaller audiences. Businesses with operations in any coastal location cannot afford to ignore it.\u00a0<\/span><\/p>\n The potential impacts of climate change on organisations, however, are not only physical. To stem the disastrous effects of climate change within this century, nearly 200 countries agreed in December 2015 to reduce greenhouse gas emissions and accelerate the transition to a lower-carbon economy. <\/span><\/p>\n The reduction in greenhouse gas emissions implies movement away from fossil fuel energy and related physical assets. This, coupled with rapidly declining costs and increased use of clean and energy-efficient technologies could have significant, imminent financial implications for organisations dependent on extracting, producing, and using coal, oil, and natural gas.\u00a0<\/span><\/p>\nWhat is a science-based target?<\/strong><\/h2>\n
Why do companies set Science-based targets?<\/strong><\/strong><\/h2>\n
Stakeholder pressure<\/span><\/h3>\n
Future-proofing<\/span><\/h3>\n
Preempting regulation and legislation<\/span><\/h3>\n
Reputation<\/span><\/h3>\n
Financial benefit<\/span><\/h3>\n
The climate crisis itself-<\/span><\/h2>\n
What are the different types of SBTs?<\/span><\/h1>\n
Level of Climate Ambition<\/span><\/h1>\n
As Temperatures Rise, Risk Grows<\/b><\/h2>\n
As Temperatures Rise, Risk Grows<\/b><\/h2>\n
<\/b><\/h4>\n
Climate Change Demands a Transition<\/b><\/h2>\n