by Marguerite Fauroux and Marine Manche
The global push for decarbonization has made sustainability a top priority for businesses across industries. Science-Based Targets initiative (SBTi) goals have become a cornerstone for demonstrating commitment to this mission. However, aligning these objectives with the realities of specific sectors can be complex. In a recent project with a leading energy company in Switzerland, Earth Action encountered significant challenges while supporting their efforts to establish SBTi-aligned targets. The journey highlighted critical contradictions between global frameworks, national strategies, and industry-specific needs, providing valuable lessons for the broader energy sector.
The Challenges of SBTi for Low-Emission Energy Companies
The SBTi methodology requires all companies to achieve percentage-based reductions, regardless of their starting point. For our client in the energy sector in Switzerland, this approach presents significant hurdle. With an already low carbon intensity (nearly 100% renewable electricity and heat), achieving further reductions to meet SBTi thresholds was disproportionately challenging compared to companies with higher initial emissions. This one-size-fits-all approach penalizes businesses that have already made significant progress.
Balancing Decarbonization with Business Growth
The energy sector faces the dual challenge of decarbonizing operations while responding to growing electricity demand and expanding services. Energy companies must make substantial investments in renewable infrastructure, such as solar panels, electric chargers, and grid reinforcements. While these investments increase their scope 3 emissions in the short term, they are essential for enabling decarbonization on a broader scale. The SBTi methodology applies the same scope 3 targets across all industries, overlooking sector-specific realities. Applying uniform SBTi reduction targets to these emissions fails to account for the critical role of such investments in achieving broader climate goals, creating a paradox where the very actions driving sustainability appear as setbacks on paper.
Bridging the Gap Between Global and National Decarbonization Goals
Another challenge lies in the conflict between global methodologies and national strategies. In Switzerland, biomass to produce heat is considered carbon-neutral and forms a cornerstone of efforts to reduce heating-related emissions. However, SBTi includes biogenic emissions – such as those from biomass combustion – in its targets, creating misalignment and forcing companies to reconcile diverging expectations. For this energy company, which actively develops biomass heating solutions, aligning with SBTi conflicted with their role in supporting Switzerland’s renewable energy objectives.
First Development Opportunity: A Carbon Budget Approach
To address these concerns, Earth Action has identified several opportunities that standards such as SBTi should consider in their future development. The first is the adoption of a carbon budget, rather than setting a reduction by a rigid target year. This approach could provide:
- Flexibility for companies to decide how best to use their budget up to 2050, and the ability to invest early in decarbonisation technologies.
- Alignment with national strategies, which are often expressed in terms of budgets, offering a more regionalized and pragmatic path to sustainability.
This approach would allow companies to work within a fair and pragmatic framework that prioritises long-term sustainability over rigid short-term benchmarks.
Second Development Opportunity: Recognizing Growth and Prior Achievements
A second development is to consider companies’ growth and past progress in sustainability efforts compared to their peers. This could include:
This could include:
- Factoring in how advanced a company is in its sustainability transition, acknowledging early movers that have already implemented significant decarbonization measures.
- Adjusting targets to reflect company growth, ensuring expanding operations or investments—particularly those critical for enabling broader decarbonization—are not penalized.
Creating industry-specific pathways to align reduction efforts with the realities of each sector’s role in the energy transition.
Though not yet widely adopted or recognized in the market, such frameworks could provide a practical pathway for industries to meet climate goals while maintaining operational feasibility and growth. Developing these frameworks will require collaboration across sectors and regions to ensure both practicality and scalability.
Third development opportunity: Include Avoided Emissions in Sustainability Strategy
Another limitation of SBTi is its exclusion of avoided emissions – those emissions that a company prevents through its activities, products, or services. For instance, energy providers offering low-carbon electricity enable other sectors to reduce their carbon footprints. Yet, this crucial contribution is not reflected in SBTi’s target-setting framework.
A framework like the Net Zero Initiative (NZI) (https://www.net-zero-initiative.com/fr) developed by Carbone 4 addresses this gap by distinguishing between three contributions to global carbon neutrality:
- Pillar A: Reducing a company’s value-chain emissions (Scope 1,2, and 3).
- Pillar B: Facilitating emissions reductions for others through the development of low-carbon products or services (avoided emissions).
- Pillar C: Contributing to carbon sinks.
NZI Pillar B quantifies avoided emissions by comparing the emissions of a company’s activities with those of a baseline scenario. The Initiative has developed a detailed methodology for accounting for such emissions, but this framework is not widely recognized, leading to inconsistencies in how these emissions can be calculated within companies. Without a globally accepted methodology, results can vary, undermining credibility and hindering the integration of avoided emissions into standardized reporting frameworks.
The omission of avoided emissions from the SBTi framework limits its ability to fully capture the systemic contributions of energy companies to global decarbonization. By failing to account for these value chain impacts, SBTi risks discouraging the development of transformative projects within companies’ value chains that are essential to achieving climate goals.
Integrating avoided emissions into the SBTi, and adjusting the effort required by a company based on how beneficial that company is in terms of avoided emissions, inspired by frameworks like the NZI, could unlock greater opportunities for systemic decarbonization. However, this will require the development of a global, standardized methodology for quantifying avoided emissions. Such a framework must ensure transparency, minimize subjectivity, and provide clear guidance for companies to report avoided emissions alongside their reduction targets.
How Earth Action Can Support Your Decarbonization Journey
At Earth Action, we specialize in helping companies navigate complex sustainability frameworks. Our expertise in carbon footprinting, life cycles assessments and sustainability strategy enables businesses to align their operations with ambitious climate targets, while staying grounded in practical realities.
Conclusion
This case study highlights the unique challenges faced by energy companies in setting SBTi targets. Discrepancies between global climate frameworks, national energy strategies, and the practical realities of the energy transition underscore the need for more flexible, sector-specific approaches.
For the energy sector to effectively drive the global transition to a low-carbon future, frameworks like SBTi must evolve to recognize the sector’s central role in enabling system-wide decarbonization. Solutions such as carbon budgeting and the inclusion of avoided emissions accounting could provide a more comprehensive and equitable path forward.
As energy companies continue to invest in low-carbon technologies, it is essential that climate frameworks recognize and incentivize these efforts. By fostering collaboration between industry stakeholders, policymakers, and sustainability experts, we can develop frameworks that not only set ambitious targets, but also provide actionable, science-based pathways to achieve them.
Looking to align your sustainability goals with industry realities? Get in touch with Earth Action for expert guidance.
