Important update on SBTs for Covid-impacted businesses

The coronavirus pandemic has had a huge impact on many businesses around the world. Covid-impacted businesses have struggled to deal with major disruptions, lockdowns and uncertainty has made it a difficult time for many. Despite this, we are pleased to see that prioritising climate action and the setting of ambitious net zero targets actually increased, with businesses leaders recognising that the time for climate action is now. Science-based targets (SBTs) play an important role in net zero transition. SBTs are ambitious emissions reductions targets that are aligned to scientific consensus on limiting global warming to relative safe levels. SBTs are validated by the Science Based Targets initiative (SBTi) and are a vital step for rapid decarbonisation. When setting and working towards SBTs, quality data is really important to enable you to accurately understand your impact, assess the implications of your decisions and to substantiate your climate claims.

How do the anomalies of 2020 effect SBTs?

This past year has been completely abnormal and has dramatically impacted emissions and reporting for lots of businesses. Many of our clients (especially those in industrial, hospitality and travel sectors) had a reduction in 2020 emissions as a result of lockdowns, operational changes or reduced demand. Such a reduction in 2020 emissions could have the following consequences for SBTi:

• Unrepresentative emissions for use as a base year
• Impact ‘forward-looking ambition’ assessments of a company’s proposed target
• Skew progress made to date from base year

While we are always pushing for emissions reductions, it is important to distinguish those that are long-term, brought about by climate action and those that are a temporary, anomalous result of the pandemic. When faced with lockdowns and business disruptions is vital to properly account for the shifting boundaries of our emissions and not undermine climate progress.

How should Covid-impacted businesses deal with SBTs?

We recently spoke to the SBTi and found out that as a result of Covid-disruptions, they are encouraging impacted business to:

• Use older base years (2018, 2019) that are undisrupted by the pandemic
• Consider 2019 as the most recent year for SBTi submissions

By following these steps, Covid-impacted businesses that have experienced lower activity levels in 2020 will not have their SBT trajectory adversely impacted by the ‘forward-looking ambition’ SBTi criteria. Forward-looking ambition will be assessed from the last year with normal business activity levels. Therefore, if you have a 2018 base year, and have 2019 (normal) and 2020 (Covid-impacted) years calculated, you should use 2019 as the most recent year in the SBTi submission form.

Considerations for companies reporting progress against target

For those companies that have had established SBTs in place for a number of years, 2020 might have seen a step change in the business’ carbon emissions due to changed operating locations (working from home) and business activities (lower activity through social distancing measures, enforced site closure). In extreme cases, such an impact might even see a business reach their SBT reductions, despite not having implemented their full decarbonisation roadmap. This represents a business dilemma; do we say our target is achieved? Or is this only partially met due to a future year rebound in emissions? In such occurrences, we would encourage businesses to separate the emissions reduction from Covid and the emissions reduction from carbon reduction initiatives (such as energy efficiency, energy procurement, supplier engagement) when reporting progress against target. This approach will give an accurate description to stakeholders of the progress made, whilst enabling the identification and recognition of ‘build back better’ initiatives to keep emissions low, rather than having to report negative progress in future years as we transition towards our ‘new-new normal’. This has no doubt been a challenging time for those businesses impacted by Covid but despite everything, it is crucial that we keep our focus on climate action and net zero transition. Businesses must remain agile in their reporting and adapt to changing circumstances to avoid undoing previous gains and to stay on track with SBTs and net zero transition. If you have any questions about the impending changes or how to set a science-based target, please get in touch and ask for our SBT experts.