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Setting ambitious corporate carbon targets techUK | 02 May 2019

Introduction

Climate change is the greatest challenge facing society. As the world uses more energy and resources, dramatic action is required to limit and reduce the risks posed by climate change. Governments from across the globe responded by signing the Paris Agreement which expects countries to adjust how they operate to limit global warming to 1.5 degrees by the end of the century. Some governments, including the UK, are actively considering whether to become 'net-zero carbon' by 2050.

Businesses have a role to play too and are increasingly looked at setting a target to reduce emissions that would see their operations and products reduce in line with the Paris Agreement. techUK held a workshop looking at how tech firms can set an ambitious carbon target based on the latest science.

The event had presentations from Mike Berners Lee from Small World Consulting and Andie Stephens from the Carbon Trust, with a panel discussion that included BT and Greenstone Plus.

Key learnings from the discussions

  • What is a Science Based Target (SBT)? An emissions reduction target is considered 'science based' if it aligns with the Paris Agreement to limit warming to under 2 degrees Celsius and pursues efforts to limit warming to 1.5 degrees Celsius.
  • The need for action. The IPCC Special Report said global emissions need to reduce by 45 per cent by 2030 on 2010 levels and aim for net zero emissions by 2050. Renewables should also account for 85 per cent of generation by 2050.
  • There is no hiding from this. Legal obligations, customer requirements, contractual requirements and stakeholder expectations are only going to increase, so firms need to show how and how quickly they plan to set a target.
  • The need for interim targets: Corporate net zero targets are decades away, so interim SBTs that bridge to the end goal are important and can focus minds and investment on decarbonisation.
  • Setting an SBT demonstrates leadership and sends market signals. A clear target sends a message to competitors, customers, investors and the supply chain.
  • Setting a Science Based Target can be an advantage. Carbon reduction can result in lower energy costs and more efficient processes, unlocking new business models. Adapting now rather than later means companies acting now have a range of competitive advantages.
  • More businesses are setting SBTs. 550 businesses have pledged to set a target and 204 have an approved target, including many tech and ICT firms.
  • The need for accurate data: Accurate data on a business/supplier operation is vital to make decisions and make targets.

Session one

There is no Planet B

Mike Berners-Lee, Small World Consulting

Mike Berners-Lee is an academic at Lancaster University, author and runs Small World Consulting, a sustainability consultancy for businesses. In his first presentation Mike set the context of the latest climate science and why we need changes.

Scene setting

  • Energy use is growing at 2.4 per cent a year. Whilst we are using power more efficiently to power new innovations and diversifying how we generate it; total demand is growing.
  • Even though we have been increasing energy usage, and with it our influence over the environment for centuries, it has only in the last few decades become clear that we are having catastrophic impacts on planetary health.
  • Society has outpaced the planet's ability to resource our growing needs and several environmental crises are converging such as biodiversity, food security, antibiotic resistance, plastics, pollutants, acidification and more. These problems are solvable via new technologies and changes to how we live.
  • The global curve in fossil fuel emissions growth has so far shown no dent which means all the current activity to cut are not yet impacting total emissions.

The science and proposed changes

  • Risk analysis by the IPCC shows that 2 degrees of warming is very dangerous, and 1.5 degrees is markedly less dangerous. But as climate science increases in sophistication, the risks are growing even at lower rates of warmth.
  • Energy sources need to change. With world energy usage at 28.6 TW (59kwh per person) we need to radically increase the share of renewables. Renewable energy is still only being used 'as well as' rather than 'instead of' fossil fuels.
  • The world only needs 0.1 per cent of land area given over to solar panels to meet today’s global energy demand, though on current energy trajectory we would need 111 per cent of land by 2317.
  • Cutting energy demand and increasing efficiency is something the tech sector is well placed to do. However, unless we ‘bag the savings’, efficiency improvements go hand in hand with increases in environmental burdens.

Session two

The Case for Setting Science Based Targets and the SBTi

Andie Stephens, Carbon Trust

Andie Stephens introduced the Carbon Trust and the Science Based Target Initiative (SBTi).

  • The Science Based Target Initiative (SBTi) was established by the UN Global Compact, CDP, WRI and WWF to oversee the SBT methodology and validate corporate SBTs.
  • The SBTi have very recently published updated guidance that says it will approve targets that are either 'well-below 2 degrees Celsius' or '1.5 degrees Celsius' as this is the very latest science.
  • To calculate an SBT companies need to understand their global carbon budget relating to their owned and controlled sources (scope 1) and indirect emissions from energy (scope 2). This gives a company a total budget that can be compared to global emissions data.

The SBTi Methodology for setting an SBT

  • To set an accurate SBT a firm needs to understand the following: baseline emissions to measure against; the scope/locations/and sector of emissions; the impact of business growth on emissions; the scenario they wish to use (detailed below); and the pace of reductions.
  • The total carbon budget is defined by allocating the total global carbon budget to a firm's activities and there two main approaches to doing this - The Sectoral Decarbonisation Approach (SDA) which measures a firm against its peers and the Absolute Contraction Approach (ACA).
  • The Sectoral Decarbonisation Approach (SDA) measures a firm against its peers, but only aligns to a 'well below 2' scenario and uses sector-specific emission reduction pathways. This is the preferred approach for industries like transport and raw materials where a like-for-like comparison is simpler.
  • The Absolute Contraction Approach uses the same reduction pathway for all firms with a set timeframe and this approach can be aligned to either the 'well below 2' or '1.5' degrees Celsius scenarios. Firms using this approach must have a 15-year target to reduce absolute emissions in line with specific scenarios.

SBTi requirements and assessment process

To get SBTi validation for their SBTs, firms must:

  • Upgrade their ambition from 2 degrees Celsius to at least 'well-below 2 degrees Celsius.
  • For scope 1 and 2 targets need to set out: level of ambition; boundaries of their emissions; baseline year; and timeframe. Offsetting and avoided emissions cannot count towards an SBT.
  • Have a target for scope 3 emissions (downstream and upstream) if the scope 3 emissions are 40 per cent or more of the total scope 1, 2 and 3 emissions. This target must cover at least two-thirds of the scope 3 emissions and meet one of the following criteria: either an absolute reduction aligned to a below 2 degrees Celsius scenario; or an economic intensity reduction of at least 7 per cent per year; or a physical intensity reduction of at least 2 per cent per year.

Session three

Supply Chain Science Based Targets

Mike Berners-Lee, Small World Consulting

In the third presentation Mike discussed emissions in the supply chain and how to get a Science Based Target in the supply chain, which count as scope 3.

  • Scope 1 and 2 targets are excellent, but there is a risk of emissions migrating upstream and elsewhere.
  • For many firms, most emissions are in the supply chain (for BT they account for 67 per cent) and setting a target for supply chain emissions reduction can encourage action from suppliers.
  • The advantages of setting a supply chain SBT range from reputational and brand benefits through to cost reduction in the long term as carbon becomes more expensive.
  • Setting a SBT in the supply chain can cause a chain-reaction as more firms set targets and it becomes a business norm where not setting a target makes it harder to win business.
  • Setting a SBT for your supply chain is possible, and practical, albeit more complicated than for scope 1 and 2.

Methodology and process for setting supply chain SBTs

  • A baseline for emissions to be measured needs to factor in several factors; process improvements (efficiencies, transport, energy), procurement processes (clauses in tender documents and reporting) and developments to the wider economy that enable decarbonisation (for example renewable costs reducing).
  • After setting a baseline, the next step should be to select the preferred SBTi methodology as well as the level of ambition, for example aiming for 2 degrees, well-below 2 degrees or 1.5 degrees.
  • For manufacturers specifically a lifecycle analysis (LCA) can be used to help measure the emissions generated by physical products.

Using the SBTi to set a supply chain target

  • 'Tech' covers a broad span of business models and companies, so tech firms prefer the Absolute-based approach. One issue with this approach though is that it disadvantages firms that grow too quickly, something that happens a lot in the sector.
  • Another metric was detailed called 'carbon per share of world economy' that sets a company's carbon emissions as a share of the global economy. This sets a carbon budget for a business that flexes with growth and allows for growth in company size and emissions as long as the total emissions globally reduce. Mike believes this gives resilience to SBTs as it allows the science basis of the target to be resilient both to changes in the size of the company and growth in the world economy.
  • Adopting the SBTi’s sectoral approach for technology supply chains is difficult as outputs are not as homogeneous as for sectors like steel or transport, so another approach has been to use a financial metric for normalisation.
  • Due to the more complex modelling, the SBTi is more flexible when approving supply chain SBTs than for scope 1 and 2 targets.

BT case study for setting a SBT in the supply chain

  • BT has set a target to reduce supply chain emissions by 29 per cent by 2030 on a 2016/17 baseline.
  • BT uses their spend data to map their supply chain and a carbon intensity value was assigned to each supplier.
  • Key steps to help meet their target included encouraging suppliers to purchasing renewables, decarbonising products, dematerialising BT’s business model and mandating more energy efficiency from suppliers and their products. BT will also benefit from decarbonisation of the wider economy.
  • For physical goods BT used a lifecycle analysis and modelling was used to determine other suppliers’ scope 1 and 2 emissions.

Session four

Science Based Target panel discussion

Susanne Baker, David Wynn, Mike Berners-Lee, Gabrielle Giner and Andie Stephens.

The final session was a discussion chaired by Susanne Baker with Andie Stephens and Mike Berners-Lee plus David Wynn from software provider Greenstone and Gabrielle Giner from BT. Key points from the session and from delegates across all the sessions are summed up below.

  • Board level buy in: Securing board-level buy in is important. After achieving the 'low hanging fruit' such as sourcing renewables in the UK, it is more difficult to transition to ultra-low emission vehicles and decarbonise buildings as there are currently few cost-effective scalable solutions.
  • More public scrutiny: The latest protests, the BBC documentary “Climate Change – the facts“ and Greta Thunberg have created a groundswell of public opinion and business needs to respond.
  • Supplier engagement: It is vital to work with suppliers. Sustainability criteria are increasingly becoming a corporate requirement to win contracts. BT has 10 per cent sustainability criteria in its RFPs and runs competitions focusing on innovation for suppliers’ environmental sustainability.
  • Supplier terms: Getting smaller suppliers on board is particularly difficult, so minimum requirements could be a Code of Conduct. Where there is little leverage, companies can work with upper tier suppliers to encourage them to push for emission reductions in their own supplier base. Reporting accurate data is also an issue for suppliers who may (via error or deliberately) not report the correct data.
  • Buildings and transport are difficult to decarbonise: Buildings and heat is as much of a challenge for businesses as well as domestic users. For service industries, business travel is a big contributor to emissions and accounts for 8 per cent of UK emissions (5 per cent globally).
  • Boundaries for counting carbon: The tech sector is a series of ecosystems, hardware and services so it is hard to put a boundary in place that determines where emissions end for a particular product or service.
  • Enabling effect and offsets: Neither the enabling effect (efficiencies enabled by a firm's products/services) nor offsets are permitted to count towards SBTs.
  • Downstream as well as upstream: For many tech businesses scope three emissions will be generated from downstream (how customers use the products) not just from their suppliers.

Going Net Zero - How tech firms set carbon targets

Video timings

  • Susanne Baker intro: 0m – 3m20s
  • Mike Berners Lee scene setting: 4m45s – 31m
  • Andie Stephens, Carbon Trust: The Case for Setting SBTs: 31m30s – 1hr21m10s
  • Mike Berners Lee, Supply Chain SBTs: 1hr21m30s – 2hr6m45s
  • Panel: 2hr07m – end

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