Zeroing-in on assurance of net zero targets and claims
Back in December 2020, when we wrote about the proliferation of corporate net zero targets (‘Closing the net on Net Zero’), we observed how setting net-zero targets is instinctively attractive to chief executives and sustainability managers alike. At that time, the development of standards to define net zero targets was starting to gather real pace. Now nearly a year later, standards have evolved significantly. Many companies that have already set net zero targets will be looking closely to see how their targets will stand up to the scrutiny of independent assurance, when the time comes to publish their sustainability reports next year.
Led by the Science Based Targets Initiative (SBTi), the first science-based global Standard for corporate net-zero targets, is nearing finalisation ahead of COP26. The Standard is designed to ensure that companies’ net-zero targets translate into action that is consistent with achieving a net-zero world by no later than 2050.
SBTi defines corporate net zero targets as “(1) achieving a scale of value chain emissions reductions consistent with the depth of abatement at the point of reaching global net-zero in 1.5˚C pathways and (2) neutralising the impact of any residual emissions by permanently removing an equivalent volume of CO2”.
The process for development of the Standard included extensive consultation exercises, testing and gathering feedback on some key questions including:
These questions have now been resolved in the pre-COP26 version of the Standard. But just looking at these example questions provides an illustration of how the devil really is in the detail. Whether companies submit their net zero targets for SBTi approval or not, a huge amount of work is required by companies to understand how their net zero targets can stand up to public scrutiny.
For those companies that claim to have non SBTi approved ‘science-based targets’ or ‘science-based net zero targets’, there are some key questions that assurance providers for a corporate sustainability report should be asking.
For those companies that have achieved SBTi approval, the questions an assurance provider should ask become less about the validity of the targets, and more about claims concerning progress. ‘We are making good progress towards our target of net zero by 2030’. This is a line we will see increasingly often in sustainability reports, but in terms of progress, how much is enough?
Companies following the SBTi Standard have a choice between a mixed sector pathway, and a sector specific pathway. These pathways dictate the annual rate of reduction in emissions that is required to limit global warming to 1.5°C. Using the mixed sector pathway, many companies set near-term science-based targets for scopes 1 and 2 that reduce emissions at a linear annual rate of 4.2% (42% over ten years). However some sector-specific pathways vary significantly from the mixed sector pathway in the near-term. Assurance providers will need to review whether the company’s achieved performance is at least in-line with the reduction rate on which the company’s SBTi was approved.
For many companies, obtaining data on scope 3 emissions is a particular challenge. All companies can expect that over time, the quality and quantity of their scope 3 emissions data will increase. The Standard specifies that for companies with scope 3 emissions that are at least 40% of total emissions (scope 1, 2, and 3 emissions), at least 67% of scope 3 emissions must be covered by a near-term science-based target. For long-term science-based (net zero) targets, this increases to 95% of scope 3 emissions. Assurance providers will need to see evidence to demonstrate how scope 3 emissions have been calculated, how and why data and calculations have changed over time, and the extent to which emission reductions have been achieved within relevant categories of upstream and downstream emissions. The time and effort requirements for both the reporting company, and the assurance provider, for including assurance over scope 3 emissions as part of reporting progress towards a long term science based net zero target, cannot be understated.
Science-based net zero targets is a rapidly developing field. Companies producing sustainability reports that include science based net zero targets, whether these are SBTi approved or not, should expect some tough questions as part of the assurance process.
Thinking about assurance of your next sustainability report? Challenge Sustainability is providing independent assurance for a range of international companies – contact us to discuss your needs.
Jon Woodhead, November 2021
 From 15 July 2022 onwards, the SBTi will only validate targets aligned with a minimum level of ambition of 1.5°C for scope 1 and 2 and well-below-2°C for scope 3. In addition to this, the SBTi is reducing the timeframe for near-term targets from a maximum of 15 years to a maximum of 10 years.