The latest IPCC reports are clear. The world will need to achieve net-zero by 2050 to stabilise global temperatures and keep global heating below the 1.5C Paris Agreement goal.
The Science Based Targets initiative (SBTi) has developed the Corporate Net-Zero Standard to clear any uncertainty regarding net-zero and ensure that organisations' claims and strategies legitimately contribute to mitigating climate change. The Net-Zero Standard is the first international framework for corporate net-zero target setting that aligns with the latest climate science.
While it's true that the world's largest companies are primarily responsible for a majority of global emissions, SMEs still play a vital role. Limiting global warming to 1.5C will require everyone to do their part. After all, more than half the global population is employed by an SME.
As such, SMEs can make substantial contributions to achieving net-zero as well as act as a potent reminder that mitigating climate change is everyone's responsibility.
Nevertheless, SMEs often struggle to translate their sustainability initiatives and net-zero intentions into concrete results.
This guide clarifies what Net-Zero really is, why SMEs should adopt science-based targets, and the challenges and best practices as an SME.
Why Set Science-Based Net Zero Targets?
Today, in light of the already present effects of climate change, achieving net-zero is a highly publicised and international goal. The IPCC is unambiguous about the need for net-zero as soon as possible to stabilise global warming at 1.5oC.
Because of this, more companies than ever are publicly committed to achieving net-zero.
However, concerns have been raised about the efficacy of many of these pledges. The net-zero policies of some of these companies are not sufficient to legitimately achieve zero-carbon operations.
This may be partly due to corporate greenwashing or because what net zero means has been unclear and inconsistent.
Because of this, the SBTi developed the Net-Zero Standard to provide a clear, science-based explanation of net-zero and a framework to allow companies to set effective net-zero targets.
SMEs that follow these science-based net-zero targets can ensure that they are doing right by the planet and making legitimate efforts to reduce their emissions and keep the world on track for the Paris Agreement's 1.5C global warming goal.
Typically, this involves an SME:
- Committing to set a science-based target.
- Establishing a target within 24 months.
- Submitting that target for approval to the SBTi's target validation process.
What do net-zero and science-based targets mean for SMEs?
Corporate Net Zero is defined by the SBTi Net Zero framework as:
- Reducing scope 1, 2, and 3 emissions to zero or to a residual level consistent with reaching net-zero emissions at the global or sector level in eligible 1.5°C-aligned pathways
- Neutralising any residual emissions at the net-zero target year and any GHG emissions released into the atmosphere.
No matter the kind of SME your organisation is, the science-based net-zero targets of your firm must involve the following:
Rapid, deep emission cuts
The only way the world will be able to limit global warming to 1.5C is through rapid, deep cuts in greenhouse gas emissions. This is the primary goal of the Net-Zero Standard and needs to be a central priority for all SMEs.
Near long-term net-zero targets
The Net-Zero Standard also involves SMEs developing and implementing near-term and long-term science-based targets to achieve net-zero. SMEs must rapidly eliminate emissions as soon as possible in the near term, then halve their emissions by 2030. The long-term target for all SMEs must be to reduce GHG emissions to near-zero GHG emissions by 2050.
No net-zero claims until long-term targets are met
Under the Net-Zero Standard, SMEs cannot consider themselves or claim to be net-zero until their science-based targets are met. This means reducing emissions almost entirely by 2050 and using carbon removals to negate any emissions that cannot be eliminated at that time.
Going beyond the value chain
It is also recommended that SMEs go further in their net-zero strategies beyond eliminating emissions. For example, this could be scaling up near-term climate finance or assisting in climate change mitigation efforts outside their firm.
To help SMEs achieve these ends, the SBTi released an updated set of resources specifically geared towards SMEs.
The SBTi knows that net-zero strategies may be more challenging for SMEs for various reasons. Therefore, the SBTi has recently introduced an expedited process for SMEs, which we will detail below.
What Are the Net Zero Challenges for SMEs
There are various challenges facing SMEs across different sectors and geographies. For instance, SMEs may lack the sustainability expertise, time, or resources that other larger firms may have to help achieve net-zero.
SMEs, especially smaller ones, may have difficulty measuring and reducing value-chain emissions according to a science-based target.
The SBTi has created an expedited process to help SMEs adopt science-based targets despite these challenges. For instance, in normal circumstances, the Net Zero Standard requires companies to set scope 3 emissions targets as a part of their net-zero strategy. However, SMEs have a significantly less strict requirement about setting these scope 3 targets.
As a brief refresher, scope 1 emissions are all direct emissions produced and released by owned or controlled sources, such as company vehicles. Scope 2 are indirect emissions from the generation of purchased electricity, steam, heating, and cooling, such as the energy demand of rented office buildings. Finally, scope 3 includes all other indirect emissions, such as employee commutes or emissions found in a company's supply chains.
Some SMEs may not be capable of adequately calculating, monitoring, and setting targets for scope 3 emissions, which involves intricate data collection and analysis.
Some may simply not have the resources required.
Rather than exclude SMEs from the Net Zero Standard because of this, the SBTi has devised a new process. Now, SMEs are still required to commit to measuring and reducing these scope 1 and 2 emissions, but they do not have the strict requirement of scope 3 targets that other businesses do.
Net Zero Best Practices for SME
The SBTi has made it significantly easier for SMEs to set Science-Based Targets. Still, other best practices ensure your organisation's Net Zero strategy will be as effective as possible.
Accurately determine your company's carbon footprint
First and foremost, your organisation will need to calculate its carbon footprint before it can start reducing emissions.
There are numerous ways these emissions can be produced and emitted, which poses a challenge in accurately calculating them on an organisational level.
Every action by your firm contributes to this carbon footprint. This means activity within your supply chain, the energy consumption of your office buildings, or an employee's commute.
Nevertheless, if an organisation does not have an accurate read of its carbon footprint, it will be unable to reduce its emissions to zero.
Engage your employees
To make the most out of your net-zero strategy and to ensure that your science-based targets are met, your organisation must engage your employees in these efforts.
Just as SMEs themselves play a vital role in the global efforts to achieve net-zero, the employees of a firm play a crucial role in achieving net zero within their organisations.
Offset the emissions you cannot eliminate
While many emissions reductions can occur rapidly at your firm, there will still be some GHG emissions that are yet unavoidable at the present time.
This inevitability is accounted for by science-based targets, which are designed to implement reductions over time rather than all at once.
Until these GHG emissions can be entirely eliminated, your firm can leverage carbon offsets to account for the unavoidable emissions.
Learn more about how carbon offsetting works and how it can fit into your company's sustainability goals.