Introduction

Let’s face it: the start of the year inspires us to set new ambitious goals. This is also the perfect time for companies to establish concrete climate targets.

Why Setting Climate Targets Matters

Multiple factors can explain companies' motivation to set climate targets, such as competitive necessity, voluntary emissions disclosures, tax credits and incentives, consumer pressure, and mandatory disclosure requirements.

The new Corporate Sustainability Reporting Directive (CSRD) is coming into effect this year for listed companies in the EU. This legislation requires comprehensive sustainability reporting, as well as transparent climate action.

Under this framework, the ESRS E1 disclosure specifically addresses climate change mitigation and mandates companies to:

• Set greenhouse gas (GHG) emission targets for 2030 (and ideally for 2050).
• Define five targets each year starting in 2030.
• Indicate whether these targets are science-based.

But what comes first? The climate goal or the climate plan? (Spoiler, it's the first one). With the recent rollback of several commitments and targets - Shell, Walmart, Microsoft, Amazon - it's clear as an industry, we haven't quite cracked how to set goals that have been backed by achievable plans.

This article is an introduction to climate goals designed for impact reduction rather than for PR. Here's what we will cover:

1. The Core Frameworks and Commitments
2. Measure Current Emissions
3. Develop an Action / Transition Plan
4. Set Clear and Ambitious Targets
5. Track Progress and Report Transparently

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The Core Frameworks and Commitments

The most recognised framework for climate target setting is the Science-Based Targets Initiative (SBTi), which has validated nearly 10,000 targets as of 2024. SBTi provides a methodology for companies to align their emissions reduction targets with the goals of the Paris Agreement. Despite facing credibility issues in 2024—when its Board suggested allowing carbon credits for scope 3 reductions, leading to significant backlash—SBTi remains the most used standard.

The SBTi Corporate Net-Zero Standard outlines a clear path to net zero:

1. Net-Zero Definition: Companies must cut their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions to as close to zero as possible, with any remaining unavoidable emissions balanced by verified carbon removal methods.
2. Near-Term Targets: Set science-based targets for emissions reductions within 5 to 10 years.
3. Long-Term Targets: Aim for net-zero emissions by 2050 at the latest.
4. Mitigation Beyond Value Chain: Take actions that extend beyond direct operations, such as investing in carbon credits or emission reduction projects.

An SBT requires:

1. Ambition: Targets must reflect a high level of ambition in emissions reductions.
2. Comprehensive Emissions Inventory: Companies should account for at least 95% of their Scope 1 and 2 GHG emissions.
3. Reporting and Transparency: Organisations should regularly report progress towards targets to build trust with stakeholders.

Other frameworks include the Forest, Land, and Agriculture (FLAG) Targets, which focus on emissions from land use; the Science Based Targets Network (SBTN), which emphasises nature-related targets; the Gold Standard Framework for credible climate mitigation strategies; and the Carbon Trust, which supports robust carbon reduction targets. These frameworks complement SBTi by addressing specific sectors and aspects of sustainability.

🚜 FLAG - Forest, Land, and Agriculture

Agriculture, forestry, and other land uses contribute nearly 22% of global greenhouse gas emissions. To address this impact, SBTi has introduced the FLAG Guidance. This is the first framework designed specifically for companies in land-intensive sectors, encompassing emissions reductions and removals related to land use.

The FLAG requirements are:

1. Set near-term and long-term FLAG science-based targets
2. Account for removals in near-term FLAG science-based targets
3. Set a no-deforestation commitment with a target date no later than 2025
4. Set science-based targets for energy/industry emissions

More on FLAG, in our State of Sustainability Podcast.

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Understanding Types of Target

There are three main types of targets:

• Absolute Targets: Achieve XX tCO2e reduction by year YY.
• Intensity Targets: Reach XX tCO2e per unit by year YY.
• Net-Zero Targets: Achieve net-zero by year YY.

Once you have chosen among the three types above, consider:

1. Activity Scope: What projects are included?
2. Baseline Year: What timeframe will you compare against?
3. Target Year: When will you achieve it? Do you have shorter-term milestones?
4. Target Value and Type: What specific metric do you aim to achieve?

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But Before Setting a Target!

Before setting targets, it's crucial to understand your emissions and identify hotspots where reductions can have the most impact. According to the GHG Protocol, measure:

• Scope 1: Direct emissions from sources owned or controlled by your company.
• Scope 2: Indirect emissions from purchased energy (electricity, steam, heat).
• Scope 3: All other upstream and downstream emissions related to your business activities.

While measuring Scope 1 and 2 may involve data you already have, Scope 3 can be challenging due to data availability and supply chain complexity. Utilising Sustainability or Carbon Management Software can help in this process.

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Develop an Action Plan

Now, it’s time to create a roadmap from Point A to Point B. Begin by breaking down your goal into realistic short—and mid-term interim targets that reflect necessary resource investments. Outline specific actions required to meet these goals, making it easier to monitor progress. Engage stakeholders throughout this process—suppliers, customers, and even competitors can play a role in collective action to bring system change.

Also, keep in mind, to avoid withdrawing your climate commitments, it is important to really understand how you’ll achieve them. You should review your targets by asking these questions:

• What specific initiatives will get you to your number?
• What's the estimated cost of each initiative?
• Which dependencies are outside your control?
• How does this align with your capital planning cycle?

Track Progress and Report Transparently

Robust data management is the foundation of achieving science-based targets (SBTs). A centralised platform that integrates energy, carbon, water, and waste data provides a comprehensive view of your sustainability performance.

By collecting and analysing data across resource streams, you create a clear baseline and can track meaningful progress. This transforms climate data into actionable insights that drive strategic decision-making.

Finally, transparency is key. Regular reporting on targets, methods, and progress builds trust with stakeholders. When facing setbacks, be open about adjustments and your recalibration strategy.

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Conclusion

We hope you enjoyed this 101 to refresh what it takes to define good climate targets! Setting targets not only positions your company as a sustainability leader but also opens doors for investment and growth opportunities while ensuring compliance with legislation.

Additional Resources

If you want to learn more about the role of data management in climate goal setting, register for our upcoming digital event here.