6 February 2025
Despite several global companies leaving the SBTi, the initiative remains the most robust framework to anticipate climate transition risks in your own operation and in the value chain. Those that left the initiative did so either because of an underestimation of the ambition level, an uncertainty about how to reach the targets or the lack of internal resources and market challenges. Although, one can argue about the merits of these individual company decisions, the SBTi-framework remains one of the most robust ways to prove 1.5°-alignment towards your stakeholders (clients, regulators, investors, banks, employees, civil society).
Recent exits show that operationalising a SBTi 1.5°- pathway is a challenge
The Science Based Targets initiative (SBTi) has recently faced significant scrutiny due to the recent withdrawal of some big companies from the initiative. In 2024, SBTi has also announced major revisions of their standards, and a controversial announcement that carbon offsets would be allowed has stirred the community and raised questions about SBTi credibility.
So, what is to be understood from these developments? Is SBTi still a robust framework to set science-aligned targets? And if so, why are companies dropping out?
First, it is worth mentioning that there can be a high variety of reasons for a company to retract their SBTi commitments. Some are indeed specific to the initiative and pertaining to the process itself:
- Criteria & requirements are overlooked or underestimated: the level of ambition set by the SBTi is resolutely high (in accordance with limiting global warming to 1.5°C), and reaching the targets requires clear support from the top management and a realistic yet ambitious operational action plan.
- Reputational risks of not achieving one’s targets are a barrier to the commitment: the repercussions in terms of litigation and/or reputation are still unclear, and some companies prefer not to commit to stringent targets, at the risk of being unable to reach them and blamed for it.
Of course, defining SBTi targets is typically part of a larger effort to define one’s transition plan, which also represents challenges in that it requires a strong commitment of the entire company to align the business activities and to anticipate the needs and required internal adaptations. So secondly, in some cases, dropping out of SBTi is the symptom of more structural questions regarding the company’s transition plan:
- Resources are lacking and/or management was not involved sufficiently: implementing an ambitious action plan requires resources and priorities to be added and/or shifted within a company, meaning the management needs to be onboard and aware of the magnitude of the challenge.
- Uncertainties and political instability are too present: technological advancements, upcoming or changing regulations, hard to predict future behaviours and markets, shifting political context, lack of short-term client willingness-to-pay for low-carbon alternatives, the challenge of competitors disregarding climate urgency… Those are among the most important uncertainties that result in a hesitation to commit, not knowing if their targets will be effectively reachable.
Sustainability professionals that are aware of these challenges and integrate them in their approach & governance mode will be better positioned in guiding boards & leadership teams towards a robust transition plan backed by SBTi-approved targets.
Lastly, it should also be noted that, despite removing their SBTi commitment, those companies still might have a robust climate strategy with a clear intention of actually reaching ambitious targets.
Overcoming that challenge results in short-term benefits as well as a path to long-term transformation and resilience
You may thus wonder what the added benefit of having SBTi-validated targets, as part of your transition plan, could be.
The SBTi is a robust framework to set science-aligned targets, as it is grounded in the latest climate science, aiming to limit global warming to 1.5°C above pre-industrial levels. It provides a robust methodology for setting ambitious climate targets and is now used by over 10.000 companies worldwide as reference & validation framework for their climate targets.
This results in multiple confirmed benefits for companies:
- Improved operational efficiency by monitoring and reducing operational costs, e.g. from energy consumption
- Energy autonomy and resilience against energy prices volatility: in general, having constraining targets (especially scope 1 & 2 targets) also goes hand in hand with an increased energy autonomy and resilience, since they will push to :
- reduce the needs,
- improve efficiency,
- steer away from fossil fuels, and increase on-site production, by shifting towards long-term green energy supply through investment corporate PPA’s & in own production.
These all mean reduced costs for a company, especially in the context of the upcoming ETS2 regulation, which will likely see the energy prices increase.
- Long-term competitiveness & business resilience: The new competitiveness compass of the von der Leyen commission confirms the combined ambition of -90% GHG-emissions by 2040 target and reaching a net-zero state by 2050. To stay competitive, resilient & be able to reap the benefits of the upcoming Clean Industrial Deal businesses must adapt their operations, products & services offerings and supply-chains to navigate this transition. A transition plan with clear SBTi-targets is thus a strategic tool to transform towards a resilient future-proof company.
- Improved investor confidence: gain easier access to transition finance from banks & investors, who are looking for companies with a clear & verifiable decarbonization ambition.
- Enhanced brand reputation: as also demonstrated by the Net Zero Tracker, SBTi remains one of the gold standards in terms of climate ambition, and is recognized internationally for it. This also helps recruiting talents who are ever more looking for companies aligned with sustainability priorities.
- Regulatory resilience: SBTi validated climate targets allow to comply to mandatory 1.5°- aligned transition plan under CSDDD and mandatory disclosure under CSRD. Indeed, for an important number of companies, CSDDD will make it mandatory to have a transition plan, and having SBTi-validated targets is the assurance to have the requirements covered for most sectors.
- Navigate other transition risks: abrupt market changes or consumption patterns are other transition risks that can be anticipated thanks to a robust transition plan.
- Strengthened involvement of the entire company: while having climate targets is of course the first step in defining a robust climate strategy, having those targets validated by the SBTi has shown to lead to more effectively reaching them, as opposed to the same ambitious targets that would not be validated. This can be explained at least partially by the internal process that going through the SBTi validation requires, where multiple stakeholders within the company are consulted, and where every level of the company is involved in the definition of the action plan. Board and management then need to validate it, which de facto ensures all relevant stakeholders are aware of the action plan, the levers at their disposal and the means & resources the plan will require.
We must also remain realistic, and acknowledge the fact that the SBTi standard, in its current form, might not be the right standard for every company. Typically, smaller companies, or companies experiencing a rapid growth phase, such as those providing necessary transition products and services, experience difficulties in reaching absolute emissions reduction. For others, the SBTi validation is not yet accessible, due to a lack of sectoral standard, for example.
This means also that SBTi is not the holy grail and may be complemented by other targets, e.g. on the GHG emissions avoided thanks to the sold products (the so called “Scope 4″ emissions).
Whilst these represent important limitations, SBTi does remain an international reference in terms of climate target setting and validation. Their standards are also currently under revision, and significant updates are expected end of 2025/beginning of 2026, precisely to address some of the limitations.
With the ongoing debates and adjustments being part of the evolving landscape of corporate sustainability, it remains essential to support and adopt science-based targets for a sustainable and resilient future.
Sources :
https://illuminem.com/illuminemvoices/the-eu-ets-2-pricing-emissions-in-buildings-and-road-transport
https://ec.europa.eu/commission/presscorner/detail/en/ip_25_339
European Central Bank, “Climate risk, bank lending and monetary policy”, 2024 (https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2969~0f4c56a156.en.pdf)
https://zerotracker.net/net-zero-good-practice
https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en
Bolay et al., What drives companies’ progress on their emission reduction targets?, Journal of Cleaner Production, 2024, (https://www.sciencedirect.com/science/article/pii/S0959652624025733)