Corporate perspective:

Achieving Net Zero Emissions Target

26 January 2022
 Curriculum Vitae

Wan Yee is the Managing Consultant, Agricultural Value

Chains of South Pole. She has over 6 years of research and
consultancy experience serving clients in various sectors
including agriculture in Asia Pacific, Europe and Americas.

Prior to that, Wan Yee completed her PhD in

environmental science on the topic of Variability in the
Wan Yee Lam, Ph.D Greenhouse Gas Footprints of Crops under the European
Managing Consultant, Commission's Marie Curie industrial scholarship led by
Agricultural Value-Chains Unilever and Radboud University.
South Pole

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A Global Issue
Climate Targets
Asian Carbon Dioxide Emissions Increase by Nation
Global greenhouse gas emissions must
be cut to reach net zero emissions by
2050, avoiding the current global
warming trajectory of 3.5°C

Limiting warming to 1.5°C

will mitigate worst effects
of climate change

Climate Status: Indonesia

Years
United Nations’ scientists have indicated
we have 10 years to cut global
greenhouse gas emissions before
reaching the point of no return
Indonesia’s emissions rose by more than 250%
between 1990-now, with the highest increase being
the energy sector.
Surface temperatures increasing from 0.2 to 0.3 of
a degree Celsius per decade
The government’s climate target of 29% below
business-as-usual in 2030 is not in line with a 1.5°C
pathway.
Emissions for 2019 are estimated at 3.4% of the
world total
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Climate Change 101
These gases trap the sun’s
2
heat in the atmosphere,
1 warming the planet and
Burning fossil fuels altering the earth’s climate
● Driving / flying over time (aka “climate
● Making goods change”)
● Growing food
● Generating power
produce greenhouse Indonesia
gases (GHGs), such as GHG Emissions
carbon dioxide, into the (By Sector in 2018)
atmosphere
43% LULUC & Forestry
35% Energy
12% Agriculture

8%
Waste
2% Industry

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Net Zero definition (based on IPCC)
What is it and why is it necessary?

’Net zero’ means that any emissions

are balanced by absorbing an
equivalent amount from the
atmosphere.

In order to meet the 1.5°C global

warming target in the Paris
Agreement, global carbon emissions
should reach net zero around
mid-century.

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 Stakeholders demand action

Governments Trade partners Shareholders Employees Customers

197 countries 49% of world's $54 trillion 87% of 73% of

have ratified GDP covered of assets employees millennials
the Paris by net zero managed by said businesses would spend
Agreement targets investors in should take a more for
public position
the Climate sustainable
on societal issues
Action 100+ relevant to their products
initiative business
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Net Zero commitments growing quickly
Huge increase in 2020 and still growing this year

Includes net zero commitments (self declared, Business Ambition 1.5)

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Net Zero commitments by corporates...
… are increasingly becoming best practice across industries
A growing number of corporations are making public net zero (and even carbon negative) pledges.
But what does setting a net zero target mean and how can your organisation raise its ambition?

Transform to Net Zero

A cross-sector initiative to accelerate the transition to a net zero global economy

Over 900 Certified B

Corporation Companies
are publicly committing
to reduce their GHG
emissions to Net Zero by
2030

Confidential. Do not distribute. 8

A credible corporate Net Zero target
Refers to the SBTi’s ‘Strategy 5: Climate positive approach’

South Pole’s narrative of a credible Net Zero target is in line with the most
ambitious strategy of the SBTi paper and entails the following
components:

● Achieving global Net Zero emissions requires ambitious

reductions across all scopes. Corporates must reduce their value
chain emissions in line with science, ideally by setting a SBT in line
with a 1.5°C scenario whenever possible.

● While reducing their emissions, companies should take climate

action today by financing and accelerating reduction, avoidance
and removal activities via compensation outside of their value
chain while transitioning towards a state of Net Zero emissions.

● Residual emissions have to be neutralised with CO2 removals to

reach Net Zero.

Source: SBTi Corporate Net-Zero Standard

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Key elements of the SBTi Net-Zero Standard

The SBTi Net-Zero Standard defines

corporate net-zero as:

● Reducing scope 1, 2, and 3

emissions to zero or to a residual
level that is consistent with
reaching net-zero emissions at the
global or sector level in eligible 1.5°
C-aligned pathways

● Neutralizing any residual

emissions at the net-zero target
year and any GHG emissions
released into the atmosphere
thereafter.

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How the new SBTi FLAG target could impact
decarbonization effort?
How the 1.5C SC decarbonization ...and how it might change in the near
pathway is calculated today…. future with new SBTi FLAG targets...

● SBTi has recognized the challenge for land-based sector to follow

absolute contraction pathways to set 1.5C targets, thus it’s developing
commodity intensity targets, e.g. for dairy, beef, poultry, soy, etc.
● This should provide more flexibility to companies for their
decarbonization effort, for which they will be able to account also for
demand-side actions (e.g. food waste, dietary shift)

● At the moment there is a lack of methodology from SBTi to

support land-intensive sectors to set meaningful reduction
targets for their scope 3 emissions associated with the raw ● The final draft of this new methodology will be released end of 2021
material and land-based commodities
● Based on current rules, the only accepted approach to set a
WB2C or 1.5C aligned target is the Absolute Contraction
methodology (very conservative and challenging to attain
for the food sector)
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Confidential. Do not distribute.
A five-step approach to setting SBTs.

01 02 03 04 05

CALCULATE
SELECT BASE YOUR SET TARGET CHOOSE A CALCULATE
YEAR COMPANY’S BOUNDARIES TARGET YEAR TARGETS
EMISSIONS

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Step 1: Timeframe and milestones
Set an appropriate base year

Base year – key considerations

● Scope 1, 2, and 3 emissions data should be accurate and verifiable

● Base year emissions should be representative of a company’s typical

GHG profile

● The base year should be chosen such that targets have sufficient
forward-looking ambition

● The base year must be no earlier than 2015

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Step 2: Calculate your emissions
Develop a full GHG inventory in alignment with the following points

Determine how to treat subsidiaries: While setting emissions boundaries and scope, parent
companies should set science-based targets for subsidiaries in accordance with the selected
organisational boundary approach.

Exclude the use of carbon credits: Carbon credits do not count as reductions toward meeting your
science-based targets.

Exclude avoided emissions: Avoided emissions occur outside of the product’s life cycle and therefore
do not count as a reduction of a company’s scope 1, 2 and 3 inventory

Review any sector-specific guidance: The SBTi publishes a wide range of resources to support
businesses in their target-setting journey

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Step 3: Set emissions inventory boundaries
Minimum boundary coverage for near-term and long-term SBTs
Scope 1 and 2
● Exclusions from inventory and target boundary up to
5% in total.
● Justification for exclusions to be provided and sources
still to be quantified.
● Biogenic CO2 emissions (reported separately from
scopes) have to be covered by the scope 1+2 target.
Scope 3
● At least ⅔ of scope 3 emissions has to be covered by
scope 3 target(s).
● Note the sector-specific guidance in the SBTi criteria
and recommendations (e.g. fossil fuel sale).

>67% boundary 100% boundary

● Companies can focus on most material emission
sources.
Advantages
● Flexible solution in case of limited resources and
lack of influence over scope 3.
● Less ambitious
Disadvantages ● More complicated to communicate
● Excludes reduction potentials from some sources
● Most robust and ambitious
● Easy to communicate
● Consistent with long-term target requirements
(95%)
● Broader range of reduction potential sources
● Can be challenging for risk-averse companies to
take responsibility of sources where the influence is
limited

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Step 4: Choose a target year
Select an appropriate target year

Target year – key considerations

● Near-term targets: must have a target year 5-10 years from the date of
submission to the SBTi

● Long-term targets: must have a target year of 2050 or sooner (2040 for
companies in the power sector)

Because the ambition of long-term science-based targets is target

year-independent, companies should begin by choosing any eligible target
year. Based on the results of their target calculation, the company may adjust
their chosen target year to be sooner or later depending on its ability to
achieve its long-term target.

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Step 5: Calculate targets
Target setting approaches for Scope 1 and 2
Absolute contraction Sectoral decarbonization approach (SDA)

● Allows peer comparisons within specific sectors.

● Robust and ambitious ● Adapts to the decarbonisation pathways of specific sectors which take
Pros

● Simple and straightforward into account current and future activity (production) levels, current
● Easy to communicate with stakeholders emissions and future reduction potentials.
● Universally applicable to most companies ● Considers achieved reductions and current performance
● Tolerates business and production growth

● Does not consider current performance or past emission

● Not as transparent and more complicated to communicate.
Cons

reduction measures.
● Not always suitable for companies with particularly low intensities.
● Does not tolerate growth.
● Rigid definition of sectors.
● Does not consider sector-specific challenges.
Scope 2

A renewable energy target can be set in addition to or as part of the scope 1 and 2 target. This target should consider the following:

1) scope 1 must meet the absolute contraction or SDA necessary reductions

2) minimum ambition: 80% RE by 2025 and 100% renewable energy by 2030.

Source: SBTi Corporate Manual, v. 1.1. June 2021 and The SBTi Net Zero Manual and Criteria v.1.0 for Public consultation, September 2021.

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Step 5: Calculate targets
Target setting approaches for Scope 3. The selection of relevant methodologies will
vary according to each company and will need to be analysed on a case-by-case basis.
Absolute contraction
Pros
● Demonstrates strong ambition
● Environmentally robust and
more credible to stakeholders as
it entails a commitment to
Pros reduce total greenhouse gases
by a specified (absolute) amount.
Cons
● Can be more challenging to
achieve with significant business
growth.
Scope 2
Cons
Source: SBTi Corporate Manual, v. 1.1. June 2021 and The SBTi Net Zero Manual and Criteria v.1.0 for Public consultation, September 2021.
Physical intensity
● Can be more in line with
emissions reduction strategies
and internal
progress/performance tracking.
● Doesn’t require a reduction in
absolute emissions, hence
suitable for growing companies.
● Less environmentally
robust/credible
● Less transparent as they are
harder to communicate to
stakeholders.
May not be suitable for
●
companies with a diverse
product mix (as you are
measuring emissions ‘per tonne
of product’ – standardised).
Economic intensity
(GEVA)
● Suitable for companies that
generate a diverse product and
service mix.
● Suitable for fast-growing
companies.
● Less environmentally robust
than absolute and intensity
metrics due to the volatility of
economic metrics.
● Feasibility is highly dependent
on business growth.
Supplier
engagement target
● High potential to drive
ambition in the value chain
and build strong relations.
● Suppliers do not have to go
through the official SBTi
validation process; however,
they do need to follow the SBTi
criteria.
● Requires a certain supply
chain structure (ideally pareto
structure) and influence over
these stakeholders.
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