2023 SBTi_Catalyzing Value Chain Decarbonization

Briefing Document: Catalyzing Value Chain Decarbonization - Corporate Survey Results

Date: February 2023

Developed by: Science Based Targets initiative (SBTi) in collaboration with Boston Consulting Group (BCG)

Acknowledgements

This report was developed by SBTi, supported by BCG, with contributions from various team members and stakeholders involved in the survey.

Executive Summary

Value chain decarbonization is pivotal for achieving a net-zero economy, with scope 3 emissions constituting over 70% of corporate GHG inventories. This report summarizes findings from a stakeholder engagement survey aimed at understanding challenges faced by organizations in baselining, setting, and delivering on scope 3 targets. Key insights include:

• Baseline Emissions: 83% of respondents include scope 3 emissions in their GHG inventory. Data access and compliance expectations are primary barriers.
• Target Setting: 90% find the process challenging, with low confidence in delivering decarbonization due to perceived risks of failure.
• Decarbonization Delivery: 50% of respondents report being "off track" in achieving their targets, with upstream supplier influence being the most significant challenge.

The findings will inform a review of SBTi's scope 3 target-setting methodologies.

Introduction

Following the Paris Agreement, there is heightened corporate climate ambition, particularly around scope 3 emissions—indirect emissions in the value chain. These emissions are substantial, prompting the SBTi to refresh its guidance for scope 3 target setting to align with climate science and best practices.

About the Survey

Conducted from September to October 2022, the SBTi Scope 3 Stakeholder Engagement Survey gathered insights from 230 organizations. The survey focused on the barriers faced in three key areas: baselining emissions, setting targets, and delivering decarbonization efforts.

Results

1. Challenges with Baselining Scope 3 Emissions

• Inclusion in GHG Inventory: 83% of respondents account for scope 3 emissions, motivated mainly by the desire to set science-based targets.
• Data Access Issues: 85% cited data access as a barrier, primarily due to a lack of supplier data. Only 6% use supplier-specific emissions factors.
• Interpretation of Standards: 45% struggle with GHG accounting standards, affecting the comparability and accuracy of baselines.
• Resource Limitations: 59% noted limited time and resources as challenges in developing robust baselines.

2. Challenges with Setting Scope 3 Targets

• Difficulty in Target Setting: 90% found the process challenging, with 67% lacking confidence in their ability to deliver decarbonization.
• Methodological Limitations: 60% see a lack of tailored target-setting methods as a barrier, with unclear SBTi requirements further complicating the process.
• Business Case Weakness: 37% identified a weak business case for action as a barrier, coupled with limited understanding among decision-makers.

3. Challenges with Delivering Scope 3 Decarbonization

• Being "Off Track": 50% self-report as off track in achieving their targets, with significant emissions concentrated in scope 3 categories related to purchased goods and services.
• Supplier Influence: 81% consider the ability to influence suppliers a major barrier, compounded by fragmentation and insufficient negotiating power.
• Cost Concerns: 61% are concerned about the costs associated with decarbonization efforts, especially regarding low-carbon products.

Discussion

The survey highlights the interconnectedness of science-based targets, GHG accounting, and broader societal efforts. Addressing the identified barriers requires comprehensive action from various stakeholders within the climate ecosystem. Six high-level solutions were identified:

1. Improving Data Collection: Enhance access to high-quality emissions data and supply chain traceability.
2. Enhancing Accounting Frameworks: Clarify and standardize GHG accounting standards.
3. Target-Setting Guidance: Develop tailored methodologies that consider individual company circumstances.
4. Collective Value Chain Action: Encourage collaboration among companies to drive systemic change.
5. Engagement of Financiers and Regulators: Foster stronger relationships with financial bodies to support decarbonization efforts.
6. Increased Internal Efforts: Companies must build internal capacity and resources to tackle these challenges.

Conclusion and Next Steps

Achieving net-zero transformation necessitates addressing scope 3 emissions through collective action and robust methodologies. SBTi will embark on a review of its scope 3 target-setting guidance, engaging various stakeholders to refine methodologies and clarify requirements.

The review aims to:

• Establish the role of scope 3 targets in achieving 1.5°C pathways.
• Evaluate materiality thresholds and boundary conditions.
• Assess and refine methodologies for target setting and accountability.

This report serves as a call to action for all stakeholders to work together in overcoming the barriers to effective scope 3 decarbonization efforts.