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published on 12 February 2025 I reading time approx. 5 minutes
Setting up a holistic climate protection strategy requires the definition of ambitious and clearly structured climate protection targets. In the second part of our series on the development of scientifically sound and realistic climate targets that meet the requirements of the CSRD (Corporate Social Reporting Directive), we take a closer look at the importance of medium and long-term targets and the corresponding criteria for setting targets in relation to science-based targets (SBTs).
The disclosure requirements under the environmental standard E1 of the ESRS (European Sustainability Reporting Standard) “Transition Plan for Climate Action”, relate to the requirements for creating a climate strategy and checks whether the company's targets contribute to limiting global warming to 1.5 °C and are therefore compatible with the Paris Climate Agreement. SBTs are characterized by their high level of ambition and therefore offer companies an effective tool for developing such targets.
The Science-Based Targets Initiative (SBTi) distinguishes between medium-term and long-term emission reduction targets. “Medium-term targets”, also known as near-term targets, extend over a period of 5 to 10 years from the time they are submitted for validation. These targets must comply with the SBTi Corporate Near-Term Criteria. Long-term targets, known as net-zero targets, have a time horizon of at least 10 years and must be achieved by 2050 at the latest. They are based on the Corporate Net-Zero Standard. The SBTi is currently working on a comprehensive revision of the Corporate Net-Zero Standard. One of the aims of the new version is to bring it into line with the latest scientific developments and best practices in climate science, for example those of the Intergovernmental Panel on Climate Change (IPCC). There are also plans to make it easier for companies to set and implement Scope 3 targets. The new version is due to come into force in 2026.
The SBTi also distinguishes between reduction approaches for Scope 1 and Scope 2 emissions and for Scope 3 emissions. The SBTi recognizes the significant challenges that companies face in reducing emissions and pursues a holistic approach in which the ambition of the targets is gradually increased.
According to the requirements of the SBTi, companies are obliged to always set a current near-term target in order to achieve the long-term goal of net-zero emissions by 2050 at the latest. The SBTi sets specific requirements for setting both near-term and net-zero targets:
In the area of Scope 1 and Scope 2 emissions, at least 95 percent of emissions must be included in the target. In addition, only targets that contribute to the 1.5°C target of the Paris Agreement are validated. Targets to reduce Scope 3 emissions are only required if they account for more than 40 percent of total emissions. In this case, at least 67 percent of Scope 3 emissions must be covered by the target. In addition, the target ambition for Scope 3 emissions should be below the 2°C limit.
The requirements for net-zero targets are stricter. The gradual expansion of the Scope 3 approach from medium to long-term targets gives companies the opportunity to deal intensively with the complexity of Scope 3 reduction and to intensify cooperation along the entire value chain. For Scope 1 and Scope 2 targets, the requirement to cover at least 95 percent of emissions remains in place, although this must also be aligned with the 1.5°C target. In addition, at least 90 percent of Scope 3 emissions must be covered, also in line with the 1.5°C target. There is also an obligation to offset all remaining emissions with negative emissions once the long-term net-zero target has been reached.
Small and medium-sized enterprises (SMEs) have the option of making use of certain simplifications when setting their targets. The following options are available for SMEs:
With the launch of the SBTi's new validation portal in October 2024, the requirements for near-term targets for SMEs have been adjusted. From now on, SMEs can choose the target year for their absolute reduction targets for Scope 1 and Scope 2 emissions themselves, instead of being set to 2030 as before.
This change allows SMEs to set a reduction rate that matches their chosen target year, instead of the previous default minimum rate, which was linked to the 2030 target year. This gives SMEs more control and flexibility in setting their targets. They can choose a target year and target that meets their specific business needs, while meeting or exceeding the minimum emission reduction requirements. It remains optional to set targets for Scope 3 emissions; however, SMEs are required to measure and reduce these emissions as well.
SMEs that have already achieved zero emissions in Scope 1 and/or Scope 2 can report annually on their progress in accordance with the standards of the Greenhouse Gas Protocol and submit relevant documentation for target validation. They can also choose a maintenance approach that corresponds to their specific emissions profile.
In order to set a net-zero target, SMEs must first define near-term targets based on a 1.5°C pathway. The net-zero targets include absolute emission reduction targets for Scope 1, 2 and 3, which are to be achieved by 2050 starting from a base year. In addition, SMEs commit to neutralize all remaining emissions once the long-term science-based target is achieved.
For small companies with fewer than 150 employees, the SME Climate Hub offers additional tools and support for the implementation of SBTs.
The sectoral decarbonization method sets sector-specific emissions intensity targets. This method is especially recommended for companies that operate in high-emitting sectors or have emissions-intensive processes. It is suitable for both near-term and net-zero targets, whereby the requirements for scope 1, 2 and 3 emissions vary in certain company sectors.
One example is in the Scope 2 area “Renewable electricity”, which relates to the purchase of electricity from renewable energy sources. For near-term targets, a target of 80 percent of electricity from renewable energy sources by 2025 and 100 percent by 2030 is set. For net-zero targets, a 100 percent target is set for electricity from renewable energy sources by 2030, with the aim of maintaining this status in the long term. There are also specific methods for Scope 3 emissions that can be used for both near-term and net-zero targets..
The development of climate targets in accordance with the requirements of the CSRD can be realized well with the help of science-based targets due to their clearly structured and ambitious requirements. Depending on the type of company and its CO2-emitting activities, the type of target and the scope of the emissions, different requirements apply to the targets and methods of implementation. The overarching objective is the long-term reduction of emissions in line with the goals of the Paris Climate Agreement by 2050.
In the third part of our series, we take a closer look at the process of developing SBTs.
Rödl & Partner provides comprehensive support to companies in all steps of developing a CSRD-compliant climate strategy. Please contact us if you have any questions!
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