Small and medium-sized enterprises (SMEs) can now set robust, credible emissions reduction targets – known as ‘science-based targets’ (SBTs) – which are aligned with the latest climate science and which provide worldwide recognition for your company’s environmental ambitions.

Reducing the impacts of climate change requires action from every individual and business. In the UK, the Government has committed to achieving ‘net zero’ greenhouse gas emissions by 2050. As SMEs employ around 60% of the UK’s total workforce and generate over 50% of all business turnover, small businesses will have a crucial role in delivering the Governments ambition. Yet whilst many small businesses expect climate change to have a significant impact on their business, many SMEs struggle to evidence the action they are taking to reduce their contribution to the problem.

In this post, we explain the latest update from the Science Based Targets initiative (SBTi), what it means for SMEs, and how company Directors can take ambitious climate action.

Setting Science-based targets for your business

The SBTi – a partnership between the UN Global Compact, CDP, World Resources Institute and WWF – provides a consistent approach to setting SBTs, and validates companies targets for their alignment with the ambitions of the Paris Agreement.

Nearly 900 companies have committed to setting, or have already, set SBTs. The majority of these, however, are larger businesses with the skills and/or capacity required to set such targets. This is because the process – which involves developing a target aligned with the SBTi criteria and submitting that target for approval to the SBTi’s target validation process – can be iterative and resource-intensive.

In recognising both the role that SMEs must play in the fight against climate change and the resourcing challenges many may face, the SBTi has launched a new, streamlined route for SMEs to set their own targets. Through this route, SMEs can choose their desired level of ambition, by committing to reduce absolute scope 1&2 GHG emissions 50% (consistent with an economy-wide trajectory to limit global warming to 1.5oC by the end of this century) or 30% (limiting warming to ‘well-below 2oC’) by 2030 from a 2018 base year. Companies must also:

  • Commit to measuring and reducing Scope 3 emissions
  • Not use offsets or avoided emissions as progress toward achieving the target
  • Publicly report emissions and progress against targets annually
  • Submit their targets to the SBTi for validation for a cost of $1,000+VAT (as opposed to the $4,950+VAT for the ‘full’ validation process for larger companies)

Targets submitted through this dedicated route for SMEs will be automatically approved and announced on the SBTi website, pending due diligence review and payment.

Benefits of the new regulation

Setting SBTs can present small and medium-sized businesses with a range of benefits.

Whilst there are costs involved in measuring, monitoring and reporting emissions, identifying opportunities for emissions reductions can provide financial benefits.

Most emissions reduction activities for SMEs involve energy efficiency improvements – many of which can deliver excellent returns of investment as well as future-proofing your operations. Whilst for some this may involve transitioning the company’s fleet to electric vehicles, for others it may be as simple as switching to LED lightbulbs in the office!

Increasingly larger organisations are future-proofing their own operations by reducing Scope 3 emissions from their supply chain and are therefore placing pressure on their suppliers – including SMEs – to disclose and reduce their own emissions. It is now commonplace to see environmental criteria feature prominently within corporate procurement processes and Government tenders.

“By setting and achieving an ambitious SBT, small businesses can unearth previously hidden cost savings, spark innovation within the workforce, attract and retain environmentally-conscious employees and evidence to key customers their resilience to regulatory changes.”

Chris Guest

Principal Consultant, Avieco

One challenge presented by the new criteria is the need for SMEs to set targets against their 2018 carbon footprint, especially because small businesses tend to change quickly and 2018 may not be a representative benchmark. However, this is deemed as essential to maintain consistency in approach as addressed by stakeholder consultations

Next steps

A more substantial challenge for SMEs is that, whilst there is now a consistent approach to setting targets, realising any ambitious target requires a long-term carbon management plan tailored to the company’s own circumstances.

We, therefore, recommend starting your SBT journey by calculating Scope 1,2 and 3 emissions for both 2018 and 2019. This will allow you to understand where the largest sources of emissions are within your operations and your supply chain, how these emissions are changing over time and to identify the key stakeholders you will need to engage to reduce emissions over time. Only then should you consider setting ambitious emissions targets.

SMEs have a critical role to play in the fight against climate change, and those which act early will gain the most. Thankfully the road to meaningful climate action just became clearer.

Contact us to discuss how your small business can benefit from tackling climate change.

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