A rising number of corporates are setting science-based targets. Here, three companies share what their targets are and how they will achieve them
Modern businesses are increasingly expected to set sustainability targets. With over 12,000 signatories, the UN Global Compact is the clearest sign of this, with many companies using the UN’s Sustainable Development Goals (SDGs) as a basis to set their own corporate sustainability targets.
Rather than focus on all 17 of the SDGs, it is common for companies to structure targets around the most relevant to their business’s footprint. Amongst those being set, targets that are science-based and contribute to limiting global warming to below 2C are a priority across multiple industries.
More than 1,000 companies have now signed up to science-based targets, each committing to goals that reduce their greenhouse gas (GHG) emissions and ensure global warming is kept to a minimum. Businesses setting such targets must look at the full scope of their GHGs, including:
- Scope 1 emissions (direct from controlled sources);
- Scope 2 (indirect from purchased energy); and,
- Scope 3 (all other indirect emissions from deeper in the value chain).
Here, three companies share what targets they have set, how they were selected, and how they will be achieved.
Key similarities and differences in approach
How are targets chosen?
The specific targets that companies set are affected by several factors, including:
- The maturity of their business generally and their corporate sustainability programme specifically;
- Whether their Scope 3 footprint occurs more upstream or downstream in their value chain; and
- The percentage reductions needed year-on-year for the business to limit its contribution to global warming to below 2C.
Scope 1 and 2 targets are usually separated from Scope 3. This is due to the added complexity of reducing GHGs upstream or downstream in the value chain.
As a result of this complexity, Scope 3 targets tend to be more modest than Scope 1 or Scope 2. For example, companies will typically aim to become carbon neutral in Scope 1 and 2 far in advance of doing the same in Scope 3.
What targets exist?
Targets are usually set for the short-, medium-, and long-term. If the company is separating its Scope 1 and 2 targets from Scope 3, this might result in targets to:
- Reduce Scope 1 and 2 GHGs by 25% by 2025; by 75% by 2040, and by 90% by 2050.
- To reduce Scope 3 GHGs by 5% by 2025; by 10% by 2040; by 15% by 2050.
Although less common, some companies combine their Scope 1, 2 and 3 targets. This could result in targets to: reduce absolute GHG emissions by 15% by 2025; by 40% by 2040; by 60% by 2050.
How are targets being achieved?
Reducing GHGs requires the support of multiple functions around the business:
- For companies with footprints concentrated upstream in the supply chain, involving procurement and changing sourcing practices is necessary.
- For those with more GHGs downstream in the consumer base, involving R&D and product development to reduce the environmental impact of the company’s products is essential.
- While more complicated, it is also important to work with marketing and communications to educate and help change consumer behaviour on the use of products. For example, on how they should be used and disposed of.
Health technology company Royal Philips has two separate GHG targets: one for Scope 1 and 2, and another for Scope 3. The two were separated due to the complexity inherent to reducing Scope 3 GHGs in its value chain. Because most of the company’s footprint is downstream in its consumer base, a lot of its work is focused on sustainable product design. This includes ensuring all new products follow an EcoDesign process.
- Reduce absolute Scope 1 and Scope 2 emissions by 75% by 2025 and 90% by 2040.
- Reduce absolute Scope 3 emissions by 4% by 2025 and 11% by 2040.
Mapping the value chain
“We have Scope 1 and 2 within our direct span of control,” says Siebe Trompert, Senior Sustainability Analyst at Philips. “Scope 3 is more complicated because it is spread throughout our value chain, both deep in our supply chain and especially in our end consumer.”
It is the consumer base that takes the lion’s share of the company’s emissions. “5% is in our own operations due to our extensive use of electricity from renewable sources, and 10% in our supply chain,” Trompert says. “But 85% occurs with consumers during the use of the product.
Reducing consumer emissions is difficult for several reasons. Because all of Philips’ products run on electricity and have a use-life of several years, the amount of energy consumed over their lifetime is significantly higher than that of production, materials, or packaging (see Figure 1, below). This is especially true in regions that use inefficient or unsustainable energy grids.
“A lot of our efforts, therefore, go into improving the energy efficiency of our products,” Siebe says. “As part of this, we ensure our innovations follow an EcoDesign process and have a smaller impact on the environment.”
This EcoDesign process requires that products improve environmental performance in at least one of five ways: on energy, packaging, substances, weight & materials, or circularity. The company currently has a target that all new product introductions meet its EcoDesign requirements by 2025. This has changed not only how its R&D and innovation teams work, but also how procurement works with suppliers.
Dylan McNeill, Director Supplier Sustainability, uses the carbon intensity of certain materials as an example. “Some are more carbon intense than others,” he says. “For instance, the energy used to liquify aluminium is much greater than plastic. With plastic, we can electrify the process, whereas with aluminium there are ovens with temperatures of over 1000 degrees.”
This makes achieving carbon neutrality with aluminium impossible, so procurement is now working with suppliers to transition towards alternatives. This may require that the supplier be connected to Siebe’s team in corporate sustainability, or another part of the business such as R&D and engineering, to help them make the transition “What gets measured gets managed, so we now have targets within procurement to achieve this,” McNeill says.
Confectionary and pet food company Mars has combined its Scope 1, 2 and 3 GHG targets, creating a single reduction target for 2050. Most of the organisation’s footprint occurs upstream in its value chain, particularly in land-use change and agriculture. As a result, much of its work is focused on bringing down emissions in these areas, including an initiative to produce deforestation-free palm and change how its supply chain works.
- Reduce absolute GHGs by 27% in 2025 and 67% by 2050, including Scope 1, 2 and 3 emissions.
- Reduce Scope 1 and 2 emissions by 42% by 2025 and 100% by 2040.
Mapping the value chain
For Mars – and for many companies with an agriculture-linked value chain – the majority of its GHGs are associated with upstream land-use change for agricultural production and direct agricultural activities. Together, these two areas comprise roughly 80% of the company’s CO2 footprint and have heavily influenced the targets that have been set.
“We started with a materiality assessment,” says David Pendlington, Global Sustainable Sourcing Director at the company. “Assessing the GHG impact of each material and multiplying it by the volume of that material.”
Because most of Mars’s footprint exists in the production and purchasing of agricultural raw materials – a Scope 3 GHG emission – its targets reflect reducing CO2 levels in this area. “And this is complex because these can be Tier-2, Tier-3, or even point of origin suppliers, which means we do not necessarily have a direct business relationship with them.”
Reducing CO2 in the supply chain makes procurement’s support essential. The function was involved in providing baseline information on purchases made in upstream agriculture and is now working closely with suppliers throughout Mars’s value chain to bring emissions down. Its ‘Pledge For Planet’ initiative calls on all strategic suppliers to adopt the same group-wide climate action commitments as Mars itself.
“You must understand the business’s end-to-end footprint,” Pendlington says. “And when it comes to working upstream in the value chain on this topic, procurement can make a significant impact.”
A good example of this is its Palm Positive Action Plan, an initiative aimed at producing deforestation-free palm and, in doing so, lowering CO2 levels. The Plan has three requirements: to reduce the number of palm suppliers from 1,500 in 2018 to less than 100 by the end of 2021; to 50 by the end of 2022; and to ensure those suppliers produce palm in a sustainable manner. “A smaller palm supply chain is both more sustainable and more manageable, in that we’re able to more easily monitor and reduce its impact on the climate,” Pendlington says.
The long-term strategic suppliers that Mars works with are chosen according to three criteria:
- A capability or a commitment to producing deforestation-free palm;
- A commitment to improving wider environmental and social sustainability conditions (such as water management and labour rights), as demonstrated through their codes of conduct and policies; and,
- Sustainability capability (including environmental and social) across their operations, as demonstrated by their current practices.
By including these as critical criteria for long-term strategic partnering, Mars will start to address its biggest source of GHGs. “This fundamentally changes our supply chain,” Pendlington says. “To make progress, we must go beyond working on individual projects that have a limited impact. We have to structurally change how the supply chain works.”
By signing the UN Global Compact’s “Business Ambition for 1.5C”, life-science company Bayer committed to reaching net-zero value chain emissions by no later than 2050. To achieve this, the company separated its Scope 1 and 2 targets from Scope 3. Most of its GHG footprint exists in its supply chain, so a lot of work is concentrated within its procurement and supply chain functions. This includes mapping its wider supply chain, identifying suppliers with the largest footprint, and working with them to bring emission levels down.
- Reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 42% by end-of 2029.
- Reduce Scope 3 GHG emissions by 12.3% by the end of 2029, taking 2019 as a baseline.
Mapping the value chain
As with Philips, the decision to set two distinct science-based targets was taken due to the more complicated nature of Scope 3 emissions. “If you look at the criteria for achieving absolute reductions, you can either set a combined target between all three scopes, or have one for Scope 1 and 2 and another for Scope 3,” says Jens Plambeck, Procurement Global Lead Environment at the company. “Considering the differences in data measurement between these scopes, we set two separate targets, because Scope 3 is far more complex than Scope 1 and 2.”
Because Bayer already has a good understanding of how to reduce Scope 1 and 2 emissions, the targets it has set there are more ambitious. “We have more experience and more robust data when it comes to Scope 1 and 2. So here we can aim to limit global warming to 1.5C, which translates into an absolute 42% reduction by the end of 2029,” Plambeck says.
“Data access and quality are less evolved with Scope 3 measurement techniques. We’re still working with internal stakeholders and external partners to obtain transparency and understand how to make significant reductions. We’re therefore aiming – for the time being – for an absolute reduction of 12.3% over the next ten years.”
Similar to Mars, Bayer recognises that to continue to reduce its GHG footprint beyond 2030, it must work more upstream in its supply chain. For that reason, there are now dedicated roles within the corporate procurement function that focus on reducing GHG emissions in the company’s supply chain – including Plambeck’s role in procurement as Global Lead Environment and others in the procurement shared-service centre.
“Our corporate sustainability function orchestrates our Scope 1 and 2 emissions,” he says. “The orchestration of Scope 3 sits mainly with me and my team in procurement. Yet the delivery of Scope 3 reductions requires the contribution of many internal stakeholders in our business divisions, plus our colleagues within procurement who are in day-to-day interactions with our suppliers.”
One of the main projects that procurement is currently working on is to identify Bayer’s suppliers with the largest CO2 footprint – steps 2 and 3 in its management process (see Figure 3, above). These are being identified from its Scope 3 inventory, using a spend-based environmental extended input-output (EEIO) modulation – a tool increasingly used in environmental accounting. This is combined with information gathered from a mixture of internal sources, such as procurement’s strategic supplier segmentation; and external, such as suppliers’ sustainability policies and positioning. “The combination of this information will help us to decide which suppliers to invite in 2021 for primary data reporting and sharing,” Plambeck says.