What is the Science Based Targets initiative (SBTi)?

The Science Based Targets initiative, commonly referred to as SBTi, is a global body that provides businesses with a specific path to reduce their greenhouse gas emissions. It is a partnership between several major organizations: CDP, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature.

For a founder, the SBTi acts as a framework to move away from vague sustainability claims and toward targets that are grounded in data. It is essentially a methodology to ensure that a company’s goals for reducing its carbon footprint are ambitious enough to meet the targets set by the Paris Agreement.

The primary objective of the initiative is to keep global warming well below 2 degrees Celsius above pre industrial levels, while pursuing efforts to limit warming to 1.5 degrees Celsius.

When you interact with the SBTi framework, you are looking at a system of validation. It is not enough to simply state that your startup wants to be green. You must submit your plans to the initiative for a rigorous review.

The initiative focuses on what are known as science based targets. These are targets that are considered necessary to prevent the most damaging effects of climate change.

To participate, a company typically goes through a five step process. First, you sign a letter of intent to set a target. Second, you develop your emissions reduction targets in line with the SBTi criteria. Third, you submit these targets for official validation. Fourth, you announce your targets to your stakeholders. Fifth, you disclose your emissions annually to track your progress.

This process is designed to be transparent. It allows investors, employees, and customers to see exactly what a business is doing. For a small business, this level of transparency can be a significant undertaking. It requires a deep dive into your operations and your supply chain.

To understand how the SBTi works in a startup environment, you must understand the concept of Scopes. These are the categories used to measure carbon footprints.

Scope 1 includes direct emissions from sources that your company owns or controls. This might include the fuel burned by a fleet of delivery vehicles or the gas used to heat your office space.

Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating, and cooling. If you rent an office in a building that uses coal powered electricity, those emissions fall into this category.

Scope 3 is often the most complex for a founder to manage. This includes all other indirect emissions that occur in your company’s value chain. This involves the emissions generated by your suppliers, the use of your products by customers, and even the travel habits of your employees.

For many startups, especially in the technology or service sectors, Scope 3 represents the vast majority of their total emissions. The SBTi requires companies to address Scope 3 if it accounts for more than 40 percent of their total emissions.

You will often hear the term carbon neutral used in business marketing. It is important to distinguish this from a science based target.

Carbon neutrality often relies heavily on carbon offsetting. A company might calculate its emissions and then pay for a project elsewhere, like planting trees, to balance the scales. This does not necessarily require the company to change its own internal behavior or reduce its actual output of carbon.

The SBTi takes a different approach. While it does not forbid offsets, its primary focus is on absolute reductions within the company operations and value chain. A science based target asks: how much do we need to cut our own emissions to stop contributing to global warming?

Carbon neutrality is often seen as a short term goal or a marketing position. Science based targets are seen as a long term operational strategy. For a founder building a lasting company, the SBTi provides a roadmap for structural changes rather than just a line item in a marketing budget.

You might wonder when a startup should prioritize these targets. Often, this becomes relevant during specific growth milestones.

If you are preparing for a Series B or Series C funding round, institutional investors may ask about your climate risk. Having an SBTi validated target can provide a level of credibility that simple internal reports cannot match. It shows that you are thinking about regulatory risks that may manifest in the next decade.

Another scenario involves enterprise sales. Many large corporations are now requiring their vendors to have science based targets. If your startup sells software or components to a Fortune 500 company, you may find that your ability to sign a contract depends on your climate disclosures.

Regulatory environments are also changing. In some jurisdictions, carbon reporting is becoming mandatory for businesses of a certain size. Starting with the SBTi framework early can help a founder build the necessary data collection systems before they are forced to do so by law.

There are several questions that the business community is still working to answer regarding the SBTi. One of the biggest unknowns is how small and medium sized enterprises can manage the cost and complexity of data collection.

Gathering data for Scope 3 emissions is notoriously difficult. If you are a small team, you may not have the leverage to force your suppliers to provide detailed carbon data. This creates a gap between the scientific ideal and the operational reality of running a startup.

Another unknown is the future of the validation process itself. As thousands of companies apply for validation, will the SBTi be able to maintain its rigorous standards without creating a multi year backlog? For a fast moving startup, a long wait for validation can be frustrating.

There is also the question of technology. We do not yet know which technologies will emerge to help businesses reach these ambitious targets. Setting a target for 2030 or 2040 involves a certain amount of faith in future innovation.

Founders must weigh these unknowns. They must decide if the rigors of the SBTi are worth the effort today, or if they should wait for more streamlined tools. However, the trend is clear: the expectation for scientific rigor in business sustainability is only increasing.

Building a remarkable company means looking at all aspects of its impact. The SBTi offers a way to measure one of the most significant impacts a business can have. It is a tool for those who want to build something that is not only successful but also compatible with a changing world.