Devex: Science-based climate targets are a must for state companies

One step governments can take to help the planet and avoid being sued by their citizens is requiring state-owned enterprises and the companies that supply them with goods and services to set science-based targets, or SBTs.

In the face of the climate crisis, citizens are urging governments to take action. Earlier this year, the European Court of Human Rights began hearing cases brought by European Union citizens against their governments. State administrations are accused of failing to take decisive action to reduce climate change, which plaintiffs argue is a violation of their fundamental rights. The court in the French city of Strasbourg is due to hear three cases, involving more than 30 countries. This is the first time the European body has been asked to consider whether inadequate climate change policies constitute an infringement of the European Convention on Human Rights, including the right to life.

The air we breathe now contains more carbon dioxide than at any time in at least 2 million years, according to the most recent report from the Intergovernmental Panel on Climate Change. Human activity has caused atmospheric temperatures to surge over the past two centuries, destabilizing our climate and endangering human lives.

António Guterres, the United Nations, secretary-general, is blunt: “Our world needs climate action on all fronts — everything, everywhere, all at once.”

Measuring emissions cuts to ensure they happen

SBTs are emission reduction plans validated by the Science-Based Targets initiative and aligned with the Paris Agreement. They seek to limit the global rise in temperature to no more than 2 degrees Celsius, and ideally to below 1.5 degrees Celsius, above pre-industrial levels. SBTs are the best tool we have to ensure companies are honoring their climate pledges.

The SBTi has developed a widely recognized standard for validating companies’ efforts to reduce greenhouse gas emissions stemming from their activities. Developed by a coalition of respected groups — the World Wide Fund for Nature, World Resources Institute, Carbon Disclosure Project, and U.N. Global Compact — it provides an external benchmark. Importantly, these targets include all the different kinds of emissions — scopes in climate jargon — including a company’s emissions, those of its suppliers, and the emissions generated when its products or services are used.

These SBTs give companies a clearly defined pathway to reduce their emissions — but it is not just big private firms that need to sign up. Global economic growth has made many states, especially in Asia, important producers in their own right. State-owned enterprises now comprise 132 of the world’s largest 500 businesses, up from just 32 two decades ago.

Moreover, state-owned enterprises are often active in sectors that account for substantial sources of global greenhouse gas emissions, such as energy, transportation, and infrastructure. Their assets, at $45 trillion in 2018, equal half of the global gross domestic product. Getting to grips with their emissions now offers a quick and efficient route to bring forward the fight against global warming.

Norway sets a new benchmark

Some state-owned companies have voluntarily drawn up environmental and climate-related goals to underpin their activities. But Norway is the first country to expect that all its state-owned companies adopt science-based targets.

In a recently published white paper, the government of Norway sets out its expectations for emissions reductions across the state sector. Some organizations are already doing so. For example, the logistics group Posten Norge has committed to halving its greenhouse gas emissions by 2030 from the base year of 2020. This includes the emissions from its own direct activities, from its energy purchases, and from the energy consumed by its suppliers and end users of its products.

In time it is hoped this expectation to set SBTs will include oil and gas companies – Norway is a leading producer – when the SBTi creates guidelines for that sector.

The Norwegian authorities are also revising public procurement rules to ensure they support important goals such as economic, social, and environmental sustainability. We are, among other things, working to introduce obligatory environment and climate requirements in public procurement.

Setting targets benefits us all

Similar trends are emerging in other high-income economies, which are also historically some of the biggest contributors to greenhouse gas emissions. Japan has encouraged companies to set SBTs since 2019 and subsequently traded places with the United States as the country with the largest number of companies with approved SBTs. In November 2022, the U.S. Administration proposed a Federal Supplier Climate Risks and Resilience Rule expected to be passed this year, which would require major federal contractors, among other things, to set science-based emissions reduction targets. In the United Kingdom, meanwhile, firms bidding for government contracts over £5 million ($6.3 million) a year must now commit to net zero by 2050.

The trend is clear: governments can lead by example by applying science-based emissions-reduction targets across the state sector. But while the pace is picking up, it is not enough. Amid a deluge of alarming reports that suggest global warming is happening faster than predicted, with more dramatic impacts, we need governments to harness their powers as owners and buyers to ensure state-owned enterprises and public contractors help slow climate change.

The SBTs are an excellent tool to help protect citizens from the harmful effects of rising concentrations of carbon dioxide in the atmosphere and rising temperatures on our planet. Governments should ensure they are used. Setting firm targets will benefit us all.

Similar trends are emerging in other high-income economies, which are also historically some of the biggest contributors to greenhouse gas emissions. Japan has encouraged companies to set SBTs since 2019 and subsequently traded places with the United States as the country with the largest number of companies with approved SBTs. In November 2022, the U.S. Administration proposed a Federal Supplier Climate Risks and Resilience Rule expected to be passed this year, which would require major federal contractors, among other things, to set science-based emissions reduction targets. In the United Kingdom, meanwhile, firms bidding for government contracts over £5 million ($6.3 million) a year must now commit to net zero by 2050.

The trend is clear: governments can lead by example by applying science-based emissions-reduction targets across the state sector. But while the pace is picking up, it is not enough. Amid a deluge of alarming reports that suggest global warming is happening faster than predicted, with more dramatic impacts, we need governments to harness their powers as owners and buyers to ensure state-owned enterprises and public contractors help slow climate change.

The SBTs are an excellent tool to help protect citizens from the harmful effects of rising concentrations of carbon dioxide in the atmosphere and rising temperatures on our planet. Governments should ensure they are used. Setting firm targets will benefit us all.