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C3 – GHG reduction targets and climate transition

🗂️ VSME Comprehensive Module - Environmental Metrics, page 13

  1. If the undertaking has established GHG emission reduction targets, it shall disclose its targets in absolute values for Scope 1 and Scope 2 emissions. In line with paragraphs 50 to 53 above and if it has set Scope 3 reduction targets, the undertaking shall also provide targets for significant Scope 3 emissions. In particular, it shall provide:

(a) the target year and target year value;

(b) the base year and base year value;

(c) the units used for targets;

(d) the share of Scope 1, Scope 2 and, if disclosed, Scope 3 that the target concerns; and

(e) a list of main actions it seeks to implement to achieve its targets.

  1. If the undertaking that operates in high climate impact sectors[6] has adopted a transition plan for climate change mitigation, it may provide information about it, including an explanation of how it is contributing to reduce GHG emissions.

  2. In case the undertaking operates in high-climate impact sectors and does not have a transition plan for climate change mitigation in place, it shall indicate whether and, if so, when it will adopt such a transition plan.

🗂️ VSME Comprehensive Module Guidance – Environmental Metrics, page 44-46

  1. Emission reductions can prove to be both a challenge and opportunity for an undertaking, as it often requires changes to the strategic and operational reality of the business. The goal of reducing emissions may require a review of strategic and financial priorities. Decarbonisation may require important initial investment in, for example, electrifying a fleet of vehicles, implementing new technologies to reduce energy consumption or developing new product lines that are less reliant on carbon-intensive materials. On the other hand, implementing low-carbon solutions to achieve GHG emission reduction can significantly lessen the costs of purchased energy and materials. Undertakings embarking on their decarbonisation journey are often facing important adjustments to their business models or daily operations. For instance, a logistics and delivery services undertaking may need to redesign its fleet management to minimise potential service disruptions due to the need of regular vehicle charging. A consumer goods manufacturing undertaking planning to replace a component of its product with a sustainable, low-carbon alternative may need to allocate time and resources to product innovation and to searching for new suppliers. These efforts can, in turn, result in reducing costs, accessing new markets, creating new workplaces and attracting additional financing, making GHG emission reduction not only a challenge, but also a strategic business opportunity. In this context, targets for GHG reductions are an important measure of responding to the need for a sustainable transition, as they allow undertakings to manage the change in a systematic, controlled and organised way.

  2. A GHG emission reduction target is a commitment to reduce the undertaking’s GHG emissions in a future year compared to the GHG emissions measured during a chosen base year. Actions that may lead to emission reductions include, for instance, electrification, renewable electricity, sustainable products development, etc. Disclosure C3 requires that the undertaking discloses GHG emission reduction targets for its Scope 1 and Scope 2 emissions.

  3. Removals and avoided emissions shall not be accounted as reduction of the undertaking’s gross GHG emissions. This is due to the important distinction between accounting practices for gross GHG emissions (inventory accounting) and GHG removals and avoided emissions (project-based or intervention accounting). Gross GHG emissions of the undertaking are designed to track the actual emissions released to the environment, providing a consistent and comparable baseline to set up GHG targets. Avoided emissions and carbon removals, on the other hand, relate to specific project activities of the undertaking, which means that their accounting is done separately from gross GHG emissions.

  4. To follow this practice, the undertaking needs to distinguish between its gross GHG emissions and other impacts which are not captured in it, such as GHG removals and avoided emissions. Removals refer to the withdrawal of GHG from the atmosphere as a result of deliberate human activities. Examples of such activities can include plant growth (transfer of atmospheric CO2 through photosynthesis) and direct air capture of CO2 and are typically linked to the subsequent storage of CO2. Avoided GHG emissions are typically referred to as emissions that would have otherwise happened but that, as a result of the undertaking’s activities, did not happen. These may include introducing new products and technologies that reduce demand for their carbon-intensive equivalents, for example insulation solutions in a building that avoid the demand for energy services therein. More information on the concepts related to carbon removals and avoided emissions can be found in the GHG Protocol Land Sector and Removals Guidance[13] as well as the WBCSD guidance[14] .

  5. A base year is a preceding year against which the undertaking’s current GHG emissions can be measured. In general, the base year should be a recent and representative year of the undertaking’s GHG emissions in which there are verifiable data.

  6. The target year is the year in the future in which the undertaking aims to achieve a certain absolute or percentage amount of GHG emission reductions. It should range over a period from one to three years from the base year to a short-term target. Longer term targets may also be included, for instance, for periods of twenty or thirty years (e.g. 2040 or 2050). Undertakings are encouraged to include target values for the short-term target year of 2030 at the least and, if feasible, for the longterm year of 2050. From 2030 onwards, it is recommended to update the base year and target year for GHG emission reduction targets after every five-year period.

  7. To set a target, undertakings should consider the existing scientific evidence on GHG mitigation. The SBTi recommends a cross-sector target in GHG emissions reduction of -42% by the year 2030 and -90% by the year 2050 (base year 2020). The Stockholm Resilience Centre also proposes a ‘carbon law’ that sets out concrete steps to achieve full decarbonisation by 2050 based on a flexible way of thinking about reducing carbon emissions by halving emissions every decade and increasing renewable energy roll-out exponentially. The authors argued that this roadmap would ensure a 75% chance of keeping the Earth below 2°C above pre-industrial temperatures – the target set out in the Paris agreement[15]. SBTi also proposes a streamlined target-setting route for small- and medium-sized undertakings[16] . Specific pathways also exist by sector and may be considered by undertakings when setting their GHG emission reduction targets.

  8. To achieve a quick reduction of both direct and indirect emissions, there are some simple actions that the undertaking can take. Some actions may be easy but still able to deliver a notable emission reduction and support the undertaking reaching its targets. For instance, electrification of the vehicle fleet by replacing vehicles running on fossil fuel with electric vehicles will lead to emission reduction as soon as the previous fleet is replaced. This can mean notable emission reduction especially for a business that is reliant on transportation. Similarly, replacing commutes and business travels by car with low carbon alternatives such as bicycles or public transport is an effective, simple and achievable decarbonisation action. Another area of low-hanging fruit is to review the internal energy management and update it to energy-efficient equipment and integrate maintenance into routine business operations. By regularly maintaining equipment and machinery and replacing these with more energy-efficient alternatives when and where possible, the undertaking can reduce its energy consumption. Such equipment can include, for example, boilers, telecommunication systems, heat pumps, air-conditioning etc. Through regular maintenance their efficient operation can be ensured, wear and tear minimised and waste minimised. By also automating systems and using timers to define periods of use, the undertaking is able to lower the emissions of such equipment even further.

  9. A climate transition plan for climate change mitigation is a set of present and future actions meant to align the undertaking’s business model, strategy and operations with the key overarching global goal of limiting global warming to 1.5°C. Underpinned by a GHG reduction target compatible with that goal, the importance of having a transition plan in place lies in the ability of understanding the means by which the undertaking will move towards a low-carbon economy while keeping track of the progress made. A transition plan serves as a mechanism for accountability and transparency, prompting undertakings to develop credible pathways for mitigating climate change through their actions.

  10. Establishing a credible transition plan for the undertaking is something that should be supported by elements such as

(a) identifying clear responsibilities and roles;

(b) integrating the plan into the undertaking’s business strategy and financial planning;

(c) including information on decarbonisation levers and pathways as well as quantifiable indicators that can be monitored throughout predefined timeframes;

(d) allowing for regular reviewing and updating after stakeholder consultations when appropriate; and

(e) covering the entirety of its own operations and, to the largest possible extent, the value chain or else providing an explanation as to any limitation.

  1. Undertakings that are disclosing targets according to the EMAS Regulation Annex IV B (d) may use its GHG reduction targets to fulfil the VSME requirement if it has set such targets. The undertaking may also support this disclosure through its implementation of the EMAS environmental management system and link to EN ISO 14001:2015 as set out by EMAS Regulation Annex II B A.6.2.1 and B.5 (environmental objectives).

Guidance on how to identify manufacturing, constructions and /or packaging processes

  1. To identify manufacturing, construction and/or packaging processes, the undertaking may refer to these activities that fall under Section C – Manufacturing, Section F Construction as well as Class N82.92 ‘Packaging activities’ of Annex I to Regulation (EC) No 1893/2006.

[6] High climate impact sectors are those listed in NACE Sections A to H and Section L as defined in Annex I to Regulation (EC) No 1893/2006.

[13] GHG Protocol Land Sector and Removals Guidance (https://ghgprotocol.org/land-sector-and-removalsguidance)

[14] World Business Council for Sustainable Development (2023), Guidance on Avoided Emissions. (https://www.wbcsd.org/wp-content/uploads/2023/09/Climate-Avoided-Emissions-guidance_WBCSD.pdf).

[15] Rockström, J., Gaffney, O., Rogelj, J. et. al. 2017. A roadmap for rapid decarbonization. Science, Volume 355 Issue 6331. Available at: https://www.stockholmresilience.org/research/research-news/2017-03-23-curbingemissions-with-a-new-carbon-law.html.

[16] SBTI https://sciencebasedtargets.org/small-and-medium-enterprise-sme-target-setting-process. SBTI offers resources for SMEs to set science based targets: https://sciencebasedtargets.org/small-and-medium-enterprisesme-target-setting-process.