SBTi and the climate transition of Swedish business life
The climate goals, both the Paris Agreement, the EU's climate goals and Sweden's climate law require a comprehensive and rapid restructuring of the business world. In this sub-study, we analyze what role the voluntary initiative Scene Based Targets initiative (SBTi) can have on the climate transition of Swedish business life. The study contains a research literature review, a description of the SBTi framework and of the Swedish companies that joined as well as an analysis of these companies' climate goals.
SBTi is a voluntary initiative that overlaps national and European climate regulation
The SBTi methodology is continuously developed and the ambition is transparent methods and climate goals in line with science, which means a goal of keeping global warming to 1.5 degrees and net-zero emissions by 2050.
As all of the companies' climate emissions are covered by the SBTi climate goals, the initiative has the potential to contribute to reducing emission beyond the reach of national and EU climate policy. Emissions from companies own operations (scope 1), purchased energy (scope 2), value chains both upstream, in the form of emissions from input goods, and downstream such as usage and waste management (scope 3) are covered. SBTi is thus a voluntary, "soft" self-regulation that overlaps both national and European climate regulation and legislation. The company perspective means that emissions and emission reductions are focused on the company's value chain, which means that they cannot be summed up in the same way as, for example, national or European emission as one company's scope 3 emissions are someone else's scope 1 or 2 emissions.
At the same time, the research literature points to challenges with the initiative. One problem is that the GHG protocol standard used by SBTi allows the companies to use renewable energy certificates that do not mean real emission reductions, which in turn means that some companies' emission reductions are overestimated. Another challenge is that the scope 3 emissions have less stringent targets, which creates uncertainties about whether the companies' targets are aligned with the 1.5-degree target.
The Swedish SBTi population includes companies from several industries, but is dominated by large companies in the manufacturing industry
In Sweden, 171 companies had joined when the project's data collection began at the end of August 2022. The number of companies joining is continuously increasing.
In August 2022, the Swedish SBTi population accounted for approximately 14 percent of Sweden's business sector's value added. They also accounted for about 10 percent of the number of employees.
The Swedish SBTi companies are found in many different industries. However, the manufacturing industry is overrepresented. Other industries with a high proportion of SBTi companies are trade, real estate operations, information and communication. The SBTi companies are characterized by the fact that they are mainly large companies with over 250 employees. Over 60 percent of SBTi companies belong to this category. However, in 2020 SBTi introduced a simplified process for companies with under 500 employees (SBTi's definition of an SME company) and the number of companies in this category is increasing.
Although the SBTi companies are mainly large companies in the manufacturing industry, it is only one of the 15 companies in Sweden with the largest (territorial) emissions that has joined.
Lack of transparency and methodologically challenging to follow up the companies' climate transition
We became aware early on that there is a lack of comprehensive statistics on carbon dioxide emissions at company level, which is why we initiated our own collection. We collected statistics through the sustainability reports of the companies' annual reports for the last five years.
The summed emissions for the companies (41 percent of the SBTI companies) for which we have data on carbon dioxide emissions (CO2e) within all scopes, i.e. scope 1, 2 and 3, for the years 2019–2021, were in 2019 223 Mton CO2e, in 2020 184 Mton of CO2e and in 2021 198 Mton of CO2e. The numbers are uncertain and only give an indication of the order of magnitude and rough development over time.
The first conclusion is that emissions far exceed Sweden's total territorial emissions. The reason is that this group of SBTi companies includes several multinational companies with large production emissions and scope 3 emissions outside Sweden's borders. A second result is that the largest part of the emissions are scope 3 emissions. These account for over 85 percent of emissions in 2019–2021. Scope 2 accounts for just over 1 percent and scope 1 emissions for between 11 and 14 percent of the emissions. Over the measured time period, it is noted that emissions for the Swedish SBTi companies decrease by 11 percent between 2019 and 2021 (3 years), which is an emission reduction rate that is in line with what is required to reach net-zero emissions in 2050. Many of these companies had however not yet joined the SBTi.
The illustrative analysis of the Swedish SBTi companies' short- and long-term climate goals shows that the companies that chose to set the least ambitious goals, but which are nevertheless verified by SBTi, will not reach net-zero until after 2050. This means that these target levels are not in line with the goals of the Paris Agreement and to an even lesser extent if one takes into account the Paris Agreement's principle of "common but differentiated responsibilities", (CBDR), which means that developed countries must take greater responsibility for emission reductions than developing countries. In contrast, net-zero is reached before 2050 with the ambitious and moderately ambitious targets. In addition, SBTi's guidelines are continuously revised to steer towards the goal, which means that companies that do not have sufficiently ambitious goals will have to update them.
SBTi and the climate transition of Swedish business life
Serial number: PM 2023:03
Reference number: 2023/32