A new WWF report published today provides companies with essential knowledge and recommendations for setting ambitious and credible climate targets, which they are required to publish under EU law. The report “Corporate Climate Targets: ensuring the credibility of EU-regulated commitments” includes a detailed description of the legal obligations of companies and financial institutions, as well as methodological recommendations. It also shows that using the Science Based Targets Initiative (SBTi) facilitates the target setting and enables companies to comply with related requirements of European regulations.
This report assesses the alignment of the methodological requirements of SBTi with the EU legal requirements outlined in the Corporate Sustainability Reporting Directive (CSRD), which provides a framework for mandatory sustainability reporting at the European level. All recommendations and conclusions issued in this report are also in line with the current version of the Corporate Sustainability Due Diligence Directive (CSDDD), which is expected to be voted on shortly by EU Member States.
According to Antoine Pugliese, Sustainable Finance Advocacy Manager at WWF France: “Strengthening corporate sustainability reporting requirements is a key element of the European Green Deal. The main objective of the Corporate Sustainability Reporting Directive (CSRD) is to provide strategic sustainability data empowering companies to align business models with a sustainable economy and a limitation of global warming to 1.5°C, in line with the Paris Agreement. This first report examines how companies, auditors and supervisors need to ensure the credibility of climate objectives as the first element of a robust transition plan.”
Reacting to the report, Anna Notarianni, Group Chief Impact Officer at Sodexo said: “As the first company in our industry with short and long term climate targets validated by SBTi, Sodexo has consistently led the way in Sustainability. We are proud that our proactive adoption of SBTi-validated targets and trajectories was the right decision to take and will be useful to address emerging regulatory requirements such as CSRD – this new WWF report confirms it.”
For Skender Sahiti-Manzoni, Head of Sustainable Policies & Stakeholder Engagements at La Banque Postale: “The recent WWF report underlines La Banque Postale’s ongoing commitment to tackling climate change in the financial sector. By adopting rigorous science-based targets and pathways early on, we are reaffirming our commitment to sustainable transitions while effectively meeting climate target disclosure standards such as the CSRD. This underlines our proactive approach, demonstrated by our commitment to withdraw completely from fossil fuels by 2030 at the latest.”
In particular, the report makes the following recommendations:
- EU institutions and Member States, relevant regulators and supervisors, and assurance providers (auditors) should immediately recommend companies to adopt SBTi-validated climate targets, to both ensure compliance with EU regulatory requirements on corporate climate target setting and reporting, and improve transparency on their projected emissions reductions.
- The EU should develop a methodological regulatory framework of reference to ensure credible, comparable climate targets aligned with a 1.5°C global temperature increase limit for companies, based on SBTi methodological guidelines and recommendations.
- Climate targets must be monitored by relevant regulators (national competent authorities) and supervisors who should ensure that appropriate means are allocated to achieving these targets and monitor progress on corporate engagements. In this sense, CSDDD represents an essential part of EU sustainability regulation, which should be complemented by the development of a robust Measurement, Reporting and Verification (MRV) process for corporate climate targets.
WWF calls for rapid consideration of these recommendations to ensure the ambition and credibility of corporate climate targets, in line with the EU 2030 climate goals, the European Green Deal, and the promotion of long-term climate resilience and financial stability.
Key Findings
CSRD requirements: the report recalls that the CSRD allows companies to set climate targets, declare whether they are aligned with a limit of 1.5°C global temperature rise, and describe the scenarios used to develop them. These targets must be set in absolute terms to ensure the rapid decarbonization of economic activities, in five-year intervals between 2030 and 2050. This should eventually be complemented by the CSDDD, which, if voted as expected, will also require supervisors to ensure that adequate means are provided by companies to implement their climate targets through transition plans.
Compliance of SBTi with European regulations: SBTi is a methodological reference for defining corporate climate objectives. It has been used to validate the objectives of over 4,000 companies and financial institutions in almost 100 countries, with over 3,000 more committed to do it. It enables economic players to ensure that their decarbonization objectives are compatible with a global temperature rise limit of 1.5°C (with little or no overshoot). WWF’s analysis shows that SBTi’s methodological requirements for the creation, submission and validation of climate targets are aligned with the requirements set out in the CSRD, and are sometimes even more stringent.
A facilitated process for setting climate targets: with its well-established presence in the EU and significant coverage of the Union’s GHG emissions, SBTi can greatly facilitate the implementation of the CSRD and projected CSDDD requirements for companies and financial institutions to set and publish climate targets. This will help to improve the credibility and comparability of these targets, and better contribute to the EU goal to achieve climate neutrality. Ambitious and credible climate targets also help to improve the resilience and long-term financial stability of companies and financial institutions. The report points out, however, that setting targets alone is not enough to provide a satisfactory assessment of the reality of companies’ climate ambitions. Indeed, these targets represent only the first step in the development of corporate climate transition plans, which will be the subject of future WWF reports in 2024.