A Practical Guide to Science Based Targets Initiative (SBTi) for EU Companies

Executive Summary

The Science Based Targets initiative (SBTi) enables companies to develop and implement climate goals grounded in scientific evidence. This comprehensive guide walks you through the entire SBTi process—from registering your commitment through to transparent monitoring and reporting. Today, over 4,000 companies globally have either validated science based targets or committed to developing them, representing approximately 34% of global market capitalisation. For German and European companies, aligning with the Science Based Targets initiative has shifted from optional to essential: the Corporate Sustainability Reporting Directive (CSRD) now mandates disclosure of emissions reduction targets, whilst investors increasingly expect validated targets in due diligence processes.

In five clear steps, companies can reduce emissions measurably, unlock cost savings, and meet evolving legal requirements. This guide shows you how to navigate the journey successfully—whether you're a fast-growing startup, a mid-market manufacturer, an international corporation, or a venture capital fund evaluating portfolio companies.

Why Science Based Targets Matter: The Business Case for Climate Action

Global Momentum Behind Science Based Targets Initiative

The Science Based Targets initiative has achieved remarkable scale. By late 2022, 2,079 companies globally held validated science based targets, with a further 2,151 officially committed and in development—together representing over 4,000 organisations. These companies collectively account for roughly one-third of global market capitalisation, demonstrating that climate action is no longer the preserve of sustainability leaders but a requirement for competitive business.

Notably, 96% of corporates with science based targets have integrated Scope 3 emissions into their climate strategy. This shift reflects a maturation of corporate climate planning: companies recognise that focusing solely on direct emissions (Scope 1) and energy consumption (Scope 2) is insufficient. Supply chain emissions—often representing 80% or more of a company's total footprint—must be part of the reduction equation.

Why SBTi Targets Are Especially Crucial for German and EU Companies Right Now

For companies in Germany and across Europe, several converging pressures make the Science Based Targets initiative urgently relevant:

Regulatory Mandates

The Corporate Sustainability Reporting Directive (CSRD) now requires an expanding circle of companies to disclose emissions reduction targets. Initially affecting the largest enterprises, the CSRD will progressively cover around 50,000 companies across the EU—compared to approximately 11,000 under the previous Non-Financial Reporting Directive. This tenfold expansion means that mid-sized and smaller firms must now align their climate strategies with recognised frameworks, and the Science Based Targets initiative remains the gold standard for credibility.

Financial Incentives and Market Preference

Banks and investors increasingly prefer companies with credible decarbonisation pathways. Research from CDP's 2022 assessment found that companies with approved science based targets achieved 12% higher returns on investment compared to peers without validated targets. The EU Taxonomy framework rewards companies demonstrating measurable climate progress, improving access to green financing.

Investor and Limited Partner Expectations

For venture capital and private equity firms, the Integration of science based targets into portfolio company strategy has become standard due diligence. Limited partners expect fund managers to demonstrate ESG integration, and validated targets provide quantifiable evidence of climate governance. Article 8 and Article 9 fund classifications now routinely require portfolio companies to adopt science based targets.

Competitive Advantage in Procurement and Partnerships

Across European supply chains, larger corporations and public procurement bodies increasingly mandate ESG credentials from suppliers. Certified science based targets strengthen your position in tender processes, customer negotiations, and partnership discussions.

Understanding the Science Based Targets Initiative Framework

What Are Science Based Targets?

Science based targets are emissions reduction targets that align with what climate science deems necessary to limit global warming to 1.5 °C above pre-industrial levels. Rather than setting arbitrary reduction percentages, companies using the Science Based Targets initiative framework adopt sector-specific, scientifically grounded reduction pathways. This approach ensures that corporate climate action translates into measurable progress toward the Paris Agreement goals.

The Science Based Targets initiative—launched collaboratively by the UN Global Compact, CDP, World Resources Institute, and others—provides the methodology, validation, and credibility infrastructure that makes science based targets recognisable to investors, regulators, and stakeholders worldwide.

Alignment with the 1.5 °C Pathway

Central to the Science Based Targets initiative is alignment with the 1.5 °C climate scenario. This pathway requires global emissions reductions of approximately 50% by 2030 and net zero by 2050. Companies adopting science based targets commit to emission reduction trajectories that, if adopted broadly, would collectively limit warming to 1.5 °C.

For different sectors, the Science Based Targets initiative provides sector-specific guidance. Manufacturing, power generation, cement, steel, aviation, and automotive sectors have well-defined decarbonisation pathways. Companies without sector-specific guidance rely on the Corporate Near-Term Criteria and Corporate Net-Zero Standard, which define reduction rates based on company size and emission intensity.

Key Timeframes for Science Based Targets

The Science Based Targets initiative distinguishes between two complementary target horizons:

Near-Term Targets: Typically covering 5–10 years, these targets drive immediate action. They must demonstrate credible, measurable progress in reducing emissions within your current operational and supply chain footprint.

Long-Term / Net-Zero Targets: Aligned with reaching net zero by 2050 at the latest (and preferably sooner), these targets map the pathway to decarbonisation over the medium and long term. An increasing proportion of companies now commit to both simultaneously—by late 2024, over one-third of all companies with science based targets held both near-term and net-zero targets, a significant rise from 17% in late 2023.

The Five-Step Process: From Commitment to Validated Science Based Targets

Step 1: Registration, Planning, and Stakeholder Engagement

The Science Based Targets initiative process begins with a formal commitment. For most companies, this takes the form of a Commitment Letter—a public declaration of intent to develop science based targets within a defined timeframe (typically 2–3 years). This commitment establishes accountability and signals to investors, customers, and employees that climate action is a strategic priority.

Key Activities:

• Define your scope: Determine which emissions you will include (typically Scope 1 and Scope 2 minimum, plus Scope 3 if material).

• Identify climate risks: Conduct a climate risk assessment addressing both regulatory risks (CSRD, carbon pricing, supply chain regulation) and physical climate risks (flooding, heat stress, water scarcity) that could affect your business model.

• Stakeholder engagement: Internal teams (operations, procurement, finance, R&D) must align on climate strategy, and external stakeholders (customers, suppliers, investors) should be consulted to ensure buy-in.

• Resource allocation: Assign budget, personnel, and expert support to lead the process through validation.

For smaller enterprises using the SME route, the Commitment Letter step is bypassed entirely, allowing direct progression to target setting.

Step 2: Measure and Analyse Your Emissions Baseline

Accurately measuring greenhouse gas emissions is foundational. The Science Based Targets initiative requires companies to collect, quantify, and verify three categories of emissions:

Scope 1 (Direct Emissions) Direct emissions from sources owned or controlled by your company—typically combustion in boilers, vehicles, or manufacturing processes.

Scope 2 (Indirect Emissions from Energy) Emissions from purchased electricity, steam, heating, or cooling. This category is particularly important as it reflects your reliance on renewable versus fossil fuel-based energy.

Scope 3 (Value Chain Emissions) Indirect emissions across your value chain—upstream from suppliers, downstream from customers using your products, business travel, waste, and transportation. For many companies, Scope 3 represents 80% or more of total emissions.

Critical SBTi Requirement: If Scope 3 emissions exceed 40% of your company's total footprint, they must be included in your science based targets. Moreover, your Scope 3 targets must cover at least 67% of Scope 3 emissions to ensure comprehensive coverage of your supply chain impact.

To measure emissions accurately:

• Gather energy consumption data (electricity, gas, fuel purchases)

• Collect activity data (business travel kilometres, purchased goods, waste volumes)

• Apply emissions factors aligned with the GHG Protocol and SBTi guidance

• Use recognised tools (Scope 3 evaluators, carbon accounting software) to standardise calculations

• Verify data quality and document assumptions

This baseline forms the foundation for target-setting and enables you to track progress over time.

Step 3: Calculate Science Based Targets Using Scientific Methods

With your emissions measured, the next step is developing reduction targets using scientifically grounded methods. The Science Based Targets initiative provides multiple approaches:

Absolute Emissions Reduction Reduces total emissions by a fixed percentage regardless of business growth. This approach is straightforward but can conflict with revenue growth objectives.

Sectoral Decarbonisation Approach (SDA) Allocates sector-wide reduction requirements proportionally based on your company's revenue or production. This method is particularly suited to sectors with well-defined decarbonisation pathways (power, cement, steel) and allows for business growth whilst meeting sector reduction targets.

Intensity-Based Targets Reduces emissions per unit of output (e.g., kg CO₂ per tonne of product, emissions per euro of revenue). This approach balances decarbonisation with business expansion and is common in manufacturing and logistics.

Using Marginal Abatement Cost Curves The SBTi calculator incorporates marginal abatement cost (MAC) curves, enabling you to identify the most cost-effective emissions reduction measures. This ensures your climate strategy is economically rational, supporting the business case for investment.

Critical Limitation: Beyond Value Chain Mitigation (BVCM)

An important clarification: external compensation measures outside your value chain—such as carbon offsets, renewable energy certificates purchased from unrelated projects, or nature-based solutions—are classified by SBTi as Beyond Value Chain Mitigation (BVCM). Whilst these can complement your climate strategy, they do not count as direct emissions reductions. SBTi guidance explicitly states that BVCM supplements but does not replace the obligation to reduce emissions within your own operations and supply chain. Relying primarily on offsets rather than genuine operational decarbonisation will not meet SBTi validation requirements.

Step 4: Submit Your Targets for SBTi Validation

Once your science based targets are calculated, they are submitted to SBTi for independent validation. The validation process typically takes:

• Corporates: Up to 6 months following submission

• Small and medium-sized enterprises (SMEs): Approximately 60 days following submission

During validation, SBTi experts review:

• Alignment with the 1.5 °C pathway

• Completeness of Scope coverage (including Scope 3 if material)

• Adequacy of interim reduction rates

• Alignment with sectoral guidance (where applicable)

• Quality of emissions data and methodology

Once validated, your targets are listed publicly on the SBTi website, enhancing credibility with investors, customers, and regulators.

Step 5: Monitor Progress and Report Transparently

Setting targets is one step; delivering measurable reductions is another. SBTi expects companies to:

• Track emissions annually against your baseline

• Report progress publicly through sustainability reports, CSRD disclosures, or CDP submissions

• Adapt your strategy if progress lags, adjusting measures or timelines where justified

• Communicate setbacks transparently rather than adjusting targets retroactively

Data shows that 76% of companies with validated science based targets report publicly on their progress, and 53% report fully across both near-term and long-term targets. Companies with validated science based targets reduce emissions at an average rate of 8.8% annually—significantly above the global average—demonstrating the effectiveness of structured, science-based climate action.

Critical Minimum Requirements: What SBTi Demands

To pass SBTi validation, your science based targets must meet these non-negotiable criteria:

Scope Coverage

• Minimum: Scope 1 and Scope 2 emissions

• If Scope 3 > 40% of total emissions: Scope 3 must be included

• Scope 3 targets must cover minimum 67% of Scope 3 emissions

Reduction Rates

• Near-term targets: Aligned with sector-specific science (typically 4–10% annually depending on sector)

• Long-term targets: Net zero by 2050 (or earlier)

• Absolute or intensity-based reductions (BVCM does not count as direct reduction)

Timeframes

• Near-term: 5–10 years from baseline year

• Long-term: Aligned with 2050 net-zero trajectory

1.5 °C Alignment

• Targets must limit global warming to 1.5 °C with no or limited overshoot

Practical Implementation: Making Science Based Targets Work for Your Business

For Startups: Integrating Climate Goals into Your Growth Strategy

Early-stage companies often view climate commitments as an obstacle to fundraising. The opposite is true: venture capital increasingly allocates capital to companies demonstrating ESG integration. Many VC funds now classify themselves as Article 8 or Article 9 funds under the Sustainable Finance Disclosure Regulation (SFDR), requiring portfolio companies to adopt science based targets.

Action: Use the SME route (no Commitment Letter required) to set targets quickly. Focus on Scope 1 and 2 initially; incorporate Scope 3 as you scale. Early action on climate differentiates your pitch in competitive funding rounds.

For Mid-Market Companies: Linking Science Based Targets to Business Resilience

Mid-market companies often face dual pressure: complying with CSRD reporting (if over €50 million revenue) and meeting customer/supply chain demands for ESG credentials. Science based targets provide a framework that addresses both.

Action: Embed your SBTi targets into your corporate strategy, linking climate goals to financial planning. Use your targets to unlock green financing (banks offer better rates to companies with validated targets) and to strengthen customer relationships.

For Large Corporations: Portfolio-Level Climate Governance

Large enterprises increasingly adopt science based targets across multiple divisions and geographies. This requires governance structures ensuring consistent methodology and transparent reporting.

Action: Develop sector-specific reduction roadmaps for each business unit, ensuring alignment with group-level net-zero commitments. Integrate targets into executive compensation and board oversight.

For Venture Capital and Private Equity: ESG Due Diligence and Portfolio Management

For investment funds, science based targets serve as a quantifiable ESG metric and a signal of management quality. Funds increasingly expect portfolio companies to adopt targets as a condition of investment or within a defined transition period post-acquisition.

Action: Establish a portfolio-wide SBTi adoption roadmap. For early-stage companies, offer support for SME-route target setting. For mature portfolio companies, require validated targets as part of operational excellence standards.

Overcoming Common Challenges

Challenge: Scope 3 Complexity

Scope 3 emissions often account for 70–90% of a company's footprint but are notoriously difficult to measure. Supplier data is sparse, methodologies are evolving, and attribution is complex.

Solution: Use a phased approach. Year one: screen major suppliers and estimate Scope 3 using recognised tools (Quantis, Watershed, carbonTrust). Year two: engage suppliers to provide primary data. Year three: refine estimates using supplier-provided emissions factors.

Challenge: Cost and Resource Constraints

Smaller companies often lack dedicated ESG staff or technical expertise to calculate science based targets independently.

Solution: Consider external support. The SME route is specifically designed to reduce resource requirements. Many consultancies (including Fiegenbaum Solutions) offer targeted SBTi support for SMEs, reducing time-to-validation from months to weeks.

Challenge: BVCM Temptation

Companies are often tempted to offset emissions rather than reduce them operationally, viewing external credits as a simpler path to targets.

Solution: Recognise that SBTi validation requires real operational reductions. BVCM can supplement your strategy but cannot substitute for Scope 1–3 reductions. Focus your investments on renewable energy, energy efficiency, and supply chain decarbonisation—measures that deliver both climate impact and cost savings.

Key Takeaways for Your Science Based Targets Journey

✓ Science based targets are no longer optional. With CSRD affecting 50,000+ EU companies and investors demanding validated targets, your competitive position increasingly depends on credible climate goals.

✓ The Science Based Targets initiative provides structured methodology. By following the five-step process and meeting SBTi's minimum requirements, you gain third-party validation and credibility.

✓ Scope 3 integration is non-negotiable. If supply chain emissions exceed 40% of your footprint, they must be included. This requires supplier engagement but unlocks significant cost savings through supply chain decarbonisation.

✓ Timing matters. Companies that set targets early benefit from early-mover advantages in financing, customer relationships, and talent attraction.

✓ Support is available. Whether you're an SME using the accelerated route or a corporation requiring portfolio-level coordination, professional guidance streamlines the path to validation.

Frequently Asked Questions About Science Based Targets

What is the Science Based Targets initiative?

The Science Based Targets initiative is a global initiative launched by the UN Global Compact, CDP, World Resources Institute, and others. It provides scientifically grounded guidelines for companies to reduce CO₂ emissions in line with the 1.5 °C climate pathway. SBTi offers validation services ensuring targets meet scientific criteria. Learn more at the official SBTi website.

How long does the Science Based Targets initiative process take?

The timeline varies by company size and complexity:

• Corporates: 4–12 months from initial data collection to submission; up to 6 months for SBTi validation

• Small and medium-sized enterprises: 2–6 months for target development; approximately 60 days for validation via the SME route

Are there special options for small businesses?

Yes. The SME route streamlines the Science Based Targets initiative process by:

• Eliminating the Commitment Letter step

• Allowing simplified emissions measurement using industry benchmarks

• Reducing validation timelines to roughly 60 days

• Offering less resource-intensive methodologies

For SME support, consult resources from SBTi's SME guidance or engagement specialists.

What is the difference between near-term and long-term targets?

Near-term targets (5–10 years) drive immediate action and measurable progress. Long-term targets (net zero by 2050) map the pathway to complete decarbonisation. The Science Based Targets initiative increasingly expects companies to commit to both simultaneously.

Can we use carbon offsets to meet our science based targets?

External offsets and renewable energy certificates fall under Beyond Value Chain Mitigation (BVCM). SBTi recognises BVCM as supplementary, but they do not replace direct emissions reductions in Scope 1–3. Your targets must be met primarily through operational decarbonisation.

What if our Scope 3 emissions are large?

If Scope 3 exceeds 40% of total emissions, SBTi mandates Scope 3 inclusion in your targets. You must cover at least 67% of Scope 3 emissions through supplier engagement, material redesign, or customer engagement. This requires supplier collaboration but often unlocks cost savings.

How do we report progress on our science based targets?

Companies report progress through:

• Annual sustainability reports or integrated reports

• CSRD disclosure statements (mandatory for covered companies)

• CDP climate questionnaires

• Investor relations communications

Transparent, consistent reporting demonstrates commitment and strengthens stakeholder trust.

Do science based targets align with CSRD requirements?

Yes. The Corporate Sustainability Reporting Directive explicitly references science-based climate targets as the standard for credible decarbonisation strategies. Aligning with the Science Based Targets initiative framework ensures CSRD compliance and investor credibility simultaneously.

Getting Started: Three Essential Steps

1. Develop a Net-Zero Climate Strategy

Define your baseline emissions, identify decarbonisation levers (renewable energy, energy efficiency, supply chain transformation), and set realistic near-term and long-term targets aligned with the Science Based Targets initiative framework.

2. Plan Cost-Effective Climate Action

Use marginal abatement cost analysis to prioritise measures delivering both climate and financial returns. Renewable energy, energy efficiency, waste reduction, and supply chain optimisation typically offer the strongest business cases.

3. Adapt Your Business Model

Integrate climate considerations into product design, supply chain strategy, and operational investment planning. Companies that embed climate thinking into core business strategy are 2.5 times more likely to achieve sustainability goals (McKinsey, 2023).

Building Your Science Based Targets Action Plan

The path to validated science based targets requires structured planning. Consider engaging expert support to:

• Conduct emissions baseline assessments and scenario analysis

• Design sector-aligned reduction pathways

• Prepare SBTi submission documentation

• Establish governance and monitoring frameworks

• Integrate targets into business strategy and capital allocation

Fiegenbaum Solutions specialises in science based target development for startups, mid-market companies, and corporate portfolios. We support companies across the EU Taxonomy integration, Scope 3 emissions accounting, and materiality assessment to ensure your science based targets are not only validated but embedded into operational strategy.

Conclusion: Science Based Targets as Strategic Foundation

Setting science based targets is not a compliance exercise—it is a strategic positioning decision. Companies that develop credible, validated targets today gain competitive advantages in financing, customer relationships, talent attraction, and investor confidence. The Science Based Targets initiative provides the framework; your commitment and disciplined execution deliver results.

The global momentum is clear: over 4,000 companies have committed to science based targets, representing one-third of world market capitalisation. For German and European companies, the convergence of regulatory mandates (CSRD), investor expectations (SFDR, ESG due diligence), and customer demands makes the choice binary: lead with credible climate strategy, or fall behind in an increasingly ESG-conscious market.

Start now. Validate your targets. Drive measurable emissions reductions. Build long-term resilience.

Your competitive future depends on the climate action you commit to today.

About Fiegenbaum Solutions

Fiegenbaum Solutions is an ESG and sustainability consulting firm based in Hamburg, specialising in VSME reporting, climate risk analysis, and science-based target development. We have supported 300+ projects for companies and financial institutions—from mid-sized firms to Commerzbank, UBS, and Allianz.

Learn more about our sustainability consulting services or explore our resources on CSRD climate risk reporting, Scope 3 emissions accounting, and double materiality assessment.