Science-Based Target Setting for the Telecom Sector
In 2015, the Science Based Targets Initiative (SBTi) was launched to help companies align greenhouse gas (GHG) reduction with climate science to avert the disastrous impacts of climate change and provide a resource for peer benchmarking. Now, with over 3,336 companies that collectively hold a third of the global economy participating, the initiative has reached critical mass to become the global standard for corporate emission reduction targets. Having a proper overview of science-based targets (SBTs), how they work, and why they matter is crucial to taking the first steps to join the momentum and future-proof your business. However, a general understanding of science-based target setting is no longer enough, as a growing facet of science-based targets is their sector-specific orientation.
Supplemental guidance containing additional frameworks, methodologies, and requirements is provided by the SBTi for a growing number of sectors, including Aviation, Apparel, Financial Institutions, Power, and Information and Communication Technology (ICT). Between this guidance and an analysis of what company SBTs in a specific sector look like, a company can derive much information on how to set SBTs that will be successful for them, too. A deep dive into the Information & Communication Technology (ICT), also referred to as Technology, Media, and Telecom (TMT), sector provides a case study of how useful this information can be.
The TMT Sector at Large
The Technology, Media, and Telecom sector was valued at $1,657.7 billion in 2020, with a 5% annual growth rate expected until at least 2028. An electricity-intensive sector responsible for 2.6% of total global emissions, it has historically managed to maintain a stable carbon footprint despite massive industry growth due to constant energy efficiency improvements.
Already a leader in climate-related disclosures, the telecommunications sector is also an active participant in the SBTi, with more than 84 companies setting or committing to set SBTs. These companies are at the forefront of facing the climate-related risks and opportunities that exist in their sector.
TMT Sector Climate-Related Risks and Opportunities
Prominent among the risks and opportunities in the TMT sector are concerns about network reliability, increasing costs of power, continuing network efficiency, and possibilities for dematerialization. In terms of risk, increasingly severe weather events could pose challenges to many areas of TMT, with extreme heat triggering power outages, strong storms downing utility lines, and floods disabling central offices. These interruptions in service provision have the potential to interrupt not just daily and office life, but also emergency communications and company reputation. A continual increase in data demand is not anticipated to help this. The overall increasing cost of power due to increased electricity demand may place a further strain on TMT companies.
Despite these challenges, forward-thinking TMT companies have much to gain from managing their GHG emissions and setting science-based targets.
Pursuing avenues of energy efficiency in Information and Communications Technology (ICT) networks and products, encouraged by climate concerns, will continue a historic trend that has previously served the TMT sector well. Additional opportunities to increase resiliency from raw material shortages and ecologically damaging raw material acquisition through dematerializing products could also favor the proactive TMT company. Recognizing that one way to lean into these opportunities, while also reducing risk, is for TMT companies to set SBTs, the SBTi has released sector-specific guidance for the telecommunications sector.
Science Based Targets: ICT-Specific Guidance
GHG reduction targets set with the SBTi for the ICT sector must follow an absolute contraction approach, as the goal is for all sector companies to converge on zero emissions by 2050. The appropriate annual rate of reduction is outlined by sub-sector:
Data centers operators: 53% reduction by 2030
Mobile networks operators: 45% reduction by 2030
Fixed networks operators: 62% reduction by 2030
This parallels the SBTi-directed decarbonization of the power sector since the electricity-intense nature of the TMT sector means most of its emissions originate in the power it uses. This same electricity-intense nature is why TMT companies should include Scope 3 emissions in their target setting; in this sector, the SBTi mandate that any company whose Scope 3 emissions cover more than 40% of total emissions must include them in the target setting almost always applies.
Decarbonization Strategies For TMT Companies
For the TMT sector to achieve this decarbonization pathway, three mechanisms are envisioned:
Energy Efficiency Improvements
As mentioned previously, the stability of the TMT sector’s stable carbon footprint has resulted primarily from improvements in product efficiency throughout time. Continuing network modernization through power-saving features, smart devices, lighting and heating system updates, and other means of efficiency enhancement is expected to play a large role in carrying TMT companies to their final target. However, exploding data demand and ever-increasing technology usage mean that this mechanism alone cannot deliver the results needed to avoid disastrous climate changes.
Renewable Energy Transitions
To achieve zero emissions by 2050, emissions from electricity in the TMT sector must be eliminated. Connected to the broader greening of the grid, Renewable Energy Credits (RECS), Power Purchasing Agreements (PPAs), and on-site renewable energy generation can be utilized to reduce company emissions. Some companies, such as T-Mobile, have already achieved 100% renewable energy.
Value Chain Reductions
Much of TMT emissions result from downstream use and upstream production. To address these, carbon consciousness among consumers and dematerialization from designers are needed. Incentivizing customers to reduce data usage, increase product recycling, and shift consumption patterns to blunt demand peaks will further any company on their downstream reduction journey. Meanwhile, the continual trend of digitalizing anything that does not need to be material, such as SMS cards, will reduce emissions associated with production, while also reducing TMT risk to material shortages.
Current TMT Science-Based Target Trends
What kind of trends do TMT company SBTs follow?
Analysis of TMT company targets as listed on the SBTi website highlight multiple patterns for any TMT company to be aware of as they discern their own SBTs. For example, 2019 is the most common baseline year chosen, cohering awareness of COVID’s impact on abnormalizing emissions with SBTi guidance to pick the most recent year for the baseline. In addressing emissions, 84% of TMT companies with approved SBTs covered Scope 1, 2, and 3 emissions, with an additional 9% of companies covering those along with supplier engagement goals. 7% of TMT companies opted to set only supplier engagement goals rather than Scope 3 emission reduction goals. Most shoot for 2030 as a target year, and over a third have committed to SBTi’s new Net Zero Standard.
TMT Progress in Science-Based Targets
Progress that the TMT sector has made against its science-based targets shows that its companies understand avoiding climate change will take more than words. Of TMT companies that have set SBTs and reported against them, an average of 63% goal completion has occurred for Scope 3 and supplier engagement goals. Though Scope 1 and 2 targets are moving more slowly, with the average being 35% to goal completion, companies are making progress there too. This trend of Scope 3 emission reduction achievements outpacing Scope 1 and 2 reductions is unusual, pointing to how potent this category of emissions is for the TMT sector.
Setting Your Own Science-Based Targets (SBTs)
As this case study has revealed, many TMT companies are taking advantage of the opportunities available in GHG reduction through setting and succeeding at SBTs in a sector-specific way. However, SBTs aren’t for TMT companies alone. The SBTi has released guidance for the Apparel & Footwear, Aviation, Financial Institutions, ICT, and Power sectors, and is in process of developing guidance for many others, including the Buildings, Cement, Chemicals, Forest, Land & Agriculture (FLAG), Oil & Gas, Steel, and Transportation sectors. Even without sector-specific guidance, any company can follow the broader SBTi guidelines laid out in their step-by-step documents.
If you want to join the momentum and set a science-based target today, KERAMIDA can help. Our Sustainability & ESG Consulting services aid companies in designing and delivering on the SBTs that are right for them. If you are interested in how we can help you succeed, please contact us or call today at (800) 508-8034 to speak with one of our sustainability consultants.