How to Set a Net Zero Target as an SME: A Practical Step-by-Step Guide

Net Zero vs Carbon Neutral: Know the Difference

Before setting a target, understand what you are actually committing to:

• Carbon neutral: Your total emissions are balanced by purchasing carbon offsets. The atmosphere ends up with the same amount of CO2. This is an accounting position, not necessarily a physical reduction.
• Net zero: You reduce emissions as close to zero as physically possible, then offset only the unavoidable residual — using permanent carbon removal. This is a physical outcome.

Enterprise clients and CSRD auditors increasingly distinguish between the two. A carbon neutral claim backed only by tree-planting offsets is scrutinised far more harshly than a net zero pathway with verified annual reductions.

The Science Based Targets Initiative (SBTi) SME Route

The SBTi is the most credible framework for setting a science-based net zero target. Their SME route — designed for companies under approximately EUR 100 million in revenue — requires:

1. Commit: Submit a commitment letter via the SBTi website (free)
2. Measure: Calculate your Scope 1, 2, and 3 baseline emissions for a base year
3. Target: Set a 1.5°C-aligned reduction target — typically 42% reduction in Scope 1 and 2 by 2030 against your base year
4. Submit: Have SBTi validate your target (free for SMEs)
5. Report: Publish annual progress

The SME route does not require third-party verification of emissions data, which makes it accessible without a large audit budget.

Step 1: Choose Your Base Year

Your base year is the starting point against which you measure progress. Rules:

• Use the most recent year for which you have complete data
• The year should be representative — avoid years with unusually low emissions (e.g. pandemic year 2020)
• Most EU SMEs use 2022 or 2023 as their base year now
• Once set, you cannot change the base year without restating all prior years

Step 2: Calculate Your Baseline Emissions

Use DeCarbonOPS to generate your baseline Carbon Passport. This gives you:

For the SBTi SME route, covering Scope 1 and 2 is sufficient for target-setting. Scope 3 is encouraged but not mandatory.

Step 3: Set Your Reduction Target

The 1.5°C-aligned pathway requires cutting absolute Scope 1 and 2 emissions by at least 42% by 2030, against your base year. This is approximately 4–5% per year.

Example: A company with 100 tCO2e Scope 1+2 in 2023 needs to reach 58 tCO2e or less by 2030.

Your reduction roadmap should prioritise the highest-impact actions first:

1. Switch to a renewable electricity tariff (often cuts Scope 2 by 40–80%)
2. Improve insulation and heating controls (Scope 1 gas reduction)
3. Shift company fleet to hybrid or electric vehicles (Scope 1 diesel/petrol)
4. Introduce a business travel policy favouring rail over short-haul flights

Step 4: Register Your Commitment

Go to sciencebasedtargets.org, create a company account, and submit your commitment letter. SBTi will acknowledge it within a few weeks. Your company then appears on the SBTi website as "committed," which you can reference in procurement responses.

After setting your target, submit it for validation. For SMEs, validation is free and typically takes 2–3 months.

What to Tell Procurement Teams

Once you have a validated SBTi target or even a committed date:

"Our company has committed to a 1.5°C-aligned science-based target. We are targeting a [X]% reduction in Scope 1 and 2 emissions by 2030 against our [year] baseline of [X] tCO2e. Progress is tracked annually using GHG Protocol methodology and DEFRA 2023 emission factors."

This single paragraph satisfies the net zero question on virtually every procurement questionnaire in Europe.