The Global Imperative to Set ESG Targets
In June 2023, the International Sustainability Standards Board (ISSB) published the inaugural IFRS Sustainability Disclosure Standards, comprising IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). Under these internationally recognised standards, companies are mandated to disclose sustainability and climate-related targets if they have established them.
As global adoption of the IFRS standards accelerates, setting ESG targets, such as aligning with science-based net-zero goals, has become a priority for companies aiming for lowered emissions and resource consumption, cost reduction, and sustainability leadership.
Why Should Companies Setting ESG Targets?
Establishing concrete ESG targets delivers five core strategic advantages:
How to Set ESG Targets: The SMART Approach
To ensure sustainability goals are realistic and achievable, companies should apply the SMART approach when setting ESG targets:
- Specific: Clearly define what you aim to achieve. (e.g., reduce Scope 1 and 2 GHG emissions by 30%)
- Measurable: Ensure progress can be quantitatively tracked with baseline metrics. (e.g., track the progress using GHG inventory data)
- Attainable: Set realistic goals based on operation control, available technology and budget. (e.g., allocate adequate capital for energy efficiency retrofits for lowered emissions)
- Relevant: Algin targets with core business strategies, material issues, and stakeholder priorities. (e.g., focus on energy conservation for manufacturing operations)
- Time-bound: Establish clear deadlines to maintain accountability. (e.g., achieve target reduction by FY2030)
