Building a credible climate target: What to consider before making a commitment

A credible climate target starts with understanding how your organisation operates, where its greenhouse gas (GHG) emissions arise and how those emissions can be reduced. Setting a percentage reduction or target year is only one part of that process.

Before making a commitment, you need a clear picture of your emissions profile, the factors that will influence your target, the reductions that may be achievable and the frameworks that could shape your approach. Doing this work upfront can help ensure the target reflects your circumstances and is backed by a credible plan.

Prefer to watch?
Watch our Setting metrics and targets that matter webinar, which covers the key considerations discussed in this article.

Start with your emissions profile

Climate target setting begins with having a clear picture of your current GHG emissions. This means establishing the organisational and operational boundaries of the GHG inventory, measuring emissions and identifying where they arise across the business and value chain. Having a reliable baseline helps identify the most significant sources of emissions and informs where to focus your target. Without reliable data, it's harder to set targets and measure progress consistently.

If you already have a GHG inventory, focus on what the data tells you. Look at your main emissions sources, any gaps in the information and which activities your target should cover.

Understand what will shape your climate target

Your emissions are not the only factor to consider. The climate policies, regulations and commitments that apply in the countries and jurisdictions where you operate may influence how your target is designed. Expectations from customers, investors and other stakeholders may also shape the level of ambition and approach you take. Understanding these influences, alongside your reporting requirements, can help clarify why you are setting a target, how ambitious it should be and what you expect it to achieve.

For Australian subsidiaries within a larger corporate group, this includes understanding whether the organisation falls within a parent company’s target boundary, what contribution is expected from the Australian operations and how the target should be reflected in local reporting. ASIC’s review of the first year of mandatory sustainability reports found that disclosures about group-level climate targets needed improvement.

Voluntary frameworks may also shape your approach. For example, an organisation may determine that independent validation through the Science Based Targets initiative (SBTi) is appropriate, based on its objectives and stakeholder expectations.

Assess potential decarbonisation pathways

The opportunities available to you will depend on your industry, operations and value chain. Consider relevant sector decarbonisation pathways, where meaningful reductions are possible in your own operations, and where progress will depend on suppliers or others you work with.

While a detailed delivery plan may not yet be in place, there should be a reasonable understanding of the actions, technologies and dependencies that could support delivery. This can help test whether the proposed targets are achievable, as well as identify any operational, financial or strategic changes that may be required.

Define what the target means

A statement such as “net zero by 2050” or “reduce emissions by 2030” doesn't explain the full commitment. If you say “net zero by 2050”, your stakeholders should be able to understand exactly what that commitment means. Be clear about which emissions your target covers, the baseline you will measure progress against, when you aim to reach the target and how you will track progress. Explain whether you aim to reduce total emissions (an absolute target) or emissions relative to a measure such as production (an intensity-based target). Where relevant, also explain how carbon credits will be used in meeting the target.

For more details on the technical steps involved in developing a GHG target, read BDO's Setting climate-related targets article.

Decide whether SBTi validation is appropriate

Independent validation through SBTi may be worth considering, depending on what you want your target to achieve and the expectations of your stakeholders. SBTi’s Corporate Net-Zero Standard provides a framework for companies setting science-based net-zero targets. Version 2.0 has now been published, with changes that place greater emphasis on implementation and ongoing progress assessment.

As SBTi transitions from Version 1.3.1 to Version 2.0, check which requirements will apply based on when you expect to submit your target. More importantly, consider what validation would add to your climate strategy. Does it align with your objectives and stakeholder expectations, and is your business ready to meet the requirements that come with it?

Importantly, validation is only one part of the process. The target also needs to be supported by appropriate governance, information and implementation capabilities to monitor progress and inform decision-making.

Consider how the target will be reported

Target setting also needs to be considered in the context of Australia’s mandatory sustainability reporting requirements. The AASB S2 Climate-related Disclosures reporting standard doesn't require an organisation to set a climate target, but where targets have been set, or are required by law or regulation, relevant information about those targets must be disclosed.

ASIC’s review of the first sustainability reports lodged for 31 December 2025 gives an early indication of how organisations are reporting their targets. Of the organisations in ASIC’s sample, 55 per cent disclosed some kind of climate-related target, although only a small proportion reported targets aligned with science-based criteria.

ASIC's review also shows why it's important to identify targets required by law or regulation. For example, some organisations covered by Australia’s Safeguard Mechanism had not identified the mechanism as a climate-related target. This reinforces the need to consider both voluntary commitments and legally or regulatory-required targets when assessing reporting obligations.

Treat target setting as the beginning, not the end

Setting a target is one decision. Delivering it could require years of operational, investment and behavioural change.

Once you’ve made the commitment, bring it into the way your business plans, invests and makes decisions. Regularly checking progress can help you understand what’s working, where delivery is proving difficult and whether the assumptions behind your target still hold.

A credible target isn’t just one you can publish. It’s one your organisation understands how to work towards.

How BDO can help

BDO’s Sustainability Reporting team can support organisations at each stage of climate target setting, including understanding their emissions profile, assessing decarbonisation pathways, developing targets, navigating relevant frameworks, and establishing processes to monitor and report progress.

Please contact us to discuss your approach to climate target setting.