Step 1b is divided into five tasks

• Task 6 - Select business units for target setting

  In Task 6, you may use the business unit approach (BUA) to select discrete parts of your business and focus the rest of the target-setting process (i.e., Steps 1b, 2, and 3) on those, rather than the entire enterprise.

  The BUA was designed with large multinationals and conglomerates in mind, to facilitate target setting when not all parts of the business might be equally ready to set targets, for example due to lack of value chain data. It is also appropriate for subsidiaries and units of companies that have a very decentralized decision-making structure, when leadership from these devolved segments of the organization want to set science-based targets before there is complete buy-in from the parent company.

  You must identify and select business unit(s) with sufficient operational autonomy and/or support from the C-suite to allow target setting. These business units may not be defined solely for SBTN, instead they must be pre-existing structures in your organization, with, for example, separate operating budgets, profit and loss statements, and financial reporting.

  The selected business units should ideally have a high impact on nature relative to other units, as shown by the materiality screening results of the economic activities of those units. You may also justify your choice by data readiness or capacity to act. Once you have made your selection, extract the outputs of Task 5 related to those business units and proceed to the next tasks of the process. Keep in mind that your target-setting claims will be limited until you have set targets for your whole business, to provide public transparency about the extent and coverage of your targets.

  Prepare for your target validation

  You will need organizational information to demonstrate the feasibility for the chosen business unit(s) to set targets and that these were already functioning parts of your company. You will also have to indicate the size of the chosen business unit(s) relative to the excluded ones and a map of their respective materiality screening results.

  Output(s) of this task

  • List of selected business units, the rationale for their selection, and justifying evidence.
  • Table of economic activities, their materiality results (Yes/No for each pressure category), and their size relative to the whole enterprise, for the selected business units.
• Task 7 - Map your value chain activities and locations

  In Task 7, you will create a map of your value chain activities, including a description and their locations and, for your upstream segment, the volumes of procured goods and the locations where these are produced and transformed.

  Indicate all of your direct operations activities, i.e., all those within your organizational boundary. This includes activities happening in your own sites as well as regular off-site activities (especially for sectors such as fishing, extraction, construction, and transportation). Indicate all the locations of these activities using subnational data or, ideally, the most precise scale possible.

  For your upstream, you only need to focus on your production inputs. These are the goods you buy to process, transform, integrate in your products, or resell—this includes raw materials, packaging, and inputs that may become waste or byproducts, as well as inputs such as fertilizers and pesticides (for agriculture) and explosives and solvents (for extraction). All other procurement, such as capital goods, services, and other goods that are not used as production inputs, are out of scope of the assessment. Use your company’s procurement and inventory data to build a list of your production inputs. Match these goods against the upstream value chain activities provided by the Materiality Screening Tool for your sector (in Task 2), adjusting the results as appropriate. You should use the value chain activity responsible for the most recent production or transformation stage leading to the product you sourced.

  Register the total volumes (measured in tonnage or an equivalent metric) associated with each of your production inputs in a typical year. Then, referring to the HICL, estimate the volumes of HIC-derived components in your procurement, disaggregating per commodity and indicating the (combined) total volume.

  You will then identify the locations of certain value chain stages that will be the focus of the assessment.

  ⇒ For HIC-derived [components of] production inputs, the relevant value chain stage is the most impactful production or transformation stage, for each material pressure category, in the upstream life cycle of the commodity.

  For some HICs, the relevant value chain stages may differ depending on the pressure categories. For example, for leather, processing may be relevant for water pollution, while primary production (for the production of the cattle hides) may be relevant for land use and land use change. In general or in absence of information, you should assume that the primary production stage will be the most impactful one.

  ⇒ For all other [components of] production inputs, it is possible to assess any value chain stage—this can be the most impactful one (as with HICs) or any other, such as the most recent processing or transformation stage.

  Before you proceed to the next task, make sure you have identified the relevant value chain locations for at least 67%, by volume, of [the components of] all your production inputs (including HICs) and 90%, by volume, of the (combined) total volume of HIC components, including all EUDR-listed commodities.

  Refer to the International Union for Conservation of Nature (IUCN)’s Red List of threatened species, and to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)’ list of species subject to international trade regulations and identify whether any of these species are present in your operations. For example, you may participate in their extraction as part of your direct operations in sectors such as fisheries or forestry. You may also find them in your upstream value chain if you procure them, either in raw or processed form, as an input for your activities. This may happen in industries such as food, wood and paper, and chemicals and pharmaceuticals, or in any industry that participates in these value chains, as would be the case for transportation and logistics, or retail.

  Record the list of species from the IUCN or CITES lists present in your operations.

  Look ahead

  You will be able to complete Steps 1 and 2 with approximate or estimated locations, but to proceed to Step 3 you may require more precise location data. Your location data will inform your pressure and state of nature assessments (Step 1b, Tasks 8 and 9), determine your target boundaries (Step 2a), and influence your ranking and prioritization (Steps 2b and 2c), so it is important to use the best data possible from the beginning. You should, in all cases, use the most precise location levels available and aim to improve your traceability across your value chains, to improve your capacity to set targets in accordance with the Step 3 guidance.

  Output(s) of this task

  • Tables of direct operations activities, their description, and location; and tables of volumes procured of production inputs, their description, breakdown into relevant components (such as HIC content), and locations for the assessment.
  • List of species from IUCN and CITES lists present in value chains (direct operations and upstream).
• Task 8 - Quantify the environmental pressures of your activities

  In the eighth task, you will quantify the pressures associated with the activities in your direct operations and with the production inputs in your procurement. This means you will estimate how much land or water was used, or the amount of pollutant emissions generated, in these value chain stages. You only need to quantify the pressures that were shown to be material in Step 1a, Task 5, using these indicators:

  Material pressure category

  Pressure indicator

  Land use and land use change

  Both required for each location:

  • Land use (area and description of land management practices)
  • Land use change (by ecosystem and land use type, since 2020 or earlier)

  Water use

  Either one required for each location, possible to mix across locations:

  • Water withdrawals (by source)
  • Water consumption (where water returns match the time, space, and quality of the withdrawals; by source)

  Soil pollutants

  Required for each location:

  • Nutrient application to soils (from fertilizer application)

  Optional for each location:

  • Nutrient loading to soil via solid waste (e.g., from organic waste)
  • Other pollution loading to soil (e.g., acidification or toxic chemicals)

  Soil pollutants

  Both required for each location:

  • Nutrient loading to freshwater via soil (ideally separating nitrogen and phosphorus)
  • Nutrient loading to freshwater via wastewater (ideally separating nitrogen and phosphorus)

  GHG emissions

  You are required to follow SBTi target-setting guidance.

  How can you quantify your pressures?

  There are two types of approaches: measurements and (model-based) estimations. Measuring means generating the values yourself, for example from sensors, stream gauges, maps, or satellite data. You should always measure your pressures if you have the data and capacity to do it, as it will facilitate target setting and implementation in Steps 3 and 4. You can also estimate the values using pre-existing databases and tools, such as life cycle analysis tools or publicly available statistical data. These models will generally rely on input data such as the production volumes of an activity, so you will need your procurement data. You can always use estimations to complete Task 8, but you should note that this will limit your capacity to complete Steps 3 and 4 and, in some cases, you may have to recalculate your pressures with measurements to proceed with the process.

  If a given activity of volume has zero or near zero associated pressures for a particular pressure indicator, you must still report these values. You should use tools appropriate for your activities, for example those that are tailored to your sector or geographic location. The SBTN Step 1 Toolbox includes a number of recommended tools that can be used in this assessment. Note that if you use an estimation tool that provides aggregated pressure data for the whole life cycle of a product (i.e., cradle-to-grave) you will need to attribute all these pressures to the value chain stage you are assessing instead of allocating only a fraction (i.e., you are required to overestimate your pressures).

  For each pressure category (each calculated separately), Task 8 will be complete when you have quantified pressure indicators for:

  • 100% of the direct operations activities;
  • at least 67% by volume (tonnage) of your production inputs, including content from HICs; and
  • at least 90% by volume (tonnage) of your HICs, including 100% of EUDR-listed commodities.

  Output(s) of this task

  • Tables from Task 7, complemented with pressure indicators for all activities.
• Task 9 - Assess the state of nature in each geographical location

  Finally, in the ninth task of Step 1 you will complement your environmental pressure estimates with information on the state of nature for each of the locations included in Tasks 7 and 8.

  State of nature indicators describe how healthy or fragile a location is, which helps us understand how serious a given pressure can be for that location. The SBTN methods use two types of state of nature indicators:

  ⇒ Pressure-sensitive state of nature (SoNP) indicators are those that describe (generally abiotic) environmental conditions that are directly affected by the pressures. You have to use those that reflect the material pressure categories of the value chain activities you are assessing in a given location:

  Material pressure category

  SoNP indicators

  Land use and land use change

  Ecosystem extent and ecosystem intactness/integrity (ecosystem structure, function, and composition)

  Water use

  Surface water flows, as defined by Hogeboom (2020) or by SBTN’s Unified Water Availability Dataset, depending on the spatial resolution

  Optional: Groundwater levels

  Soil pollution

  Nutrient pollution levels in soil or other soil pollution indicator (if nutrients are not relevant)

  Water pollution

  Nutrient pollution levels in freshwater (instream nitrogen or phosphorus concentration), as defined by McDowell (2020) or by SBTN’s Unified Water Pollution Dataset, depending on the spatial resolution.

  ⇒ Biodiversity state of nature (SoNB) indicators describe the state of biodiversity at the levels of species and ecosystems and of nature’s contributions to people (NCP). As biodiversity is affected by all pressure categories, these indicators provide a holistic reference of the state of the environment in a given location that complements all the pressure-sensitive indicators.

  You must assess one ecosystem-level and one species-level indicator, and can optionally assess NCP indicators. Noting that some SoNB indicators only capture terrestrial or freshwater biodiversity, you must use those that are relevant for your activities and pressures. For example, population abundance of freshwater species (SoNB) would be relevant to complement the indicators of water withdrawals (pressure) and water availability (SoNP).

  Use the tools in the SBTN Step 1 Toolbox (or other tools meeting SBTN data quality criteria) to check the state of nature values for each location in your direct operations and upstream.

  Output(s) of this task:

  • Tables from Task 8, complemented with SoNP indicators matching the material pressure categories for each activity and at least two SoNB.