Step 1a is divided into five tasks:

• Task 1 - Define your organizational boundary

  Your first task is to define your organizational boundary. This is a list of the business operations that fall directly within your company’s ownership or control, and thus under your responsibility, in the year in which you are completing your assessment. You may use one of three approaches to define the organizational boundary: financial control, operational control, or equity share.

  In the financial control approach, you account for the impacts associated with operations that you can direct (e.g., you have the right to the majority of benefits or retain financial risks and rewards); in the operational control approach, you account for operations where you can implement operating policies; and in the equity control approach you account for a percentage of the impacts, equal to the share of equity or economic interest you hold in the operations.

  If you have previously set climate targets with SBTi or have defined your organizational boundary for other sustainability initiatives that align with the Greenhouse Gas Protocol (GHGP), we encourage you to use the same approach for SBTN. As a reference, you can consult the GHGP’s guidance on how to define your organizational boundary.

  Output(s) of this task

  • List of business operations considered in your organizational boundary.

  Prepare for your target validation

  You will have to justify the approach chosen to define your organizational boundary and provide supporting documentation explaining your activities (such as organizational charts and annual reports).

• Task 2 - Identify your direct operations and upstream activities

  In Task 2, you list all the economic activities in your organizational boundary classified by the group-level codes defined by the International Standard Industrial Classification of All Economic Activities (ISIC) system. This inventory is simply referred to as your “direct operations [activities]” in the SBTN guidance. This inventory requires general (i.e., categorical) information rather than specific descriptions of what happens at each site.

  You will then use SBTN’s Materiality Screening Tool to automatically get a list of your (expected) upstream activities. This list is built from known economic input-output relationships between sectors and you should sense-check that each item applies to your company’s specific case.

  The first release of the SBTN methods does not cover any downstream activities, i.e., any economic activities and processes (such as distribution, consumption, and end-of-life) occurring after the sale of your goods and services. You may interpret and adapt the methods to address these parts of your value chains, but this is currently outside the scope of the SBTN methods and targets.

  Look ahead

  For Step 1b you will require operational and spatial data for all material pressures and activities in your value chains (e.g., volumes of goods and the places where they are produced). This will require you to trace (some of) your sourcing beyond Tier 1 suppliers. This information is not used in Step 1a, but you may start gathering this information already if it helps your data collection process.

  Output(s) of this task

  • Lists of standardized economic activities for your direct operations and for the operations of your suppliers.
• Task 3 - Identify high-impact commodities in your activities

  For your third task, you will refer to SBTN’s High Impact Commodity List (HICL), which is a compilation of commodities known to be major drivers of biodiversity loss, including those listed in the EU’s new Deforestation Regulation (EUDR). You will prioritize your data collection efforts for these commodities in later tasks.

  Check which of these commodities are present in your operations. For example, you may participate in their primary production as part of your direct operations or you may find them in your procurement if you source them for processing, manufacturing, distribution, or any other value chain activity. You must also indicate whether commodities such as soy and palm oil are embedded in animal feed in your value chains.

  You must report any high-impact commodity (HIC) in your value chains and indicate in which form (such as raw or processed) you produce or acquire them. The HICL includes a handful of commodities in different stages of transformation. For example, you will find both cattle and (cattle-derived) leather, and both iron and steel. Use the form that is most closely related to your activities.

  Record the list of HICs in your direct operations (if you do the primary production) and upstream (if you source the commodity).

  Output(s) of this task

  • Lists of HICs in direct operations (primary production) and upstream (sourcing).
• Task 4 - Screen for materiality

  In the fourth task, you screen each economic activity for its materiality based on the eight pressure categories required by SBTN: land use and land use change; freshwater ecosystem use and use change; marine ecosystem use and use change; water use; other resource use; greenhouse gas emissions; freshwater pollutants; and soil pollutants. You may include additional pressure categories, such as invasive species or air pollutants, but this is not required.

  Using the Materiality Screening Tool, select any standardized economic activity from the database and the tool will directly indicate its materiality against each pressure category.

  You must also consult the HICL to determine whether any additional pressure categories are considered material for your HICs (on top of those categories that are considered material at the activity level).

  Take note

  This screening reflects the expected materiality of the economic activity, based on global, sector average data, rather than of your company’s specific operations. It provides you with an indicative overview rather than a definite assessment.

  Output(s) of this task

  • Tables showing the expected materiality (Yes/No) of each economic activity (and HIC) against each pressure category.
• Task 5 - Refine the results to reflect your company’s activities

  In the fifth task, you can use data unique to your organization or operating context to justify that an economic activity in your value chain is significantly different from the global average results given by the Materiality Screening Tool due to different practices, processes, product choices, or regional context.

  In other words, you may argue that in your particular case, an activity should not be considered material despite the screening tool indicating otherwise. The opposite situation, where the screening tool indicates an activity is in general not material, but you consider it to be material in your particular case, is also possible. This is important because the materiality screening results will directly inform the scope of the data collection efforts in Step 1b and all subsequent steps of the method.

  Note that the screening is done at an activity-wide level, hence the entirety of your operations that fall within that activity classification must be different from the global average to justify changes across all pressure categories at the activity level. You must present all information to support your refinements as part of your target submission for validation.

  Although it will be rare, if the results indicate that one of your activities is not material on any of the eight pressure categories, you may exclude it from all following tasks in the process.

  Output(s) of this task

  • Tables with refined materiality results (Yes/No) of each economic activity against each pressure category.
  • Accompanying information justifying any changes from the outputs of the screening.