SBTi (Science Based Targets initiative) certification applications were once primarily pursued by large corporations, but the introduction of a simplified pathway for small and medium-sized enterprises (SMEs) has made it a realistic option for mid-size and smaller manufacturers with annual revenues below approximately JPY 5 billion. In Japan, domestic SME applications — including from mid-size manufacturers like Kyohatsu Kogyo (a metal press manufacturer) — are accumulating, and as major customers begin requiring SBTi commitments through supply chain engagement, the priority for addressing this requirement is rising.
What Is SBTi? — A Review of the Core Concepts
SBTi is an international initiative co-founded by the UN Global Compact, CDP, WRI, and WWF. It is the body that scientifically verifies and certifies whether corporate greenhouse gas reduction targets are "aligned with the 1.5°C or 2°C temperature rise limit that the Paris Agreement aims for." Being certified as a "Science Based Target (SBT)" provides a highly credible proof of decarbonization commitment to business partners, investors, and consumers.
As of end-2024, more than 8,000 companies worldwide and more than 700 companies in Japan have obtained SBTi commitments or certifications. The number of applications in Japan has surged since 2022, particularly as major suppliers such as Toyota, Hitachi, and Panasonic have begun requesting SBTi commitments from their primary suppliers, driving a significant increase in applications from mid-size and smaller companies.
Differences Between the SME Program and the Standard Track
Eligible company size
The SME program targets companies with 500 or fewer employees or annual revenue below EUR 50 million (approximately JPY 8 billion). The large majority of Japan's mid-size manufacturers fall within these thresholds. Eligibility conditions may vary based on capital requirements and relationships with group companies, so verification on the SBTi website is necessary. Subsidiary companies of large corporate groups may be evaluated on a consolidated basis with the parent company, so caution is advised.
Scope 3 requirements
The standard track requires detailed Scope 3 disclosure, but the SME program makes Scope 3 measurement and reduction target-setting optional in principle. This difference has the greatest impact on preparation effort, and SME-track companies can often reach submission 1–2 years earlier. For SMEs that find it difficult to build a Scope 3 measurement infrastructure, this relaxed requirement effectively lowers the barrier to entry.
Simplified target-setting
The SME track allows a choice between an absolute reduction target (reducing Scope 1 and 2 by a specified percentage within 5 years) or an intensity reduction target. There is no requirement to apply complex SBT methodologies such as the Sectoral Decarbonization Approach — targets can be set using the provided template. Since entering data into the SBTi-designated SME tool (a spreadsheet) completes the target calculation, reliance on external consultants is reduced.
Verification process
The standard track requires third-party verification at a cost, but the SME program uses a simplified self-declaration-based process. However, SBTi may conduct sample verification of submitted targets, and it is recommended to maintain documentation supporting the basis for emissions calculations.
Application Process and Required Preparation
The SBTi SME application generally proceeds in the following order. First, declare a "Commitment" on the SBTi website, and submit targets within 24 months. What is required at target submission are the base-year Scope 1 and 2 emissions and the calculation basis for the reduction targets.
Calculate base-year Scope 1 and 2 emissions
Convert electricity consumption (invoice-based is acceptable) and fuel consumption into emissions using the GHG Protocol. The base year should in principle be 2020 or later, and avoiding years affected by COVID-19 is the practical recommendation. Use the emission factors published by METI and the Ministry of the Environment (supplier-specific emission factors) for electricity. If there are multiple sites within the company, the consumption of all facilities must be aggregated.
Calculate the reduction target
The 1.5°C-aligned target is a benchmark of at least 42% reduction in Scope 1 and 2 by 2030 compared to a 2025 baseline (based on the latest SBTi guidelines). Verify feasibility by cross-referencing with specific energy efficiency measures and renewable energy procurement plans. Even if a target looks ambitious, it is not a problem as long as a realistic set of measures can be accumulated. Build an achievement scenario using a combination of energy efficiency investment, solar installation, and non-fossil certificate purchases.
Internal approval before declaring the commitment
An SBTi commitment requires a signature from management. Failing to submit targets after declaring the commitment will result in removal from the official list. Prioritize decision-making at the representative director or executive officer level and confirm resource allocation to the ESG manager. While the commitment declaration itself is free on the SBTi website, there is a fee for target submission and certification (as of 2024, a discounted fee applies for SMEs).
Application Costs and Required Resources
While the commitment declaration itself is free, there is a cost for target submission and verification. As of 2024, the SME application fee is set significantly lower than the standard track, with a benchmark of approximately EUR 1,000 (around JPY 160,000). Since fees are revised periodically, it is necessary to check the latest information.
In terms of internal effort, realistic benchmarks are approximately 40–80 hours for Scope 1 and 2 emissions calculation, and approximately 20–40 hours for target calculation and application document preparation. Companies that already calculate GHG emissions (e.g., those that have responded to CDP or the Ministry of the Environment GHG Protocol) can substantially reduce preparation effort.
Practical Examples from Japan
Kyohatsu Kogyo (a metal press manufacturer supplying automotive Tier 2/3) declared an SBTi SME commitment and was able to indicate "SBTi targets set" when responding to supplier survey forms from major automotive Tier 1 suppliers. While the direct impact on order volume is difficult to quantify, the company has publicly noted that evaluation scores on ESG questionnaires from business partners improved.
Other usage patterns include:
- European exporters: With growing cases of CSRD compliance driving requests from European business partners for emissions information, SBTi target-setting enhances the credibility of Scope 3 data provision.
- Public procurement: SBTi commitments are increasingly valued in tender cases under the Ministry of the Environment's Green Purchasing Law and the Ministry of Land, Infrastructure, Transport and Tourism's decarbonization construction initiatives.
- Financial institution relationships: A growing number of financial institutions offer preferential lending (green loans, ESG loans) to companies with SBTi commitments, in some cases reducing financing costs.
Companies with high transaction dependence on major suppliers
Major companies such as Toyota, Hitachi, Panasonic, and Sony are recommending or requiring SBTi commitments through supply chain engagement. Some companies are finding that applying has become effectively mandatory in order to maintain their position as a primary supplier.
Companies with a track record of exports to Europe
The impact of the CSRD (Corporate Sustainability Reporting Directive) is driving an increase in cases where EU-based business partners are requesting disclosure of climate targets from Japanese suppliers. An SBTi commitment is the most widely recognized response to this requirement.
Companies seeking to improve ESG rating agency scores
SBTi certification directly and positively impacts scores from rating agencies such as CDP, EcoVadis, and Sustainalytics. Particularly effective for companies targeting reduced financing costs through improved assessments from banks and investors.
Even for SMEs, the status of "application in progress" alone is increasingly sufficient to meet procurement evaluation criteria, prompting a trend of prioritizing the commitment declaration before completion of the full process. Since targets can be submitted within 24 months of the commitment declaration, the most resource-efficient approach is to declare the commitment first and use that window to build the Scope emissions calculation infrastructure.