The Science Based Targets initiative (SBTi) has released a draft update of its Corporate Net-Zero Standard. This framework helps companies set and reach science-based emissions reduction targets.
The 132-page document, Corporate Net-Zero Standard Version 2.0, shares important updates. These changes focus on flexibility, accountability, and aligning corporate actions with global temperature goals.
The draft is open for public feedback until June 1, 2025, after which it will undergo further revisions before final approval.
SBTi Chair Francesco Starace emphasized the importance of the net zero standard overhaul, noting:
“The draft standard addresses complex, emerging issues and lays the foundation to enable more companies to move further and faster towards net zero. Working hand-in-hand with stakeholders across the ecosystem to seek and consider a diverse range of views, we aim to produce a standard that is both rigorous and practical, and works for businesses and the planet. With a limited carbon budget left, this is more important than ever.”
The Major Revisions in SBTi’s Net-Zero Standard
The new draft has several key changes. These include Scope 3 emissions accounting, carbon removal targets, and governance expectations.
Stronger Requirements for Scope 3 Emissions
Scope 3 emissions, which cover indirect emissions from a company’s value chain, have long been a challenge for corporations. Over half of the companies surveyed by SBTi said Scope 3 is their biggest hurdle to reaching net zero. The updated draft proposes new rules for this emission:
- Large companies, those earning over $450 million, must set Scope 3 targets. This rule applies no matter how much they contribute to total emissions.
- Businesses should identify high-emission activities. These should account for at least 1% of their Scope 3 footprint or exceed 10,000 metric tons of CO₂ annually.
- The old fixed-percentage rules for Scope 3 targets are gone. Now, there’s a flexible system that highlights high-impact emissions categories.
- Companies need to use their influence to make sure top suppliers set net-zero targets. This can be done through commitments to cut emissions or by using procurement practices that align with net-zero goals.
This approach seeks to balance what is doable and what is ambitious. It helps companies focus on the biggest sources of emissions in their value chains.
New Approach to Carbon Removal Targets
The draft also sets carbon removal targets to help reduce residual emissions. Companies can add high-integrity carbon removal efforts to their path toward net zero. Three pathways are under consideration in the updated standard:
- Mandating carbon removal targets alongside emissions reduction commitments.
- Providing recognition for voluntary carbon removal efforts in corporate strategies.
- Allowing flexibility in how companies address their residual emissions.
This proposal shows a significant change. It aims to include more carbon removal solutions in corporate net-zero strategies. This shift could boost investment in technologies like direct air capture and nature-based solutions.
Tighter Governance and Monitoring
To enhance credibility and accountability, SBTi is introducing stricter governance measures:
- Large companies must set net-zero targets within 1 year of commitment, down from the previous 2-year timeframe.
- Organizations will be subject to random audits to verify compliance.
- Companies should check their baseline emissions every year. They need to update their targets if big changes happen, such as mergers or acquisitions.
- A formal climate transition plan must be published within 12 months of target validation.
These measures aim to prevent greenwashing and ensure that companies remain on track to meet their commitments.
What Is the Potential Impact on Carbon Markets?
The new SBTi standard will likely impact voluntary carbon markets, corporate sustainability plans, and rules.
Potential Boost for Carbon Credit Markets
One of the most debated aspects of the revised standard is its evolving stance on carbon credits. SBTi is looking for new ways to include Beyond Value Chain Mitigation (BVCM) in offsetting Scope 3 emissions, even though its use is still limited. This idea lets companies fund emissions reduction projects beyond their own operations. These include reforestation or carbon capture.
If SBTi accepts specific high-integrity carbon credits, demand may rise. This could lead companies to fund big mitigation projects outside their immediate operations. However, concerns remain about ensuring the integrity and permanence of these credits.
Implications for Corporate Climate Strategies
The proposed changes mean companies can’t just focus on overall emissions targets anymore. They need to take a more strategic and data-driven approach to manage emissions. Businesses will need to keep in mind these things:
- Improve supply chain transparency and engagement to meet stricter Scope 3 requirements.
- Invest in renewable energy and zero-carbon electricity procurement.
- Consider carbon removal projects earlier in their net-zero planning rather than treating them as a last resort.
Pressure on Regulators to Align Standards
As SBTi’s framework gets stricter, regulators might feel pressure to match their policies to the standard. This could lead to:
- Stricter mandatory reporting requirements for large corporations.
- Increased scrutiny of corporate climate claims and carbon offset use.
- Greater integration of voluntary carbon market mechanisms into national and regional climate policies.
The Key Challenges and What Comes Next
The proposed updates are a step forward for corporate net-zero strategies, but challenges remain:
Balancing ambition and feasibility can be tough. Some businesses might find it hard to meet the new rules, especially when it comes to Scope 3 emissions tracking.
Ensuring high-integrity carbon removal. The effectiveness of proposed carbon removal targets depends on rigorous verification and permanence criteria.
Industry adaptation. Companies will need time and resources to adjust to the new reporting and compliance standards.
SBTi is currently accepting feedback from corporations, NGOs, policymakers, and other stakeholders until June 1, 2025. The team will publish a second draft after this consultation phase, and they expect to receive final approval by 2026.
Companies that set new near-term targets in 2025 and 2026 can use the current Corporate Net Zero and Near-Term Criteria methods. However, from 2027 onward, all targets must follow Version 2.0.
SBTi’s updated net zero standard marks an important step in corporate climate governance. The new framework seeks to speed up real climate action. It does this by strengthening Scope 3 requirements, adding carbon removal strategies, and boosting accountability.
The standard has challenges, but it can greatly impact corporate sustainability and global carbon markets. Businesses need to get ready for these changes so they can stay credible as part of the global move to net zero.
