The Science Based Target Initiatives (SBTi), which mobilizes the private sector to lead the fight against climate change, has launched a draft of its revised Corporate Net-Zero Standards V2. The SBTi Corporate Net-Zero Standard is a framework that helps companies set credible, “science-based” targets to achieve net-zero on the GHG emissions.
With the updated and improved version 2.0, SBTi aims to develop a robust and practical standard that enables more businesses achieve their climate targets. The new Corporate Net-Zero Standard focuses on being both pragmatic and progressive, introducing changes to the approach for all Scopes 1,2, 3 emissions. This draft is currently open for public consultation till 1st June 2025.
As global pressure to act increases, this revised version represents a critical opportunity for companies to strengthen their net-zero strategies. This article provides an in-depth analysis of the key changes proposed in the Draft Corporate Net Zero Standard V2.0.
The climate landscape is changing rapidly with updated regulations both within and outside EU. Reporting requirements are undergoing major revisions through Omnibus package for CSRD. At the same time, the Intergovernmental Panel for Climate Change (IPCC) has finalised its Sixth Assessment Report (AR6), which brings together contributions from hundreds of scientists worldwide to provide a comprehensive assessment of climate change.
Furthermore, according to the UNEP’s latest Emissions Gap Report, we are still on track for a 2.6° C rise this century. Many companies are struggling to meet their targets for achieving carbon neutrality by 2030. Amid this shifting landscape the SBTi has introduced a revised version of its Corporate Net-Zero Standards to shift the focus from ambition to action and help businesses more effectively track and report their carbon footprint.
The new validation model uses an end-to-end framework, marking a significant shift from the unified criteria in V1 to new categories based on company size and geography, making it more globally inclusive. Category A will cover large and medium-sized companies operating in higher-income geographies. There will be no concession for such companies reiterating SBTi’s focus on climate action. SMEs operating in lower income geographies are put in Category B and will enjoy much more flexibility. This will motivate the SMEs that have never previously submitted for “Target Validation”
Another important change observed in V2 is the splitting of the Scope 1 and Scope 2 targets. Previously, Scope 1,2 and 3 targets were combined. Now, separate targets are required for each scope. The main purpose behind this split is to improve transparency, as Scope 1 emissions could previously be hidden behind the large numbers of Scope 2.
Scope 1 (Direct Emissions) : Companies have to report annual Scope 1 emissions starting from 2020, tracking cumulatively emissions over time. Scope 1 emissions come from sources completely in control of the company. Hence, 100% of these emissions should be covered in the target.
Scope 2 (Indirect Emissions) : Companies must set a location-based target based on grid-average emissions (CO2 emissions per kWh of all electricity generated on a specific power grid). Additionally, they can set a target based on purchased renewable electricity (market) or opt for a zero-carbon electricity target. This new category allows a broader approach, inclusive of nuclear and hydro energy. Targets must cover 100% of Scope 2 emissions. In the past, companies often bought cheap, unbundled RECs (Renewable Energy Certificates) or GOs (Guarantees of Origin), which did not contribute to the decarbonising the grid they used. Hence, SBTi now proposes geographical and temporal alignment (the location and time of energy claims must match the actual energy use) to prevent greenwashing.
To encourage science-based Scope 3 targets and to prompt the companies to address their full value chain impact, SBTi has tightened the rules around the Scope 3. Companies will no longer be able to use the loopholes in Scope 3 by making weak or indirect claims. The Draft Corporate Net-Zero Standard V2 proposes that targets must now align with 1.5°C pathway. In the earlier version, companies could align the Scope 3 emissions well below 2°C trajectory. Where previously 67% of coverage was required, companies are now obligated to cover atleast 90% of the total Scope 3 emissions within their target boundary. For large emitters (eg. tech, pharma, consumer goods, fashion, automotive), it will be imperative to target all upstream and downstream emissions.
The target setting format has undergone critical change: separate, explicit Scope 3 targets are mandatory highlighting clear accountability. Moreover, companies have to set both near-term and long-term Scope 3 targets. For Category A companies, Scope 3 emissions are mandatory whereas for those in Category B, these emissions are optional but recommended.
A new option of “Alignment Target Setting” has been introduced, allowing companies to set targets in which their customers and suppliers are in line with SBTi approved pathways (scientifically derived emission reduction trajectories). This provision is intended to push suppliers to have their own science-based targets in line with the 1.5°C goal.
Additionally, companies cannot count offsets or carbon credits towards Scope 3 target achievement. This measure also contributes to the prevention of greenwashing.
In the journey towards Net-Zero, Residual emissions represent the final, smaller share to be addressed. Companies cannot declare net-zero while still emitting large scale residual emissions. The neutralisation of residual emissions is a vital step in validating net-zero.
Companies are advised to use carbon removals, such as direct air capture, soil carbon sequestration, afforestation, to neutralise these emissions in their value chain. These removals must conform with the mitigation hierarchy. In the V1, SBTi allowed 5-10% residual at net-zero. For V2, the percentage has not yet been finalised. However, it is likely that SBTi will push for lower residuals wherever possible. For SBTi, direct decarbonisation remains priority, and it advises against heavy reliance on removals.
Typical Mitigation hierarchy in SBTi: prioritised order of actions for companies to follow
The Draft Corporate Net-Zero Standard V2 sets stronger expectations for Beyond Value Chain Mitigation (BVCM), while retaining its optional status. Companies are now encouraged to view BVCM as an integral part of their net-zero journey. It remains clear that BVCM is meant to complement decarbonisation, which continues to be the first and foremost priority. Additionally, the draft provides clarity on acceptable types of mitigation interventions, including funding activities such as nature-based removals, engineered carbon removals, and high-integrity emission avoidance projects in sectors or regions outside their own footprint. SBTi encourages the use of carbon credits to support action BVCM. Engagement with BVCM is emerging as an indicator of serious commitment among top players.
Although decarbonisation is the main principle that SBTi advocates for achieving net-zero, it does not overlook the importance and necessary role of carbon credits in the journey. The message from SBTi is plain and simple for the companies: Carbon credits cannot be used to meet science-based targets, but they must be used to neutralise residual emissions at net-zero and for BVCM. V2 emphasizes on high quality and integrity of the carbon credits - ones that are verifiable and permanent.
SBTi’s New Corporate Net-Zero Standard V2 sharpens climate accountability for businesses. By clarifying the rules around Scope 3, introducing new Full cycle, elevating expectations around residuals and BVCM, it reinforces that deep decarbonisation remains central focus. Emissions reduction is non-negotiable and it should be rightly paired with credible removals. V2 makes it clear that credible net-zero strategies must extend beyond the company boundaries, engaging the full value chain and supporting global mitigation effects.
The draft of revised standard maintains a firm emphasis on emissions reduction while exploring incentives to scale up climate finance and carbon removals. At the same time, it opens doors for companies in emerging economies by simplifying target setting, and introducing a more inclusive validation model to recognise those demonstrating real ambition and measurable progress. SBTi’s V2 intends to empower businesses to take bolder, more impactful steps toward achieving net-zero, driving real change across industries and reinforcing the need for urgent and collaborative climate action.
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