The Science-Based Targets Initiative (SBTi) is the premier greenhouse gas (GHG) emission reduction target setting organization, having guided 10,000+ companies set their ambitions to limit global warming to 1.5˚C by mid-century. After some internal conflict in 2024 and a change in leadership in January, SBTi has released a draft of Version 2.0 of their Corporate Net-Zero Standard (CNZS) for public consultation. The SBTi anticipates that, starting 2027, companies will use this new version to set new near-term and long-term targets.
This release comprises the most substantial and comprehensive set of changes made to the SBTi framework since its inception in 2015 and represents a fundamental shift in how companies would approach their decarbonization journey. It’s not just about setting targets in line with a climate goal anymore — it’s about enhanced accountability and making sure ambition aligns with real-world performance.
The updated framework reshapes how companies tackle value chain decarbonization, adds much-needed clarity on what actually counts toward meeting targets (including long-overdue guidance on residual emissions), and introduces new requirements for detailed Net-Zero transition plans. With all this at play, companies need to start rethinking their post-2030 climate strategies in advance of the changes.
New requirements at a glance
To fully grasp the impact of these upcoming changes it is important to contrast it with the current operating framework of the SBTi:
| Topic | SBTi Net-Zero 1.2 | SBTi Net-Zero 2.0 |
| SBTi’s Role | Validation of targets upfront | Validation of targets, assessing performance of base year and entire target cycle, communication of progress, and validating reduction claims |
| Criteria stratification | Full list of requirements applied to companies independently of location. A simplified validation route, with reduced requirements, is available for eligible Small and Medium Enterprises (SME). To qualify under the SME route, companies must fulfill the following requirements: Annual Scope 1 and 2 emissions < 10,000 tons of CO2e, not classify as a Financial Institution, or in the Oil & Gas or FLAG sectors, not have sector-specific requirements, not be a subsidiary of another company that must follow the standard validation route. In addition, companies must be below two of the following thresholds: a) turnover < 50 million ($ or €), b) total assets < 25 million ($ or €), and c) employee number < 250. | Two-tiered requirements: Category A: large companies in any geography and medium-sized companies operating in higher-income geographies are required to follow all criteria. Category B: small and micro companies in any geography and medium-sized companies operating in lower-income geographies are allowed flexibility with certain criteria. To qualify for the medium-sized category, companies must fulfill the following requirements: Annual Scope 1 and 2 emissions < 10,000 tons of CO2e. In addition, companies must be below two of the following thresholds: a) balance sheet > 25 million ($ or €), b) net turnover between 50 and 450 million ($ or €), and c) employee number between 250 and 1,000. To qualify for the small size category, companies must fulfill the following requirements: Annual Scope 1 and 2 emissions < 10,000 tons of CO2e. In addition, companies must be below two of the following thresholds: a) balance sheet < 25 million ($ or €), b) net turnover < 50 million ($ or €), and c) employee number < 250. |
| Assurance | No assurance requirement | Limited assurance required on base year GHG Inventory for category A companies |
| Climate Transition Plans | High-level commentary on reduction strategy | Climate Transition Plan required within 1 year of validation for Category A companies |
| Commitment Phase | Must submit targets within 2 years of commitment | Must submit targets within 1 year of commitment for Category A companies |
| Aggregation | Scope 1 and 2 targets may be combined. | Companies must set separate targets for Scope 1 and Scope 2 emissions |
| Scope 3 Target Boundary | Targets must cover more than 67% (Near-Term) or 90% (Net-Zero) of Scope 3 Inventory | Targets must include categories that individually cover 5% or more of Scope 3 Inventory |
| Scope 3 Target Tracking | Reductions through either an absolute contraction approach or an economic intensity approach | Emphasis on reductions through non-emission KPIs (e.g. % suppliers with SBTs) |
| Mitigation outside value chain | Recommends addressing emissions outside a company’s Scope 3 (optional) | Provides framework for recognizing carbon offset efforts separate from inventory |
| Carbon Removal | Carbon removal limited to addressing residual emissions at end of target period | Provides framework for separate carbon removal targets to address Scope 1 emissions |
Navigating the transition to version 2.0
While the next version of the SBTi Corporate Net-Zero Standard (CNZS) will not be finalized and adopted until the end of 2026, it remains essential for corporations and financial institutions to continue submitting targets under version 1.2 throughout this period. This will help organizations maintain credibility over their decarbonization journeys, build internal alignment and momentum, and improve their readiness for navigating the forthcoming framework – one that will introduce shorter target cycles and put emphasis on assessing performance.
This is how the SBTi CNZS version 2.0 describes the intended transition from the current standard:
- Until 2027, companies should continue to set targets in line with Net-Zero 1.2 and Near-Term 5.2. These targets will remain valid for 5 years or until the end of 2030, whichever is earlier.
- Existing near-term targets will also remain valid until 2030, or the end of the target timeframe, whichever is sooner.
- SBTi is “planning to provide a pathway” for companies with targets validated in 2025 and 2026 to align their Scope 3 targets with V2.0.
What does this mean for your organization?
For companies considering setting targets, or with targets under development, these changes can seem stressful and complicated. The good news is that these changes are intended to make target setting more practical, more accountable, and more capable of delivering emission reduction outcomes. Let’s dive into the changes that matter the most.
Preparing for increased accountability
With the proposed shift to shorter target cycles (every 5 years), the SBTi will move beyond initial validation to actively assessing progress. This entails a new recurring validation cycle based on performance which is intended to enable continuous improvement of a company’s decarbonization journey. Other areas where the new CNZS has increased accountability include new criteria preventing companies from covering direct and indirect emissions under a single target (e.g. aggregating Scope 1 and Scope 2 targets), measuring and reporting progress, and formally recognizing efforts to address ongoing emissions through mitigation actions or investments that fall outside a company’s value chain, including the use of carbon credits, otherwise known as Beyond Value Chain Mitigation.
A key tradeoff of shorter target cycles is that a 5-year timeframe may not properly capture the impact returns of large-scale investments, particularly relevant for companies seeking to decarbonize in heavy industry. Companies will need to carefully assess how projects in their mitigation portfolio, particularly those with longer implementation timelines, align with recurrent target validations and performance assessments.
Nevertheless, a number of requirements will vary based on company size and geographic locations. Large companies in all countries and medium-sized companies (i.e. less than $50m+ in net turnover) in high and upper-middle income countries are required to meet all criteria. Some criteria are optional for smaller companies in any geography and for medium-sized companies located in low and lower-middle income countries in order to incentivize SBT adoption in developing economies.
More effective value chain decarbonization
Moving away from blanket coverage of Scope 3 categories (often including low influence, low control emissions), the new approach in CNZS version 2.0 emphasizes addressing emissions that are most relevant. It pushes for the Net Zero alignment of value chain activities through the use of non-emission-based metrics (e.g. supplier engagement metrics), incentives for data quality improvement and, for the first time, the use of market instruments such as book and claim mechanisms. Often used with sustainable aviation fuel and green steel certificates, book and claim instruments allow companies to purchase and claim environmental attributes which can in turn be used to lower the carbon intensity of commodities procured elsewhere in the supply chain. This provides significantly more flexibility and effectiveness for decarbonizing value chains and, at the same time, enabling industry collaboration and data sharing.
While it’s an improvement to move away from subjective target coverage requirements for indirect emissions (e.g. two-thirds of total Scope 3 emissions), the newly proposed threshold of 5% that deems a Scope 3 category relevant poses the risk of still including categories of emissions in the target for which companies have little insight or control to reduce. Maintaining a simplified threshold for all companies seems practical, but this is one place where sector-specific mapping of priority emissions sources and activities could be far more effective and consistent with the purported goal of placing greater emphasis on non-emission metrics and targets, such as procurement ratios over clean energy, net-zero aligned commodities or climate-aligned suppliers.
Bolstering credibility to claims and ambitions
Version 2.0 of the CNZS introduces the option for organizations to communicate clear and credible claims around their net-zero efforts —whether about target ambition, progress, or achievement— which aim to align with best practices and evolving regulations. For example, companies will be allowed to make SBTi-validated claims related to target achievement at the target renewal stage. At the same time, as scrutiny on greenwashing increases, organizations will need to substantiate their net-zero strategies with robust transition plans, transparent performance tracking, and, for certain companies, assurance of their GHG emissions inventory.
Rising compliance burden
With this expansion of SBTi’s role into recurrent validations, transition plan review, progress assessment, and the requirement for third-party assurance, companies will need to scale up their commitment and incur in increasing costs and effort to participate. This runs the risk of competing with resources that would otherwise be allocated to decarbonization mechanisms (e.g. renewable energy deployment, electrification, etc.). It is more important than ever for sustainability teams to define and articulate the value of these endeavors to bolster executive buy in and ensure they can account for appropriate time and resources in their planning process.
Recommendations by Sustainserv
- For companies that already have targets or are preparing to submit: Stay the course—don’t slow down or stop. Pre-2030 targets remain valid, and early carbon reduction planning is essential.
- For those companies part-way through or near the end of their current target timeframe, start assessing how these changes will impact your plans for resubmission.
- For all organizations, staying ahead of the curve means:
- Developing, updating, or refining climate transition plans that are actionable (with feasible, near-term implementation steps), traceable (ensuring mitigation efforts can be monitored and verified), and collaborative (engaging key stakeholders such as suppliers, investors, and regulators to drive meaningful change).
- Before limited assurance is required, reviewing and refining the areas of your inventory that may not be audit-ready.
- Prioritizing efforts to obtain robust, high-quality estimates over most emission-intensive activities and areas of greatest influence (e.g. commodity procurement, use of sold products), and building up supplier and customer engagement mechanisms to target emissions of high relevance.
- Seek out non-emissions KPIs that you can leverage to decarbonize. For example, what percentage of your procured commodities, products or services is from climate-aligned sources.
- Connecting with peers in your industry about emissions mitigation, collective energy procurement, and investments in emissions-free technologies.
- Assessing the role of carbon removals in your business model to mitigate your Scope 1 emissions.
Climate strategies are challenging, multi-faceted projects that require diligent data processes, a commitment to flexibility, and a focus on value. As companies work to understand the implications of the updated SBTi Net-Zero Standard and strengthen their climate strategies, Sustainserv can provide clarity and practical support. To explore how our team can help your organization interpret these changes, align with best practices, and move forward with confidence, don’t hesitate to get in touch.
Info@sustainserv.com
Get in touch. We are happy to tell you more about it.
