SBTi Releases New Corporate Net-Zero Standard: Everything You Need to Know

One of the most significant updates is the introduction of a best-efforts framework. Previously, businesses were largely evaluated on whether they achieved their emissions reduction targets. Under the revised standard, companies can remain aligned with SBTi even if they fall short of a target, provided they can demonstrate that they have used all available levers to drive emissions reductions. This includes implementing available decarbonisation measures, transparently reporting implementation barriers, and outlining the actions being taken to overcome them. The change acknowledges that external factors outside a company's control; such as policy changes, technology availability, or supply chain disruptions, can affect progress despite genuine efforts.

Version 2.0 introduces a more tailored approach by categorising companies based on their size and economic context. • 𝗖𝗮𝘁𝗲𝗴𝗼𝗿𝘆 𝗔 includes large companies from all countries and medium-sized companies in high-income countries. • 𝗖𝗮𝘁𝗲𝗴𝗼𝗿𝘆 𝗕 includes small companies from all countries and medium-sized companies in lower-income countries. While all organisations must establish near-term (five-year) Scope 1 and Scope 2 targets, only Category A companies are required to set near-term Scope 3 targets, disclose climate transition plans, and provide limited assurance of their target base year data. This differentiated approach recognises that organisations have varying levels of resources and reporting capabilities.

A notable structural change in V2.0 is that companies now set separate targets for Scope 1 and Scope 2, rather than combining them, with distinct target-setting options for each. 𝗙𝗼𝗿 𝗦𝗰𝗼𝗽𝗲 𝟭 𝗲𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀, companies can choose from three approaches: • 𝗔𝗯𝘀𝗼𝗹𝘂𝘁𝗲 𝗲𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀 𝗿𝗲𝗱𝘂𝗰𝘁𝗶𝗼𝗻, using a straight-line trajectory from the target base year to the net-zero year. • 𝗘𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀 𝗶𝗻𝘁𝗲𝗻𝘀𝗶𝘁𝘆 𝗿𝗲𝗱𝘂𝗰𝘁𝗶𝗼𝗻, following sector-specific pathways designed to reflect sector-specific reduction opportunities. • 𝗔𝘀𝘀𝗲𝘁 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻, for companies with capital stock that does not follow a linear or sector pathway; operating existing assets efficiently and replacing them with low-carbon assets against predetermined milestones. 𝗙𝗼𝗿 𝗦𝗰𝗼𝗽𝗲 𝟮 𝗲𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀 businesses can set targets based on emissions reductions or on increasing their share of low-carbon electricity, including optional long-term targets to reach 100% low-carbon electricity. These can be met through investment in low-carbon power generation or through contracts such as power purchase agreements (PPAs) or renewable energy certificates, subject to defined conditions. 𝗙𝗼𝗿 𝗦𝗰𝗼𝗽𝗲 𝟯 𝗲𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀, companies now have three options: • An 𝗼𝘃𝗲𝗿𝗮𝗹𝗹 𝗲𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀 𝗿𝗲𝗱𝘂𝗰𝘁𝗶𝗼𝗻 𝘁𝗮𝗿𝗴𝗲𝘁, set on a linear basis toward residual emissions of roughly 10% or less by a net-zero year of 2050 or sooner. • A 𝘀𝘂𝗽𝗽𝗹𝗶𝗲𝗿/𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗮𝗹𝗶𝗴𝗻𝗺𝗲𝗻𝘁 𝘁𝗮𝗿𝗴𝗲𝘁, based on a growing share of tier-1 suppliers and customers setting and progressing on their own science-based targets. • A 𝗰𝗮𝘁𝗲𝗴𝗼𝗿𝘆- 𝗼𝗿 𝗮𝗰𝘁𝗶𝘃𝗶𝘁𝘆-𝘀𝗽𝗲𝗰𝗶𝗳𝗶𝗰 𝘁𝗮𝗿𝗴𝗲𝘁, for companies with concentrated emissions in particular Scope 3 categories or high-emitting activities. This enables businesses to develop strategies that better reflect their operational realities while remaining aligned with climate science.

Recognising that not all value chain emissions carry the same level of impact or influence, the updated standard allows companies to prioritise their most material emissions sources and the areas where they have influence. Where appropriate, businesses may make justified exclusions on a limited basis; for example, where a category accounts for less than 5% of total Scope 3 emissions, or where the company lacks practical influence. This allows organisations to focus resources where they can deliver the greatest emissions reductions.

Another major enhancement is the introduction of an implementation hierarchy. Rather than relying heavily on market-based mechanisms, companies are encouraged to prioritize direct emissions reductions at source through operational improvements such as energy efficiency, fuel switching, and supplier engagement. Where further reductions are required, businesses may use interventions within shared systems or activity pools, such as market instruments conveying low-carbon attributes within a shared grid. Sector-level actions sit last in the hierarchy, available where there are constraints on activity-level options. The hierarchy reinforces the principle that reducing emissions at their source should remain the highest priority.

The revised standard also introduces the Ongoing Emissions Responsibility (OER) framework. Initially a voluntary framework, OER recognizes companies that take responsibility for their ongoing emissions by funding emissions reductions or carbon removals beyond their own operations. For Category A companies, OER remains voluntary until 2035; from then on, these companies will be required to support carbon removals, and are expected to use them to neutralise 100% of residual emissions by their net-zero target year. This represents a significant step in integrating long-term carbon removals into corporate climate strategies.