SBTi releases updated Corporate Net-Zero Standard: Items to Watch
March 25, 2025
Last week, the Science-Based Targets Initiative (SBTi) released a highly-anticipated consultation draft of their Corporate Net-Zero Standard, Version 2.0 (CNZS V2.0). Green Strategies has been closely watching SBTi’s treatment of key issues (see Ballentine 2023; Ballentine 2024) with the hope that SBTi’s next standard will better maximize real climate action and emissions reductions.
While SBTi has included an excellent comparison of the draft Version 2.0 and the older Version 1.2 (see page 10 of the consultation draft with narrative), Green Strategies reviewed CNZS V2.0 for its treatment of key issues facing our clients, including Scope 2, Scope 3, and investment in carbon dioxide removals.
We are happy to see that:
- SBTi has embraced the idea that a science-based climate action framework should incentivize action and progress, as opposed to primarily goal-setting ambition. In the draft standard, the new SBTi validation model is an “end-to-end” framework that better tracks and substantiates progress by: assessing and communicating progress at the end of the target cycle (a fixed 5-year time period, at least for Scopes 1 and 2); establishing new targets for the next cycle; and requiring companies to communicate transition plans.
- SBTi-target setting companies will now make public Net-Zero commitments in line with the UN High Level Expert Group recommendations. This is a step towards unifying practices for corporate net-zero attainment and avoiding duplication of definitional and reporting efforts.
- SBTi newly acknowledges the “urgency of addressing emissions released into the atmosphere today and the critical role companies can play in mobilizing finance for mitigation activities beyond their value chain.” As such, SBTi will examine provisions to require or reward companies for pursuing beyond value chain mitigation (BVCM) ahead of the net-zero target date.
- SBTi has allowed the purchase of removals to occur earlier than the net-zero target deadline, which is crucial to avoiding emissions overshoot and to providing finance for the carbon removals market that will need to scale up between now and net-zero target dates.
- SBTi has indicated greater tolerance for indirect mitigation, acknowledging the importance of investment in mitigation actions crucial for the net-zero transition even if the action cannot be physically traced back to sources within the company’s value chain.
- SBTi will now allow emissions data and interventions at the ‘activity pool’ level to assess performance and progress towards targets in cases where traceability to specific emissions sources in the value chain cannot be established, but where interventions in the likely supply shed are possible and impactful.
- SBTi has adopted a “technology-agnostic” stance, introducing zero-carbon electricity targets as a revision to the concept of renewable electricity targets. This rightly acknowledges the need for a broad array of zero-carbon electricity generation, including firm and dispatchable resources.
We applaud SBTi for being responsive to stakeholder feedback and making strides towards these changes. However, certain criteria in the draft CNZS 2.0 may need further consideration:
- Scope 2:
- SBTi will now require companies to set location-based Scope 2 targets in addition to either a market-based or a zero-carbon electricity target. We hope SBTi will further elaborate on how companies will make progress against location-based Scope 2 targets. Currently, companies use the market-based method to reduce Scope 2 emissions because they have limited control over location-based emissions other than through electricity conservation. We are concerned that achieving a location-based Scope 2 target may not be possible in many areas due to the realities of the electrical grid and regulatory frameworks.
- SBTi provides a provision for when sourcing zero-carbon electricity (ZCE) within the grids in which the company powers its operations is not possible. In this case, companies shall “contribute to zero-carbon electricity in other grids as an interim measure to address the corresponding portion of scope 2 emissions.” We would like SBTi to specify the threshold for when a company many conclude that procuring ZCE is “not possible” and to define the boundary of “other grids.”
- Scope 3:
- SBTi states that it has adopted a more focused approach for the Scope 3 boundary, indicating that companies should set Scope 3 targets on “the most emission-intensive categories within their value chain and those where they have the greatest influence.” SBTi defines the most relevant Scope 3 categories to be those that comprise 5% or more of total Scope 3 emissions. We feel that this is not sufficiently narrow and does not fully capture which Scope 3 emissions are most relevant to a sector.
- Direct and Indirect Mitigation:
- SBTi outlines distinctions between direct and indirect mitigation approaches, which are both distinct from BVCM. SBTi should provide greater clarity on the time limitations and reporting for indirect mitigation including book and claim and mass balance systems. We feel that these approaches should be eligible to make progress against SBTs. If not, we would like SBTi to specify how it will incentivize companies to invest in indirect mitigation. We also caution that reporting indirect mitigation measures separately from direct mitigation, as SBTi currently instructs, runs the risk of making these valid climate interventions into a second-tier approach and once again poorly incentivize needed investment in markets supported by book-and-claim approaches.
- SBTi should clarify the “direct mitigation” threshold for demonstrating physical connectedness, and whether chain of custody approaches like mass balance count as direct or indirect mitigation.
- Non-emission metrics and targets:
- SBTi states that CNZS V2.0 places greater emphasis on non-emission metrics and targets, for example the procurement from suppliers aligned with global climate goals. We support allowing companies to receive credit from actions that may not impact their inventory but are beneficial to the climate. SBTi should provide further guidance on how SBTi will incentivize and validate these non-emissions metrics and targets. Will there be a standard level of ambition, or standard ‘menu’ of non-emissions metrics to choose from? Will companies need to set a net-zero goal in order to be eligible for an SBTi-approved non-emissions target?
- SBTi should discuss whether consequential accounting, or the assessment of the carbon impact of certain decisions, is a valid non-emissions metric. SBTi should also consider requiring a discussion of impact and optional quantification of impact, such as for procurement of zero-carbon electricity or other low-emissions products and services.
The public consultation period will be open until June 1st, 2025, and feedback can be submitted via an online survey.
