The Science Based Targets Initiative was set up to provide a consistent framework for establishing emissions reduction targets and to drive ambition, transparency and accountability. SBTi targets have become a globally recognised signal of a genuine commitment to addressing climate change. Over 10,000 companies, representing 40% of global market capitalisation, have set targets.
The SBTi began a revision process of its Corporate Net Zero Standard (CNZS) in 2024, marking the first major revision since the SBTi published the standard in 2021. The new standard, CNZS V2, will apply to all new or renewed targets after 1 January 2028.
Both the urgency around reducing emissions and quality expectations around GHG accounting have increased significantly since the start of the decade and the new standard reflects these changes. Net Zero has been solidified as a guiding light, with greater scrutiny of near-term progress introduced. The seemingly contradictory themes of flexibility and specificity run throughout, enabling carbon footprints to more closely reflect reality, and drawing out where companies have agency and should channel their resources to maximise impact.
What are the changes to the SBTi Corporate Net Zero Standard?
An overarching structural change in V2 is the introduction of differentiated requirements for companies based on their size and location. Category A companies are required to make more comprehensive targets and meet stricter deadlines than Category B.
The table below illustrates the thresholds for each category:
The remaining changes can be summarised under four key themes: Strengthened pathway to net zero, specificity, flexibility, and scrutiny.
Strengthened pathway to net zero
V2 introduces new mechanisms and timeframes to create intermediary stepping stones to net zero, with the focus shifting from ambition to implementation. This means near-term targets will be more closely aligned with net zero.
Key changes
- Category A companies will have to prepare transition plans.
- Long-term targets for Scope 1 and 2 must cover 100% emissions, rather than 95%.
- Near-term Scope 3 targets become mandatory.
- Additional timelines are introduced:
- Companies must transition toward 100% low-carbon electricity by 2040.
- Companies must start addressing residual emissions (now called ongoing emissions) from 2035. This involves investing in mitigation or adaptation projects outside of their value chain, for example, through purchasing carbon credits.
What this means for companies
Embedding long-term thinking on climate change into business strategies and financial planning will become essential. Companies will be expected to work backwards from net zero in 2050. Therefore, a comprehensive picture of what needs to be done, how and when, and the resources required, should be developed. Companies should also establish mechanisms to monitor progress internally and assumptions and dependencies.
Companies should also prepare to set an internal carbon price, meaning that for every tonne of emissions released, a set amount of money will have to be invested in offsetting it.
Specificity
V2 moves away from overarching emissions reduction targets to addressing specific emssions sources, alongside raising expectations around data quality. This will enable companies to develop more targeted strategies for reducing emissions and channel resources more effectively, as well as providing a more accurate and granular indication of progress.
Key changes
- Scope 1 and 2 targets can no longer be combined.
- Targets for heat, steam and cooling must be separated from electricity targets.
- High-energy users will be required to provide hourly electricity data from 2030.
- Scope 3 targets must be set for categories and emissions sources more than 5% of Scope 3 emissions.
What this means for companies
Companies will be setting and working towards more targets. A more granular understanding of your company’s emissions profile, with a plan for reducing assumptions and estimations, will be needed.
Companies should also increase engagement with their supply chain, particularly high-emitting suppliers, pushing for increased data quality and emissions mitigation.
Flexibility
Acknowledging that change is not always linear, V2 enables companies to measure progress beyond just absolute emissions reductions. This is to account for variations in the transition pathways of different sectors, and the degree of agency companies have over their supply chain.
Approaches to meeting targets can be tailored towards the specific emissions source companies are addressing and the specific nature of a company’s supply chain and their relationships with suppliers.
Key changes
- New target-setting methods for Scopes 1 and 3
- Four intervention levels for Scope 3 targets, from activity level to sector level
What this means for companies
Companies will need to understand and map out the transition pathways for different emission sources.
Increased supplier engagement will help companies capitalise on this new flexibility, ensuring they understand different transition pathways and what stage suppliers are at. Companies can then determine where and how they can influence suppliers’ transitions.
Scrutiny
V2 introduces more checks and balances into the SBTi process, standardising quality expectations for sources of electricity and climate investments. With increased scrutiny comes increased accountability and companies will need to make sure they are making progress and can evidence it.
Key changes
- Five-year reviews to measure progress and update targets.
- Third-party assurance of GHG data required for Category A companies.
- Quality criteria for low-carbon energy suppliers.
- Integrity principles for EACs and investments beyond the value chain.
What this means for companies
Companies will need to exercise greater scrutiny over electricity providers to ensure they meet quality requirements and can provide the necessary evidence trail. Traceability and transparency sit at the heart of the new integrity principles.
Companies should also build their understanding of carbon markets and the markers of quality, such as additionality, independent verification and vintage.
Next steps
The demand for clarity, comprehensiveness and accuracy is increasing across the regulatory landscape around climate reporting. Transitioning to this new standard will enable companies to stay ahead of the curve when it comes to data quality and ambition.
This new SBTi update offers companies the opportunity to curate a more tailored approach to reducing emissions. Capitalising on this will require comprehensive and accurate emissions reporting, a clear understanding of climate risks now and in the future, and increased supply chain engagement.
Acclaro offers expertise and support in all three of these areas. Our understanding of the climate transition, the nuances of GHG reporting, and how to align climate strategy with business growth, will ensure companies can successfully navigate the transition from ambition to implementation.
For those with targets
Companies should seek to renew their targets early to align with the new standard before 2030. Renewal in 2028 is recommended to enable companies to prepare for raised expectations around data quality and mitigation actions in the 2030s.
For those wanting to set SBTi targets
We recommend aligning targets with the new standard once it is published to save time and resources. The standard is expected to be published imminently.
We’d be happy to discuss the best approach for your SBTi targets, please do get in touch.
