SBTi Publishes Draft Update to Corporate Net-Zero Standard

On 18 March 2025, the Science Based Targets initiative (SBTi) released the long-awaited draft of its revised Corporate Net-Zero Standard for public consultation, open until 1 June. This update proposes significant changes to the existing framework, which has served as a benchmark for corporate net-zero target setting since its launch in 2021. The SBTi’s standard is widely used by businesses to validate their decarbonisation commitments, ensuring alignment with the Paris Agreement and limiting global temperature rise to 1.5°C.

Last year, the SBTi faced controversy after announcing potential changes to its framework that could allow companies to use carbon credits to address Scope 3 emissions. This sparked backlash from the climate community, leading to internal dissent and the eventual resignation of CEO Luiz Amaral in July 2024. Critics argued that permitting carbon credits in Scope 3 targets would weaken corporate accountability and undermine real emissions reductions. The newly released draft seeks to clarify and balance these concerns while accelerating corporate decarbonisation efforts.

Key changes to the Corporate Net-Zero Standard

The proposed updates aim to address several key challenges:

• Strengthening Scope 3 action by tackling the most commonly cited barriers companies face in measuring and reducing value chain emissions. Scope 3 emissions often account for the majority of a company’s footprint, yet they remain the hardest to control due to complex supply chain relationships.
• Maintaining a strong focus on absolute emissions reductions while exploring mechanisms to scale climate finance and carbon removals. The SBTi acknowledges that removals will play a role in long-term decarbonisation but is prioritising near-term emission cuts.
• Making it easier for companies in emerging economies to set and meet targets by introducing greater flexibility in transition pathways. This recognises that many developing economies face unique decarbonisation challenges due to infrastructure, financing, and energy mix constraints.
• Introducing a new validation and recognition model to better track corporate progress against net-zero targets. This aims to increase transparency and incentivise continuous improvement.
• Sector-specific pathways have been introduced to provide tailored decarbonisation strategies for industries such as heavy industry, transport, and finance. This ensures that companies in high-emitting sectors have clearer, more applicable guidance to reduce emissions effectively.

Impacts and Insights for Companies

For companies, these updates will have significant implications. The increased scrutiny on Scope 3 emissions will require businesses to engage more deeply with their supply chains to drive emission reductions. This means improved supplier collaboration, more rigorous data collection, and the need to implement sustainable procurement strategies. Companies that have not yet developed a structured approach to Scope 3 will likely face greater pressure to do so.

The balance between short-term and long-term targets is another important aspect. The SBTi is pushing for clear interim milestones to ensure companies are making steady progress rather than delaying action until closer to 2050. This shift will require organisations to adopt more immediate and measurable decarbonisation plans, integrating sustainability into their overall business strategies.

In response to feedback, the SBTi has also clarified its stance on carbon credits. While removals will play a role in neutralising residual emissions, the new standard remains firm that direct emission reductions must be the primary focus. This means companies can expect little flexibility in using offsets to meet their near-term climate targets and will need to prioritise operational and value chain decarbonisation efforts instead.

Additionally, the new sector-specific pathways provide much-needed guidance for industries with complex decarbonisation challenges. Heavy industry, transport, and finance sectors will now have clearer frameworks for aligning their emissions reductions with science-based targets, potentially easing the transition for businesses operating in these areas.

The update also aligns more closely with regulatory reporting frameworks such as CSRD and ISSB, making compliance with multiple disclosure requirements more streamlined. Companies operating across jurisdictions will benefit from this integration, as it reduces the complexity of managing different reporting obligations.

Ultimately, the SBTi’s updated Corporate Net-Zero Standard is a step towards more stringent, science-based corporate climate action. Businesses must prepare to enhance their Scope 3 engagement, accelerate absolute emissions reductions, and align with sector-specific pathways to remain credible in their net-zero commitments. As the consultation period progresses, companies should assess how these changes will impact their strategies and provide feedback to shape the final standard before its implementation.