Key takeaways from SBTi’s new Corporate Net-Zero Standard draft

The Science Based Target initiative (SBTi) recently published its long anticipated initial draft of the Corporate Net-Zero Standard V2.0 for consultation, which guides companies in setting targets to limit global temperature rise to 1.5 degrees Celsius by 2050. While the draft includes proposed changes, there are still two additional rounds of revisions before the final publication date, which has not yet been determined. 

The revision process:

1. Through June 1, 2025, SBTi is asking for feedback in its consultation survey and will be convening the Expert Working Groups for input.
2. An interim revision follows, incorporating feedback and revising materials once again as needed.
3. This revised draft will then be shared in a second consultation period. During this second phase, there will be another feedback survey, along with pilot testing.
4. The final draft will be crafted and published.

Overall, this initial draft proposes substantial changes from the current V1.2, representing a significant shift rather than a minor refresh. We anticipate that these changes could have real-world implications for companies with existing net-zero commitments, as well as for those in the process of setting net-zero targets. 

Here are some key takeaways:

1. Flexibility for some companies: The draft standard differentiates companies based on their geographic footprint and size, providing greater flexibility across some criteria for companies that are located in lower-middle and low-income countries, or those that are classified as small or micro*.
   1. “Category A” must meet all requirements
      1. Large companies in all countries
      2. Medium companies allocated to high and upper-middle income countries
   2. “Category B” has increased flexibility, with some criteria being optional
      1. Medium companies allocated to lower-middle and low-income countries
      2. Small & micro companies in all countries
2. Target requirements: The draft proposes a series of new target-setting requirements, with key highlights below.
   1. Targets by scope: Separate targets are now required for scope 1 and scope 2 emissions. This would mean an end to scope 1+2 aggregated targets.
   2. Scope 2: Now required to set both a location-based target, and either a market-based or zero-carbon electricity target.
   3. Category A: Near-term targets required for all scopes, with long-term targets only required for scopes 1 and 2. This would mean an end to scope 3 long-term targets, although this is under consultation.
   4. Category B: Near-term targets required for scopes 1 and 2 only, with long-term targets no longer required.
3. Scope 3 major updates: The draft boundary shifts the basis for establishing which scope 3 emissions must be included and provides additional methodological options.
   1. Target boundary: Would now be based on relevancy of scope 3 emissions rather than percent thresholds (e.g., 67% for near term).
   2. Expansion of target method options: Includes non-emissions focused targets, such as procuring from net-zero aligned suppliers.
4. Residual emissions: SBTi provides 3 options under consideration for addressing residual emissions with carbon removals between now and the net-zero year.
   1. Option 1: Mandate companies to establish removal targets and interim milestones.
   2. Option 2: Recognize companies that set removal targets, although setting removal targets would not be mandated.
   3. Option 3: Allow companies flexibility in how they manage residual emissions, either through removals, absolute reductions, or a combination of both.
5. Updated validation model: The draft provides an end-to-end framework to improve accountability and recognition, increasing the scrutiny and complexity of having targets validated.
   1. While SBTi’s current validation model focuses primarily on target-setting, that is just the beginning of the process. The draft requires companies to now evaluate and communicate progress at the end of their target timeframes and to set new targets based on previous target performance.

While this is just the initial draft, it is clear that the final draft will contain significant changes from the current standard. Be on the lookout for more information on this topic from Trio, and be sure to share your thoughts with SBTi in its consultation survey before June 1. And, if you’re considering setting a target or trying to navigate the appropriate standard and approach, we’re here to help. To get connected, please reach out to information@trioadvisory.com

* Geographical categorization is based on the World Bank classification, and the company size categorization is guided by EU regulatory definitions. Company size thresholds can be found in Table 1 of the draft standard.