SBTi Corporate Net-Zero Standard V2

Framework Overview

The Science Based Targets initiative (SBTi) Corporate Net-Zero Standard is the world's only science-based framework for corporate net-zero target setting aligned with climate models limiting global warming to 1.5°C above pre-industrial levels. Developed collaboratively by CDP, United Nations Global Compact, We Mean Business Coalition, World Resources Institute, and World Wildlife Fund, the standard has guided nearly 12,000 organizations to set credible decarbonization pathways.

Governance & Organization

SBTi Structure:

• UK-registered charity (1205768) with subsidiary SBTi Services Limited
• Independent target validation authority (not affiliated with companies or governments)
• Biennial standard review cycle aligned with IPCC assessment reports

Net-Zero Definition & Pathways

Science-Based Definition

Net-zero is achieved when residual greenhouse gas emissions cannot be economically abated are balanced through permanent carbon removals, targeting:

• Global temperature ceiling: 1.5°C warming above pre-industrial baseline
• Target year: 2050 at latest (some sectors: 2040)
• Scope coverage: Scope 1, 2, and 3 emissions (including supply chain, use phase, end-of-life)

Three Decarbonization Pathways (V2 Updates - November 2025)

Pathway 1: Absolute Emissions Reductions (AER)

• Reduce absolute emissions by 80-90% from baseline year
• Most ambitious; applicable across all sectors
• Portfolio emissions intensity reduction acceptable for financial institutions

Pathway 2: Scoped Sectoral Intensity Reduction (SSIR)

• Reduce emissions intensity (e.g., per unit of production, per $ revenue)
• Flexibility for growing companies with increasing absolute emissions
• Applicable to specific scope-specific targets (Scope 1+2 or Scope 3 separately)

Pathway 3: Relative Decarbonization with Offsets

• Combination of emissions reductions + credible carbon removals
• Removals limited to 10-30% of target ambition
• Requires robust methodology for removal permanence & additionality

Target-Setting Requirements

Near-Term Targets (2030-2035 Horizon)

Scope 1 & 2 Emissions

• Reduction by 45-50% from baseline year (vs. 2023 levels)
• Options: Absolute, intensity-based, or sectoral benchmarking
• Alignment with 1.5°C-aligned science across all sectors

Scope 3 Emissions (where material >40% of total)

• Reduction by 30-35% from baseline year
• Supply chain engagement targets: 2/3 of suppliers by spend aligned with SBTi
• Product use phase intensity improvements for consumer goods

Sectoral Specifics:

• Oil & Gas: 65-75% Scope 1+2 reduction (most stringent sector)
• Automotive: 50% fleet average emissions reduction by 2035
• Financial Services: Portfolio emissions intensity reductions + financed emissions targets
• Agriculture: Methane intensity reduction 40-50% (methane-specific targets)

Long-Term Targets (2040-2050)

Net-Zero Baseline: Residual emissions after 80-90% reductions

• Sequestration & removals: 10-20% of residual through permanent carbon removal technologies
• Nature-based solutions: Reforestation, regenerative agriculture (max. 50% of removal targets)
• Direct air capture (DAC): Emerging acceptable methodology; cost >$100/tonne CO₂

Validation & Assurance Process

Target Submission & Review

1. Baseline selection: Historical year (typically 2023); can adjust for significant portfolio changes
2. Target quantification: Calculate 1.5°C-aligned reduction pathways using SBTi tools
3. Evidence gathering: Collect data on reduction initiatives, capital investments, supply chain engagement
4. Expert review: SBTi analysts assess against 50+ validation criteria
5. Public announcement: 3-month validation timeline; results published on SBTi dashboard

Validation Criteria (Key Elements)

• Scope coverage and completeness: All material Scope 1, 2, 3 included
• Baseline integrity: Representative year; no cherry-picked low-emission baseline
• Target ambition: Consistent with 1.5°C warming scenario (15.4% annual reductions minimum for near-term)
• Reduction initiatives: Credible roadmap with capital allocation and governance
• Supply chain engagement: 70%+ supplier emission coverage for Scope 3 targets

Re-certification Requirements

• Annual progress reporting against validated targets
• 5-year recertification cycle: Revised targets required post-baseline year evaluation
• Enhanced rigor post-2030: Stricter validation criteria for long-term targets

V2 Standard Updates (November 2025 Draft)

Major Revisions

• Flexibility in timing: Extended 2035 window to 2025-2035 for target-setting (previously 2030 fixed)
• Interim milestones: Optional shorter-term stepping stones (2027, 2028) recommended for transparency
• Nature & biodiversity: New criteria linking carbon targets to forest protection, biodiversity net-gain commitments
• Financial institution pathways: Expanded financed emissions methodologies; Art. 6 credit utilization rules clarified

Carbon Credit Utilization (V2 Position)

• Removal credits acceptable: Permanent, verified removal methodologies (Puro, Charm, Nori protocols)
• Offset limitations: Max. 10% of near-term target achievement through eligible offsets
• Avoided emissions ineligible: No credit given for "avoided deforestation" or prevention-based projects
• Article 6 mechanism: International carbon transfers permitted if:
  • Project meets high-integrity standard (CDM, Verra, Gold Standard)
  • Baseline conservativeness verified
  • No double-counting across multiple climate regimes

Implementation Challenges & Adoption Rates

Adoption Trends

• 9,000+ companies with validated science-based targets
• 2,200+ net-zero commitments announced (1,000+ validated under v1.0)
• Geographic leaders: EU (35%), North America (28%), Asia-Pacific (22%)
• Sector distribution: Manufacturing (30%), Financial Services (18%), Technology (15%), Energy (12%)

Common Implementation Barriers

• Scope 3 complexity: 40% of validation failures due to incomplete supply chain emissions mapping
• Technology infrastructure: Legacy IT systems unable to track granular emissions data
• Supply chain alignment: SME suppliers lack emissions tracking capability or willingness
• Financial constraints: Required capex for renewable energy, electrification (€500M-5B+ for large industrials)
• Verification costs: Third-party assurance expenses ($50K-500K annually)

Case Studies & Business Benefits

Observed Outcomes (SBTi Survey)

• 67% of SBTi companies report innovation acceleration in clean tech investments
• 45% report cost savings from energy efficiency and operational optimization (avg. 12-18% savings)
• 92% report improved investor relations due to transparent climate governance
• Customer acquisition: 73% report enhanced brand reputation with ESG-conscious consumers

Integration with Other Frameworks

CSRD Alignment

European companies submitting SBTi targets simultaneously satisfying CSRD climate target disclosure requirements, with 80%+ mapping to ESRS E1 requirements.

ISSB S2 Standard

SBTi targets increasingly referenced in ISSB climate-related financial disclosures; 85% of public companies with SBTi targets now include in ISSB S2 submissions.

Article 6 & CDSB

SBTi net-zero definition informs corresponding Article 6 mechanism design; Climate Disclosure Standards Board (CDSB) governance framework leverages SBTi methodology.

Document Status

Last Updated: September 2025 (v1.3); V2 Second Public Consultation Ongoing | Authority: Science Based Targets Initiative | Public Access: Full standard and guidance available at sciencebasedtargets.org