The Science Based Targets initiative (SBTi), a corporate climate action organisation that develops standards, tools and guidance which allow companies to set science-based greenhouse gas emissions reductions targets, has published an initial draft of its revised Corporate Net-Zero Standard for public consultation, which will run until 1 June 2025.[1] The Standard provides guidance for companies on setting science-based targets.
The SBTi made several announcements relating to its proposed revision of the Corporate Net-Zero Standard last year, including publishing a series of technical papers on Scope 3 target setting and the use of carbon credits, which we blogged about at the time. The use of carbon credits in meeting emissions reductions targets has attracted criticism from some stakeholders in the past, due to concerns about the integrity of voluntary carbon markets and related greenwashing risks.
The revised Standard aims to strike a balance between being robust and practical, to enable more businesses to set and make progress towards net-zero targets. Key areas of proposed revision include:
Greater flexibility for Scope 3 emissions reductions targets
Acknowledging that Scope 3 emissions target setting is often the most significant challenge for companies, the SBTi proposes moving away from its previous approach of requiring companies to set overarching targets, with a minimum 67% coverage (of total reported and excluded Scope 3 emissions) for near-term targets and 90% (of total Scope 3 emissions) for long-term targets.
Instead, the SBTi will encourage companies to prioritise their Scope 3 targets on the most emissions-intensive activities within their value chain and those where they have the greatest influence (e.g. Tier 1 suppliers). Consequently, greater emphasis will be placed on non-emissions metrics and targets, such as the share of procurement allocated to net-zero-aligned suppliers and activities, as well as the share of revenue derived from net-zero-aligned products and services.
Greater recognition of and incentive to invest in high integrity carbon credits and carbon removals, but the ability to use credits towards emissions reductions targets remains restricted
Under the existing Standard, carbon credits do not count as reductions towards meeting targets, including for Scope 3 emissions. Carbon credits may only be considered as an option for neutralising residual emissions (i.e. those that remain after all reasonable efforts to reduce emissions have been made) or to finance additional climate mitigation efforts that take place outside of a company’s value chain, known as beyond value chain mitigation (BVCM). As noted above, the question of whether to permit increased use of carbon credits towards targets can be controversial, with proponents citing the challenges of reducing Scope 3 emissions without doing so, and opponents questioning the effectiveness and integrity of carbon credits.
Perhaps in an attempt to navigate this tension, the revised Standard sets out stronger incentives for companies to invest in BVCM activities, which can include purchasing high integrity carbon credits. In addition, it proposes approaches to address the impact of residual emissions both during the transition to net-zero and from the net-zero year onwards (as opposed to just from the net-zero year onwards), including setting removals targets. Removals targets are targets to remove carbon from the atmosphere and durably store it. However, companies will remain unable to use carbon credits and removals to meet their emissions reductions targets.
Tracking and communicating progress against targets
The SBTi proposes broadening the scope of the Standard from a primary focus on target setting only, to covering target implementation, assessment and communication of progress and claims, in a bid to increase corporate accountability. The revised Standard also proposes that companies publish climate transition plans within 12 months following validation of their targets by the SBTi.
Other proposals include splitting out Scope 1 and 2 emissions to reflect specific challenges faced when reducing emissions in each category, and requiring large companies to obtain third-party (limited) assurance on their base year emissions data.
Simplified requirements for medium-sized companies in developing markets and SMEs
The SBTi suggests introducing differentiated requirements based on company size and geographic locations, which is a shift from the existing Standard which does not differentiate requirements within SBTi criteria (although a separate validation process exists for SMEs). By doing so, the SBTi aims to make universal voluntary corporate climate action more accessible. These companies will have longer to submit and have their targets validated, and may be exempted from setting Scope 3 targets (depending on the consultation outcome).
Next steps
The SBTi is developing a transition pathway to facilitate a “smooth transition”[2] from its existing Standard to the revised Standard, including the alignment of Scope 3 targets with the revised Standard. Further details on this are to be released soon, along with further information on the intended renewal process for companies with existing near-term targets.
Companies will continue to be able to set near-term targets for 2030 under the current Standard, and it is intended that companies will be able to use the revised Standard from 2027. A drawn-out consultation process is unlikely to be helpful for companies wishing to set or update their targets currently, but the SBTi has emphasised the need for the Standard to be sufficiently robust – a process which may take some time.
Businesses who have or who are looking to set SBTi-validated targets may wish to follow and engage with the development of the Standard in order to prepare for upcoming changes, and can respond to the public consultation on the revised Standard here.
[1] SBTi launches draft Corporate Net-Zero Standard V2 for consultation - Science Based Targets Initiative
[2] SBTi launches draft Corporate Net-Zero Standard V2 for consultation - Science Based Targets Initiative