SBTi Corporate Net-Zero Standard V2: What companies should know now

The Science Based Targets initiative (SBTi) has released a draft update to its Corporate Net-Zero Standard. While this draft is still open for public consultation, it signals significant changes that will shape how companies approach target setting and climate action in the future. The finalized standard is expected to be enforced by 2027, but companies should start preparing now to stay ahead of the curve.

In this article, we take a look at the proposed changes, what they mean for corporate climate strategies, and how companies can proactively prepare to stay compliant, credible, and competitive.

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What’s changing in the SBTi Net-Zero standard?
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The proposed updates are designed to clarify target-setting, enhance accountability, and ensure that companies are in line with the latest climate science. Some of the most important proposed changes include:

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Increased accountability and progress monitoring

• Inclusion of climate transition plan reporting to guide companies in creating tangible plans to meet their targets.
• Third-party assurance of emissions for Category A companies.
• Requirements for reporting progress and setting new targets at the end of each target cycle.

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New target requirements

• Separate targets for each scope rather than allowing combined targets.
• Dual targets for Scope 2, requiring both location-based and either market-based or zero-carbon electricity targets.
• More flexibility for Scope 3 decarbonization with "alignment targets" focused on net-zero aligned outcomes, such as increasing procurement from net-zero aligned suppliers.
• Scope 3 targets focusing on all significant scope 3 categories (>5% of total scope 3 emissions)

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Other changes

• Supplier engagement targets: requirements for companies to scale up supply from net-zero aligned suppliers.
• New categorization based on company size and location, affecting compliance requirements and making it feasible for more companies of different sizes and geographies to set net-zero targets.
• Clarity and increased opportunities for the use of indirect mitigation options, such as the Book & Claim approach, scaling up GHG removals even before 2050, and recognition for Beyond Value Chain Mitigation (BVCM). These can, if realized in the final version, increase opportunities for mitigating hard-to-abate emissions throughout the value chain.

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How could these changes affect your climate strategy?
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Although the standard is still under revision, its ambition is clear. While the final standard won't be enforced before 2027, companies aiming for net-zero should adjust their climate strategies now to avoid resource strain and tight deadlines later on. Active monitoring and adaptation to new best practices should be a part of every climate strategy. Many of the changes suggested by the SBTi are already practices leading companies are following, and others should follow them closely.

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With increasing demands around target setting, companies will need to:

• Ensure high data quality and auditability of their inventories.
• Establish climate transition plans that drive impactful decarbonization.
• Develop a well-defined monitoring and revision process for climate targets.
• Increase supplier engagement and encourage suppliers to take climate action.
• Monitor opportunities for including indirect mitigation options, GHG removals, and BVCM actions meeting the developing quality criteria for hard-to-abate emissions, while maintaining focus on direct decarbonization.
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By taking these steps early, companies can position themselves for success and avoid the strain of last-minute changes as deadlines approach.

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Potential risks to keep in mind

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While these changes are designed to improve accountability and clarity, they may also present challenges. 

Some of the key risks companies should consider include:

• Companies may need to revise target-setting practices, which can increase resource demands and require expanded climate expertise to align with evolving best practices.
  
  
• Companies must stay accountable to existing targets, especially if they’ve committed to ambitions aligned with new requirements but lack a clear implementation path. With increased accountability, setting targets with a clear plan and taking decisive action is more critical than ever.
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• Companies should maintain credibility by avoiding over-reliance on indirect mitigation, environmental attribute certificates, or removals. Instead, they should prioritize direct decarbonization and apply strict quality criteria to any alternative approaches to mitigating emissions that they cannot reduce directly.

However, changes also bring opportunities. Increased clarity in target setting, communication, and progress monitoring can offer greater stability and credibility for companies committed to decarbonization. 

The world is more aware than ever of the risks of climate change, yet we’re seeing companies pull back from their climate goals. Those who decide to take action can position themselves as leaders, attracting new market opportunities with sustainability-aligned partners and consumers.

According to McKinsey, the net-zero transition is reshaping global value chains, opening up to $12 trillion in annual revenue potential by 2030 across sectors like energy, transport, and buildings, as well as fast-growing green industries. Companies that play offense can position themselves at the forefront of this shift.

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What should companies do now?

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1. Engage and provide feedback: The draft standard is now open for public consultation. This gives companies the opportunity to contribute their input on defining the future of net-zero target setting.

2. Review and adjust targets in a timely manner: Even for companies not seeking SBTi validation, this framework offers best practices to help ensure their climate strategies remain future-proof.

3. Set up a climate transition plan: A strong transition plan serves as a roadmap for turning ambition into action. It outlines how the company must evolve to meet net-zero requirements, and maps out targets, decarbonization actions, and required resources. It is also a strong signal to stakeholders that the company is well prepared for the future. This can help win over new customers looking for net-zero aligned suppliers.

4. Make decarbonization actions impactful: With increased monitoring requirements, setting unachievable targets is no longer an option. Companies should identify emissions hotspots, find sustainable alternatives that reduce emissions, and implement policies and processes that reduce their climate impact.

5. Don't ignore the value chain: Scope 3 is a major emissions source for most companies, yet many feel they have little control over those emissions. Emissions reductions are, however, possible through collaboration and shared goals with value chain partners. With increasing requirements for scope 3 decarbonization, taking action has never been more important.
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       Great actions to start with include:

• Engage suppliers to increase emissions visibility by gathering first-hand data;
• Select low-emission goods and transport alternatives;
• Improve energy efficiency and circularity of own products to reduce downstream impacts;
• Encourage value chain partners, especially suppliers, to set their own climate targets and transition plans for net-zero.

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Conclusion

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The draft update to the SBTi Net-Zero Standard represents a significant shift toward more rigorous and transparent climate action. While it’s still open for consultation, companies should begin adjusting their strategies to ensure they are ready for the final requirements. By doing so, they will not only meet the demands of the evolving climate landscape but also position themselves as leaders in the transition to net-zero.

Want to better understand how your company can navigate these changes with confidence? Cozero’s ACT Module supports companies in setting, tracking, and adjusting climate targets in line with evolving standards like SBTi. Book a demo to explore how it can work for your organization.

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Resources

McKinsey. (2022). Playing offense to create value in the net-zero transition. Retrieved from https://www.mckinsey.com/capabilities/sustainability/our-insights/playing-offense-to-create-value-in-the-net-zero-transition

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