What does the latest SBTi Net Zero Standard mean for your company?
On March 18 2025, the Science Based Targets initiative (SBTi) released the draft of its updated Corporate Net-Zero Standard, introducing significant changes. This revision aims to enhance corporate accountability, improve emissions measurement, and refine target-setting methodologies, ensuring alignment with the latest climate science and regulatory expectations.
For companies already using Version 1.2 or considering setting science-based targets, understanding these updates is essential for strategy and planning. Here are the key changes businesses should be aware of:
Six key SBTi updates for businesses to know
1. Addressing Scope 3 challenges
The new draft acknowledges the difficulties in tracking Scope 3 emissions and proposes:
- Sector-specific benchmarks to assess decarbonisation progress.
- Greater use of third-party data verification to ensure transparency.
- Recognition of activity-based interventions (e.g. supplier engagement programmes, clean energy procurement) as legitimate ways to track progress.
These changes are crucial, as many companies struggle with Scope 3 data accuracy. The new framework offers more flexible yet rigorous methodologies to ensure better tracking and action.
2. Stronger target validation process
The focus is shifting from ambition to measurable progress. Previously, companies followed a linear path towards validation, but their actions to meet targets were not assessed. The new draft introduces:
- A maximum 12-month window to validate initial targets.
- A renewal process at the end of each target cycle to increase accountability and prevent greenwashing.
3. New company categorisation for greater fairness
Historically, the SBTi applied a one-size-fits-all approach, with separate validation only for SMEs. However, lower-income regions and smaller businesses often face unique challenges in data access and emissions reductions. Version 2.0 introduces two new categories:
- Category A – Large & medium companies in high-income regions: Must comply with all criteria.
- Category B – Small & medium companies in lower-income regions: Allowed more flexibility in some requirements.
This ensures a balanced yet ambitious approach to emissions reductions.
4. Stricter Scope 2 (electricity) targets
Reducing Scope 2 emissions (purchased electricity) has been one of the easiest ways for companies to decarbonise, often through Renewable Energy Certificates (RECs). However, with no standardised approach, companies could previously choose between market-based or location-based accounting methods. The new draft strengthens requirements by mandating:
- Location-based targets to track real-world grid emissions reductions
- Market-based or zero-carbon electricity targets to ensure active investment in clean energy.
This ensures companies are not just offsetting emissions on paper but contributing to actual grid decarbonisation.
5. Greater focus on value chain decarbonisation
A major shift in the draft is the stronger emphasis on Scope 3 reductions, which often make up the majority of a company’s carbon footprint. Companies must now:
- Prioritise high-emission areas in their supply chain.
- Engage directly with suppliers and customers to drive actual reductions.
- Use non-emissions-based metrics, such as procurement from net-zero-aligned suppliers.
This approach ensures companies take targeted action, rather than relying on broad reduction targets.
6. A more nuanced approach to carbon markets
The updated draft redefines the role of carbon credits, ensuring they are used strategically, transparently, and with high integrity. Key changes include:
- Companies must first reduce emissions before using credits – offsets can no longer be a substitute for real reductions.
- Recognition of high-quality carbon removal credits to address residual emissions.
- More structured reporting requirements for carbon credit use, ensuring quality and durability.
This means carbon markets remain relevant, but they must evolve towards high-quality, long-term carbon removal solutions rather than traditional offsetting.
What this means for corporate sustainability
More scrutiny on Scope 3 emissions
Companies will need to actively engage suppliers rather than simply reporting Scope 3 emissions. Expect:
- Tighter tracking and reduction requirements for supplier emissions.
- New industry-specific guidance for net-zero-aligned supply chains.
- More flexibility in measuring Scope 3 progress, including supplier engagement metrics.
A stronger focus on value chain development
Companies must go beyond reporting Scope 3 emissions to actively supporting suppliers in reducing their carbon footprint. This will require:
- Deeper supplier relationships to improve data accuracy and emission reductions.
- Climate-aligned procurement policies to ensure suppliers comply with net-zero goals.
- Greater collaboration to tackle shared sustainability challenges.
Carbon markets: A tool, not a shortcut
Companies will no longer be able to rely on carbon offsets as a quick fix. Instead, they must:
- Prioritise deep decarbonisation before using offsets.
- Reassess their carbon strategy to align with stricter SBTi guidelines. to align with stricter SBTi guidelines.
- Transition towards verified carbon removals (e.g. BECCS, DAC).
- Encourage corporate action in climate finance and carbon markets.
In conclusion
A pivotal shift in sustainability
The SBTi Net Zero Standard draft represents a major transformation in corporate sustainability. With stricter Scope 3 guidelines, a stronger focus on value chain decarbonisation, and a redefined approach to carbon markets, businesses must adapt quickly to stay ahead of regulatory and investor expectations.
This new framework is an opportunity for companies to demonstrate real leadership in tackling climate change by focusing on genuine emissions reductions, rather than relying on offsets. Companies that take proactive steps now will be better positioned for long-term success.
Written by Peter Jones
Head of Sustainability
Skilled in sustainability strategy and analytics, Peter is passionate about steering organisations toward a sustainable future, leveraging strategic vision and extensive experience for global betterment and bottom-line success.
