The Science Based Targets initiative (SBTi) recently released an updated version of the Corporate Net-Zero Standard V2.0, introducing greater flexibility in target-setting while increasing expectations for transparency. The updated standard provides organizations with best practices for setting net-zero targets aligned with a 1.5°C future.
“Version 2.0 reflects where climate target setting is headed,” said Lisa Becker, sustainability advisor at Pinion. “Companies are being asked to move beyond setting ambitious goals and show how those goals connect to real operating decisions, supply chain engagement, and capital planning.”
As organizations approach their next target-setting cycle, they’ll have additional pathways to demonstrate progress while still being expected to prioritize direct emissions reductions and transparently report implementation challenges. Below, our advisors highlight the key changes in Corporate Net-Zero Standard V2.0.
Applicability
Companies already using Version 1 can continue doing so through the end of 2027.
Companies with 2030 targets should begin planning for the next target cycle (2030–2035) under the Corporate Net-Zero Standard V2.0.
Major Changes in Version 2.0
- Greater Flexibility: There are now accommodations for small- and medium-sized enterprises and companies in lower-income countries.
- Context-Based Target Setting: Target ambition reflects a company’s opportunity to reduce emissions in different contexts depending on capital stock, supply chain, sector, and geography.
- Enhanced Transparency: Companies are expected to act transparently and use all available levers to reduce emissions, including market-based instruments, energy attributes, and commodity certificates based on chain-of-custody models with guardrails (see the GHG Protocol Land Sector and Removals Standard for more details).
- Expanded Use of Market-Based Instruments: Companies are allowed to use market-based instruments such as high integrity carbon credits and other climate contributions as complements and not a substitute for reducing direct emissions.
- Greater Accountability: Companies periodically assess progress and barriers to implementation, including the gap between emissions and targets as well as separate reporting and descriptions of actions and instruments used to reduce emissions.
New Approaches to Target Setting: Target Options
SBTi provides multiple options for GHG targets (outlined below). Large and medium-sized companies in high-income countries should note that limited assurance of base-year data is required.
- Scope 1 target setting options:
- Absolute emission reduction.
- Emissions intensity reduction for specific sectors, including an option for agriculture.
- Asset transition for companies whose capital stock turnover does not follow a linear or sector pathway.
- Scope 2 targets can be achieved through investment in low carbon power generation or contracts (PPAs, RECs, etc.).
- Scope 3 target setting options:
- Overarching emissions reduction targets with a linear reduction in emissions of approximately 10% or less of base year emissions with a net-zero year of 2050 or sooner.
- Overarching supplier/customer alignment targets, with tier 1 suppliers setting targets and tracking progress.
- Category or activity specific targets for companies with concentrated emissions in certain scope 3 categories, such as agriculture.
The SBTi Hierarchy for Action: Implementing Targets
SBTi identifies a hierarchy for meeting targets:
- Direct action or reducing emissions within the reporting company’s direct operations or value chain. This should be the priority.
- For example, the reporting company works with farmers within its supply chain to reduce fertilizer use.
- Actions within shared systems (activity pools) such as electricity grids, supply sheds, or logistics networks that companies purchase from or feed into but may not be directly in its supply chain. This may include market-based instruments that convey low-carbon attributes.
- For example, the reporting company purchases carbon credits from a project developer that works with farmers within the reporting company’s supply shed but not its supply chain to reduce fertilizer emissions.
- Sector-level actions where reduction opportunities in the shared systems are constrained, the company can take actions that relate to the same type of activity and occur in a relevant geographic system outside of its supply chain. This may include market-based instruments that convey low-carbon attributes.
- For example, the reporting company purchases carbon credits from a project developer that works with farmers outside its supply shed to reduce fertilizer emissions, when it is not possible to reduce activity pool emissions due to structural constraints.
Refer to the Net-Zero Standard V2.0 for specific project and market-based instrument criteria.
What This Means for Companies and Their Target Setting
SBTi’s Net-Zero Standard V2.0 signals a shift from a one-size-fits-all approach to more flexible implementation-focused climate strategies. Companies now have more flexibility in how they set and meet targets that align with a 1.5°C future. The use of market-based instruments and flexibility based on company size, sector, and geography make net-zero targets more accessible across different industries while ensuring rigor.
Contact Pinion’s sustainability team for assistance evaluating how SBTi’s Net-Zero Standard V2.0 may affect your climate strategy.
