Unpacking the SBTi Net-Zero Standard V2

The Science Based Targets initiative (SBTi) has become a cornerstone in guiding companies toward meaningful climate action. With over 10,000 companies having made commitments to date and nearly 8000 with validated targets, the momentum is undeniable.
Now, the SBTi is proposing a major revision to its Net-Zero Standard, known as Version 2 or just V2.
The consultation on the initial draft of V2 closed at the start of June, with a second round and pilot testing to follow. Therefore, all changes here are proposed only and subject to confirmation.

Why a new version?

The original SBTi Net-Zero Standard, released in 2021, focused heavily on ambition, encouraging companies to set science-based targets aligned with limiting global warming to 1.5°C.
Ambition is great, but the climate crisis demands more. We need action. The proposed V2 is intended to align with the latest climate science, particularly the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6), and to reflect emerging good practice.

A new classification system

A key change is the removal of the existing ‘simplified’ pathway for small and medium-sized enterprises (SME). Instead, companies will be categorised into two types:

• Category A: all large companies, plus medium-sized companies in upper and upper-middle income countries (UUMIC*)
• Category B: all small companies, plus medium-sized companies in lower and lower-middle income countries (LLMIC*)

*World Bank Classification

There are several differences. Under the proposed changes, category A companies will need to set targets within 12 months of commitment and to obtain third-party assurance for their base year data. Category B companies have 24 months and do not require assurance.
In UUMICs, category A and B companies roughly align to (respectively) existing non-SME and SME categorisation. However, in LLMICs, medium-sized organisations are now included in category B. This means that medium-sized organisations in LLMICs will need to meet fewer requirements than those in UUMICs.

Scope 3: A sharper focus

Scope 3 emissions – those that occur in a company’s value chain, rather than within direct operations – can be notoriously difficult to measure and manage. Current SBT guidance requires companies to cover 67% of their Scope 3 emissions in their near-term targets. The proposed update introduces a more granular approach: companies will need to set targets for all Scope 3 categories that account for more than 5% of total Scope 3 emissions AND for any emissions-intensive activities that exceed 1%. By tightening the criteria, the SBTi aims to drive more comprehensive and accountable emissions reductions across more individual scope 3 sources.

Emphasis on reporting and transparency

The proposal places more emphasis on ongoing reporting. Companies will be expected to disclose transition plans within 12 months of target validation, outlining how they intend to meet their targets, including mechanisms for improving data quality and tracking progress. This would reduce the risk of companies treating SBT commitment as a PR exercise by ensuring substance behind the commitment.
Additionally, the base year for emissions data must now be within three years of the validation year. This will mean targets based on relatively recent and relevant data, enhancing credibility and comparability.

Standardising timelines and target

The near-term target year will be standardised to either five years or a fixed milestone, replacing the current range of five to ten years. Furthermore, companies will now need to set two separate Scope 2 targets: one location based and a second either market based or zero carbon electricity based. This approach is intended to provide a more nuanced view of energy-related emissions and to encourage and reward the use of all low-carbon energy.

Introducing direct and indirect mitigation

Recognising the complexity of Scope 3 emissions, the updated standard introduces the concept of direct and indirect mitigation. This acknowledges that while some emissions can be directly influenced by a company, others may require broader systemic changes or collaboration with suppliers and customers.

Our thoughts: A necessary evolution

At Nature Positive, we feel that the proposed updates are a necessary evolution and welcome the shift from ambition to action.

We are also aware that the new requirements may increase the complexity and cost of setting targets, potentially discouraging new signatories. Internal and external buy-in will be essential to maintain momentum. We also support the enhanced Scope 3 coverage and the requirement for transition plans, noting that these elements will make targets more actionable and achievable. While the process may become more demanding, the payoff – reduced climate impact and enhanced corporate accountability – will be worth it.

What should companies considering SBTs do now?

For companies considering committing to a SBT, the message is clear: don’t wait. The existing standard remains in place for now, and near-term targets set under it will be honoured until 2030 or the end of the target time frame, whichever comes first.

It’s also a good time to prepare for the second public consultation on Draft 2, expected later this year. Engaging in this process will help shape the final standard and put your organisation ahead of the curve.