Is your science-based target (SBT) future-proofed?
The rules for setting credible SBTs are getting stricter. The Science Based Targets initiative (SBTi) is revising its Corporate Net-Zero Standard to close loopholes and drive more meaningful reductions. The new Standard - Version 2.0 - is expected to be finalised in 2027.
While this may seem far off, it's crucial to understand the proposed changes now to ensure your climate strategy is robust and future-proof.
What are science-based targets?
A science-based target is a goal to reduce a company's greenhouse gas emissions in line with what the latest climate science says is necessary to limit global warming to 1.5°C above pre-industrial levels.
These aren't just arbitrary goals - they are officially validated by the SBTi, a partnership of leading climate organisations. This validation ensures your target is credible and aligns with the global effort to combat climate change.
Why do businesses set SBTs?
Setting a science-based target signals environmental responsibility but is also good for business. It shows an organisation’s commitment to a sustainable future, which can build brand value and increase investor confidence. For many, it's also about staying ahead of the curve and preparing for potential future regulations.
What does net-zero mean?
Net-zero means cutting your emissions as much as possible and offsetting only what’s unavoidable. The SBTi is clear that reaching net carbon zero requires deep, direct emissions reductions across the entire value chain first. Organisations must reduce most of their footprint through meaningful changes, such as switching to renewable energy or electrifying transport.
What is the current Corporate-Net-Zero Standard?
At the moment, companies setting net-zero targets follow the Corporate Net-Zero Standard Version 1.2. This standard requires:
- Near-term targets (5–10 years): Companies must set science-based targets to cut emissions in line with 1.5°C.
- Long-term targets (by 2050 at the latest): Companies must reduce emissions by at least 90–95%. Only a small amount (5–10%) of residual emissions can be neutralised through permanent carbon removal.
- Scope coverage: Targets must cover all material scope 1, 2 and 3 emissions. Scope 3 targets are required if they make up more than 40% of total emissions.
- Validation: All targets must be approved by the SBTi to ensure alignment with climate science.
The upcoming Version 2.0 builds on these foundations but makes the rules stricter, especially around scope 3, deadlines, and planning.
What's proposed with the new Corporate Net-Zero Standard 2.0?
The proposed updates to SBTi’s Corporate Net-Zero Standard 2.0 place a stronger emphasis on accountability and credible transition plans. While the bar is being raised overall to ensure more rigorous emissions reductions, the Standard also recognises different capacities, giving smaller firms and those in lower-income regions a more achievable pathway.
In a webinar, thinkstep-anz's Principal Sustainability Specialist, Nicky Andrews, highlighted some of the changes businesses should be aware of. She explained the SBTi’s motivation behind the update, saying that “since the corporate net zero standard was first published, it has become increasingly clear that time is running out to tackle climate change.”
Nicky noted that the latest climate science provides a better understanding of the necessary steps needed to curb temperature rises and mitigate the worst effects of climate change. For that reason, she says, the SBTi has produced this new 2.0 Standard to not only increase ambition but also "make the entire process more robust."
Nicky noted that while the Corporate Net-Zero Standard 2.0 is currently in draft consultation, businesses setting a science-based target this year would still be using the 1.2 version. She advises them to keep a close eye on the proposed changes.
Some changes in the new Standard Corporate Net-Zero Standard 2.0:
- No more combining scopes: The new standard will require separate targets for scope 1 (direct) and scope 2 (indirect from electricity) emissions. This addresses a loophole in the previous standard where companies could buy large amounts of renewable energy certificates (RECs) to cover scope 2 emissions, which sometimes gave the appearance of strong progress while little was done to reduce scope 1 emissions.
- Dual scope 2 reporting: With version 2.0 of the Corporate Net-Zero Standard, companies are now required to report both location-based and market-based scope 2 emissions, rather than choosing one method. Location-based reporting reflects the average emissions intensity of the local electricity grid where the company operates. Market-based reporting, on the other hand, accounts for contractual choices such as RECs and power purchase agreements (PPAs).
This means companies can no longer rely solely on buying RECs to claim progress toward their targets. Instead, they must demonstrate genuine emissions reductions by improving energy efficiency in their operations and investing in direct renewable energy generation. Contractual agreements alone will no longer be enough to meet science-based targets.
- Mandatory scope 3 targets: For large and medium-sized companies, setting a scope 3 (value chain) target will no longer be optional. The new rules, with their stronger boundaries, will emphasise targeting the suppliers and activities that cause the most emissions to maximise impact.
- Tighter deadlines: Net-zero targets for scope 2 emissions must be achieved by 2040 instead of 2050.
- Five-year validation cycles: The new standard introduces a requirement for companies to revisit and reset their targets regularly, with a five-year validation cycle. This ensures targets stay relevant and align with the latest climate science.
- A full transition plan: “In this latest version 2.0, it can't just be an idea. You have to have a full transition plan to explain exactly how you plan to get to those reductions,” says Nicky. This shift from a simple target to a comprehensive plan will increase accountability and transparency.
How to prepare for the changes
To handle these changes, take a proactive approach. Nicky shares tips to help your business prepare for the new standard:
- Get your data in order: The new standard puts a greater emphasis on data quality. Start by improving your systems for tracking and measuring all emissions, especially scope 3. Having a robust a full record of your greenhouse gas emissions (a GHG inventory) is the foundation for a successful strategy that helps you manage risks, reduce costs, and stay ahead of the competition.
- Engage your supply chain: Since scope 3 targets will become mandatory, now is the time to start collaborating with your suppliers.
- Start with a science-aligned target: For companies that face hurdles to formal validation, a science-aligned path is a viable alternative. This means setting an ambitious goal based on SBTi principles, but without seeking formal validation. It's a strategic first step for companies that want to make a credible commitment but can't yet meet all the requirements.
- Develop a transition plan: Don't wait for 2027. Begin drafting your transition plan now, outlining exactly how you will achieve your emissions reductions. This planning will help you identify opportunities for innovation and cost savings while mitigating future risks.
Whether you're starting your net-zero journey or looking to align with the latest standards, our team of experts can guide you.
Don't wait for the new rules to take effect. Our experts can help you build a robust and ambitious climate strategy that is ready for the future. Contact us today to learn how we can guide your business.