SBTi Corporate Net-Zero Standard — The Definitive Reference

Executive Summary

The SBTi Corporate Net-Zero Standard is a voluntary but rigorously defined framework that translates the Paris Agreement’s 1.5°C goal into a corporate target-setting methodology. It requires every participating company to adopt two complementary targets: a near-term target covering a 5–10 year window that puts the company on a 1.5°C-aligned reduction trajectory, and a long-term target that drives emissions down by at least 90% across Scopes 1, 2, and 3 by 2050 at the latest. Power-sector companies must reach net-zero by 2040.

Residual emissions — the small share that remains once a company has completed its long-term target — must be counterbalanced at the target year using permanent carbon removal and storage. Offsets and avoided emissions cannot be used to claim progress against the underlying reduction targets. This distinction between neutralization and compensation is the single most important conceptual feature of the standard, and the one most frequently misunderstood in corporate communications.

What Is the SBTi Corporate Net-Zero Standard?

The Corporate Net-Zero Standard is the single global standard that defines the criteria a corporate net-zero target must satisfy to be considered consistent with climate science. It was first published on 28 October 2021 by the Science Based Targets initiative — a partnership of CDP, the United Nations Global Compact, the World Resources Institute, and the World Wide Fund for Nature. It exists alongside, and depends on, the Corporate Near-Term Criteria, which governs the 5–10 year reduction targets that are a mandatory prerequisite for any net-zero validation.

The standard performs three jobs that no other widely-adopted framework performs together. First, it defines the technical thresholds that distinguish a credible net-zero claim from a marketing assertion. Second, it provides the calculation methods (principally the Absolute Contraction Approach and the Sectoral Decarbonization Approach) that translate a global carbon budget into a per-company reduction trajectory. Third, it operates an independent validation service, run by SBTi Services Limited, that publishes validated targets on a public Target Dashboard.

Roughly ten thousand companies have validated science-based targets through this process as of early 2026. Many more have committed but not yet completed validation, and several thousand have used the standard as a reference without entering the formal validation pathway.

Why the Standard Exists

Net-zero pledges proliferated rapidly between 2019 and 2021. By the time the Corporate Net-Zero Standard launched, pledges nominally covered around 92% of global GDP and 88% of global emissions. The pledges, however, were not technically comparable. Some excluded Scope 3. Some treated offsets as primary reductions. Some set 2050 endpoints with no interim targets. Some disclosed a base year, others did not. Investors, journalists, regulators, and customers had no shared definition against which any individual claim could be evaluated.

The standard exists to close that definitional gap. It is, in effect, an attempt to convert a marketing claim (“net-zero by 2050”) into an audited technical specification — coverage, ambition, methodology, base year, removals quality, and a public record of progress.

Version History and Where We Are Today

The standard has undergone five revisions since its launch in 2021. Reading the standard as if it were unchanged is the single most common technical error made by sustainability teams returning to the framework after a multi-year absence. The table below traces the lineage and identifies what is operative right now.

Two related events shape the operative landscape today. On 19 March 2026 the SBTi published Version 1.2 of its FLAG Guidance, updating no-deforestation requirements and timelines. On 29 April 2026 the SBTi released a refreshed Absolute Contraction Approach that adjusts annual reduction rates by the time remaining to net-zero, while preserving the historic 4.2% annual rate floor. Both updates are operative immediately and apply to companies setting targets under V1.3.1.

Governance: Who Owns the Standard

The Science Based Targets initiative is a partnership of four institutions: CDP (formerly the Carbon Disclosure Project), the United Nations Global Compact, the World Resources Institute, and the World Wide Fund for Nature. The SBTi itself is a registered UK charity (Registered Charity number 1205768) and a private company limited by guarantee (Company number 14960097). Its registered office is at 66 Lincoln’s Inn Fields, London.

Validation is operated by SBTi Services Limited, a wholly-owned subsidiary of the SBTi, registered separately as a UK private limited company (Company number 15181058). The separation of standard-setting from validation services is a deliberate governance choice modelled on other ISO-aligned conformity-assessment regimes — it prevents the body that writes the rules from also being the body that adjudicates conformance with them.

Substantive technical decisions — including approval of new methods, revisions to existing standards, and the publication of sector-specific guidance — are made by the SBTi Technical Council, an independent body of subject-matter experts. Final adoption rests with the SBTi Board of Trustees. Standards revisions follow a published Standard Operating Procedure that requires open public consultation, pilot testing, and a documented basis-for-conclusions report.

Core Principles

The standard is anchored in five principles that govern every requirement and every validation decision.

Completeness. Targets must cover all material sources of emissions across the company’s value chain. The standard sets explicit minimum coverage thresholds — at least 95% of combined Scope 1 and Scope 2 emissions for both near-term and long-term targets, and at least 67% of Scope 3 emissions in near-term targets where Scope 3 represents at least 40% of total Scope 1+2+3 emissions, rising to 90% Scope 3 coverage in long-term targets.

Early action. The near-term target ensures the company begins reducing emissions immediately rather than deferring action to the late 2040s. This is the principle that distinguishes a science-based net-zero target from a 2050-only commitment.

Ambition. The reduction trajectory must be consistent with limiting warming to 1.5°C. Targets aligned only with “well below 2°C” are no longer accepted for new submissions in most sectors as of 15 July 2022, although some pre-existing targets remain valid.

Timeframe. Companies must commit to reaching net-zero no later than 2050, with the power sector required to reach net-zero by 2040 in line with sector decarbonization pathways.

Accountability. Targets are subject to independent validation by SBTi Services, public listing on the Target Dashboard, and a mandatory five-year review cycle. Failure to meet the review and update requirements triggers status changes that are visible to the public.

Near-Term Targets

Near-term targets are the foundation of the standard. They define the rate at which a company must reduce its emissions over the next 5–10 years and are a mandatory prerequisite for net-zero validation. A company cannot set a long-term target without a near-term target — the standard does not recognise “net-zero by 2050” as a standalone commitment.

Required parameters

A near-term target submitted under the Corporate Near-Term Criteria V5.3.1 must satisfy each of the following:

• Timeframe: a minimum of 5 and a maximum of 10 years from the date of submission.
• Base year: no earlier than 2015. Scope 1 and Scope 2 targets must use the same base year. Multi-year average base years are not accepted unless specified in applicable sector guidance.
• Most recent inventory year: for submissions in 2026, the most recent inventory year must be no earlier than 2024. Proxy data — applying one reporting year’s data to another reporting year — is not permitted.
• Scope 1 and 2 coverage: at least 95% of company-wide Scope 1 and Scope 2 emissions.
• Scope 3 coverage: if Scope 3 emissions are 40% or more of total Scope 1+2+3 emissions, Scope 3 must be included in near-term targets and must cover at least 67% of Scope 3 emissions. Companies that sell or distribute natural gas or other fossil fuels must set a separate Scope 3 target for the use of sold products regardless of share.
• Ambition: the forward-looking reduction rate must be consistent with reaching net-zero by 2050 at the latest, assuming a linear absolute reduction, linear intensity reduction, or intensity convergence between the most recent year and 2050.

Allowable exclusions

Companies may exclude up to 5% of combined Scope 1 and Scope 2 emissions from the target boundary, provided a documented rationale is supplied. Crucially, this 5% exclusion cannot be stacked on top of a separate 5% inventory-boundary exclusion — the standard treats the two as a single 5% ceiling against the as-reported, post-inventory-exclusion total. Excluding 5% from the inventory and then a further 5% from the target boundary is non-compliant.

Long-Term Targets

Long-term targets define the destination — model yours in the SBTi Net-Zero Target Calculator. Under the Corporate Net-Zero Standard, every long-term target must satisfy three thresholds:

• Reduction depth: at least 90% absolute reduction in greenhouse-gas emissions from the base year by 2050 at the latest. Power-sector companies must achieve this by 2040 at the latest.
• Scope 1 and 2 coverage: at least 95% — the same threshold as for near-term targets.
• Scope 3 coverage: at least 90%. This is materially higher than the 67% near-term floor and is one of the principal reasons companies treat near-term and long-term submissions as separate maturity stages.

Some sector-specific pathways set the long-term reduction floor higher than 90%. Most cross-sector and sector pathways drive Scope 1 and Scope 2 CO₂ emissions down by 90% or more from 2020 levels by 2050. Sector pathways may also require steeper or more gradual reductions in the near term, depending on the technical decarbonization potential of the sector.

Scope 1, Scope 2, and Scope 3 Coverage

Scope definitions follow the GHG Protocol Corporate Standard exactly. The SBTi adds requirements about which scopes must be included in targets, at what coverage threshold, and under which calculation method.

Scope 1 — direct emissions

Scope 1 captures direct greenhouse-gas emissions from sources owned or controlled by the company: stationary combustion (boilers, on-site generation), mobile combustion (company vehicles, owned transport fleets), process emissions (cement clinker production, refrigerant manufacture), and fugitive emissions (refrigerant leaks, methane venting). Under V1.3.1, Scope 1 must be included in all near-term and long-term targets at ≥95% coverage. Under draft V2.0, Scope 1 will require its own dedicated target, separate from Scope 2.

Scope 2 — purchased energy

Scope 2 captures indirect emissions from the generation of purchased electricity, steam, heat, and cooling consumed by the company. The GHG Protocol Scope 2 Guidance requires dual reporting using both location-based and market-based methods where applicable. Under V1.3.1, companies may set a renewable electricity target as an alternative to a Scope 2 reduction target — typically 80% renewable by 2025 and 100% by 2030 in line with RE100. Under draft V2.0, Scope 2 will require its own dedicated target, with a higher bar: low-carbon electricity sourced from the same market as consumed and matched on an hourly basis, with a phased implementation timeline.

Scope 3 — value chain

Scope 3 captures the fifteen GHG Protocol value-chain categories: purchased goods and services, capital goods, fuel and energy-related activities, upstream transportation, waste, business travel, employee commuting, upstream and downstream leased assets, processing and use and end-of-life of sold products, downstream transportation, franchises, and investments. The 40%-of-total trigger and the 67% near-term coverage floor apply here. Under V1.3.1, Scope 3 may be addressed through reduction targets, supplier engagement targets, or a combination of both. Supplier engagement targets are typically expressed as the share of suppliers (by emissions or spend) that will themselves have validated science-based targets within five years.

The Absolute Contraction Approach (ACA)

The Absolute Contraction Approach is the cross-sector method used by approximately four out of five companies with validated science-based targets. It is conceptually simple: it requires the company to reduce its absolute emissions by a fixed annual percentage rate that is consistent with the global reduction rate required to limit warming to 1.5°C — regardless of the company’s growth, sector, or geography.

The ACA’s strength is comparability. Because the reduction rate is set by a global carbon budget, not by the company’s own performance, lenders, regulators, and investors can compare the ambition of any two companies on the same basis. It also closes a loophole that earlier intensity-based methods left open: under intensity targets, a fast-growing company could improve its emissions per unit of revenue while increasing absolute emissions. The ACA forbids that outcome.

The 4.2% annual rate floor

Under the historic version of the ACA, companies were required to reduce Scope 1 and Scope 2 emissions by at least 4.2% per year on a linear basis to be 1.5°C-aligned, and by at least 2.5% per year for Scope 3. These rates are derived from the IPCC’s 1.5°C-with-no-or-limited-overshoot scenarios, allocated to the corporate sector.

The April 2026 ACA refresh

On 29 April 2026 the SBTi released a refresh to the ACA. Approved as an urgent revision by the Technical Council, the refresh adjusts the required annual reduction rate by the time a company has remaining to reach net-zero from its chosen base year. The refresh addresses an unintended consequence of the original method: as time passed and the 2050 endpoint drew closer, the original ACA produced increasingly steep — and in some cases prohibitive — reduction rates for companies setting targets later in the decade. The refresh re-distributes the ambition across the available time horizon, while preserving the 4.2% annual rate floor and the requirement to reach net-zero by 2050 at the latest.

Targets validated under the previous ACA remain valid. No new data inputs are required from companies. Updated tools within the SBTi Validation Portal apply the revised calculation automatically. The refresh applies to all companies using the ACA, including FLAG and energy-and-industrial targets.

The Sectoral Decarbonization Approach (SDA)

The Sectoral Decarbonization Approach is the alternative target-setting method used in heavy-emitting sectors where the global cross-sector pathway is a poor representation of the technical decarbonization potential of the sector. It is built from sector-specific emissions trajectories derived primarily from the IEA’s Energy Technology Perspectives modelling and from sector-specific roadmaps developed in collaboration with industry experts.

Under the SDA, companies set physical-intensity targets — emissions per unit of physical output (e.g. kgCO₂/MWh for power generation, tCO₂/tonne of cement, kgCO₂/m² for buildings) — that converge with the sector’s 2050 (or earlier) endpoint. The intensity convergence avoids the inequity that a uniform absolute reduction rate would impose on companies that started from very different intensities.

Sectors with mandatory or recommended SDA pathways under V1.3.1 include power, cement, steel, buildings, FLAG (where the FLAG Guidance defines the sector pathway), maritime shipping, aviation, and chemicals. The full eligibility table for each sector is published in the SBTi Criteria Assessment Indicators.

ACA versus SDA — which method applies

If the company operates entirely in a sector without a defined SDA pathway, the ACA applies. If the company operates in a sector with an SDA pathway, the SDA applies to the emissions covered by that pathway, and the ACA may be used for any remaining emissions outside the SDA scope. This is most common in industrial conglomerates whose operations span multiple sectors.

Residual Emissions, Neutralization, and Carbon Removals

Once a company has reduced its emissions by 90% or more across Scopes 1, 2, and 3 from its base year, a small residual remains. This residual — typically 10% or less of base-year emissions — must be neutralized at the net-zero target year using permanent carbon removal and storage. Only when the long-term reduction has been achieved and the residual has been neutralized can the company claim to have reached net-zero.

The neutralization–compensation distinction

This is the single most important concept in the standard, and the one most frequently obscured in corporate communications. The standard treats two activities as fundamentally different:

Neutralization is the act of permanently removing greenhouse gases from the atmosphere and storing them, in a quantity equal to the company’s residual emissions, at the net-zero target year and in every subsequent year. Neutralization counterbalances the small share of emissions that cannot technically be eliminated even after deep decarbonization. Only permanent removals — those with multi-decade or multi-century storage — qualify.

Compensation is the use of avoided-emissions or short-lived-removal credits to claim that an unabated tonne of emissions has been “offset”. Compensation is not eligible to claim progress against any SBTi reduction target — neither near-term nor long-term — and it is not eligible to neutralize residual emissions at the net-zero target year.

Beyond Value Chain Mitigation (BVCM)

Beyond Value Chain Mitigation is the SBTi’s term for climate-mitigation activities a company undertakes outside its own value chain — financing emissions reductions or removals in geographies, sectors, or activities the company does not operate in. The SBTi recommends that companies invest in BVCM in addition to their near-term and long-term science-based targets, on the principle that the global pace of decarbonization required to limit warming to 1.5°C exceeds what corporate value-chain action alone will deliver.

Critically, BVCM is not creditable against any SBTi target. It is not a substitute for value-chain reductions. It is treated as a separate, additional contribution to societal net-zero. Companies that purchase high-quality carbon credits as part of a BVCM strategy must report those credits separately from any progress claim against their reduction targets.

Under the V2.0 draft, BVCM is being reframed as part of a broader “ongoing emissions responsibility” framework. The draft introduces the term “supplementary climate contributions” to encompass various pathways for taking responsibility for emissions a company continues to produce while transitioning to net-zero. The detailed mechanics of this framework are still under consultation and may shift before publication.

Base Year and Target Year Rules

Base year selection is one of the most consequential decisions a company makes during the target-setting process. It defines the reference point against which all future progress is measured, and it has both substantive and presentational consequences.

Base year requirements

• The base year must be no earlier than 2015.
• Scope 1 and Scope 2 targets must use the same base year.
• Scope 3 targets are recommended, but not required, to use the same base year as Scope 1 and Scope 2. Where a company sets multiple Scope 3 targets, the base year must be consistent across all of them.
• Multi-year average base years are not accepted, except where specified in applicable sector guidance.
• The base year should be representative — not anomalous due to extended shutdowns, natural disasters, one-off events, or unusual economic conditions.

Base-year recalculation triggers

The standard requires base-year emissions to be recalculated when material changes occur — acquisitions, divestments, methodology changes, factor source changes, or category-by-category changes that materially affect the company’s reported footprint. The threshold is 5%: if base-year emissions for the scopes covered by a given target change by 5% or more, the target must be recalculated. The recalculation is scope-specific. A company with a validated Scope 1+2 target whose Scope 1+2 base-year emissions change by 5% or more triggers a recalculation; a company with a validated Scope 1+2+3 target whose Scope 1+2+3 base-year emissions change by 5% or more triggers a recalculation.

Most recent inventory year

The standard requires a recent inventory year to be submitted alongside the target. For submissions in 2026, the most recent inventory year must be no earlier than 2024 — that is, 2024 or 2025. Proxy data, applying one year’s data to another reporting year, is not permitted.

Sector-Specific Pathways

Where the SBTi has published sector-specific guidance, that guidance supersedes the cross-sector criteria for the activities and emissions covered by it. Companies in these sectors are required to apply the sector pathway to in-scope activities and may use the cross-sector ACA only for activities outside the sector pathway.

FLAG (Forest, Land and Agriculture)

The Forest, Land and Agriculture sector represents roughly 22% of global greenhouse-gas emissions and is the third-highest emitting sector after energy and industry. The SBTi FLAG Guidance, first published in September 2022 and now at Version 1.2 (19 March 2026), is the world’s first standard method for companies in land-intensive sectors to set science-based targets that include land-related emissions and removals.

Who must set FLAG targets

FLAG targets are mandatory for any company that meets either of two triggers:

1. Sector membership: the company operates in Forest and Paper Products, Food Production, Food and Beverage Processing, Food and Staples Retailing, or Tobacco.
2. Emissions threshold: the company’s FLAG-related gross emissions are 20% or more of its total Scope 1+2+3 emissions.

Companies that meet neither trigger may still set FLAG targets voluntarily.

FLAG target requirements

• Near-term FLAG target: 5–10 year emissions reduction in line with climate science. The default sector pathway requires approximately 30.3% absolute reduction in FLAG emissions by 2030.
• Long-term FLAG target: at least 72% reduction in FLAG emissions by 2050.
• Removals: unlike non-FLAG targets, FLAG near-term targets can count carbon removals associated with land-based activities (improved forest management, soil carbon enhancement, silvopasture). This is the only place in the standard where removals contribute to near-term progress.
• No-deforestation commitment: a mandatory prerequisite for validation, not a target type. Companies setting FLAG targets for the first time have up to two years after submission to eliminate deforestation, with an absolute deadline of 31 December 2030 for submissions made after 2028. The expected deforestation cutoff date is 2020 or earlier; where 2020 is not feasible, the cutoff must be no later than three years prior to first FLAG submission.
• Bioenergy: direct CO₂ emissions from biomass combustion, processing, and distribution must be included in the target boundary, alongside the land-use emissions and removals associated with bioenergy feedstock.

What changed in FLAG V1.2 (March 2026)

Version 1.2 made five targeted changes, focused on Criterion 1 and Criterion 4. The most material updates: companies that already have validated non-FLAG targets but have not yet set a FLAG target must now do so as part of their mandatory five-year review, replacing the earlier requirement to add a FLAG target within six months of the GHG Protocol Land Sector and Removals Standard publication. The previous 2025 no-deforestation deadline has been removed and replaced with the two-years-from-submission timeline above.

The Target Validation Process

Validation is the formal process through which a target moves from a corporate intention to a published, science-based commitment listed on the SBTi Target Dashboard. The process is operated by SBTi Services Limited and follows a published Procedure for Validation of SBTi Targets.

The process in stages

1. Build the inventory. Develop a complete GHG inventory under the GHG Protocol Corporate Standard covering Scope 1, Scope 2, and a complete Scope 3 screening across all 15 categories.
2. Define the boundary. Determine the consolidation approach (operational control or financial control) and document inclusions and exclusions.
3. Select the method. Choose between the Absolute Contraction Approach, the Sectoral Decarbonization Approach, or — for Scope 3 — supplier engagement targets, economic intensity, or physical intensity. Match the method to sector requirements.
4. Calculate the targets. Apply the SBTi target-setting tools (separate tools for near-term and net-zero) to compute the required reduction trajectory.
5. Internal sign-off. Secure executive approval and document the rationale for material choices (base year, exclusions, method).
6. Submit a commitment letter. Companies new to the SBTi may begin with a commitment letter, which gives them 24 months to submit validated targets.
7. Submit targets to SBTi Services for validation. The submission package must include the inventory, the target calculations, the methodology rationale, and supporting documentation against each Criteria Assessment Indicator.
8. Validation review. SBTi Services reviews the submission against the operative Criteria Assessment Indicators. The review typically takes several weeks. Targets that fail to meet ambition or coverage thresholds are returned for revision.
9. Publication on the Target Dashboard. Validated targets are published, listing the company name, sector, target type, scope, target year, base year, ambition, and temperature classification.
10. Annual reporting. Companies are expected to report progress annually, typically through CDP disclosure or equivalent public reporting.
11. Mandatory five-year review. Every five years, companies must review their targets and, if needed, update them to align with the latest SBTi criteria. The review begins at the trigger date — the end of the month, five years after the initial targets’ validation publication. Companies have 6 months to complete the review and submit evidence; if updates are required, revised targets must be submitted within 12 months of the trigger date.

The Commitment Compliance Policy

A commitment is an expression of intent. The Commitment Compliance Policy, in effect since January 2023, requires companies to submit validated targets within 24 months of making a commitment. Companies that fail to meet this deadline have their commitment status changed to “Commitment Removed” on the Target Dashboard. The status is reversible: companies that subsequently complete validation are reclassified as “Targets Set”.

In March 2024, the SBTi exercised this policy in a high-profile episode that reshaped how the corporate world perceives SBTi commitments. The status of 239 companies — including Microsoft, Walmart, Procter & Gamble, Unilever, Eurostar, Asda, Marks & Spencer, X, Diageo, JBS, EDF, United Airlines, and Johnson & Johnson — was changed to “Commitment Removed”. Approximately 60% of these companies retained their separate near-term targets even as their net-zero commitments were withdrawn. A small number — around 14 companies as of mid-2025, including Unilever and Johnson & Johnson — subsequently had near-term targets validated. The episode is examined in more detail in the Criticisms and Limitations section below.

Relationship with the GHG Protocol

The SBTi standard is built on the GHG Protocol. The relationship is one of strict dependence — every SBTi inventory must be GHG Protocol compliant, and SBTi will not validate targets built on accounting that does not adhere to the GHG Protocol Corporate Standard and the relevant SBTi Criteria Assessment Indicators for accounting.

Three GHG Protocol documents anchor SBTi practice:

• The GHG Protocol Corporate Standard defines Scope 1, Scope 2, and Scope 3, the operational-control and financial-control consolidation approaches, and the boundaries of corporate inventories. See the GreenCalculus GHG Protocol Corporate Standard reference page.
• The GHG Protocol Scope 2 Guidance requires dual reporting of purchased electricity using both the location-based method (grid-average emission factors for the geography where consumption occurs) and the market-based method (contractual instruments such as supplier-specific factors, energy attribute certificates, and PPAs).
• The GHG Protocol Corporate Value Chain (Scope 3) Standard defines the 15 Scope 3 categories and provides calculation guidance for each. See the GreenCalculus GHG Protocol Scope 3 Standard reference page.

The newer GHG Protocol Land Sector and Removals Standard (published 2026) adds detailed accounting requirements for land management, land-use change, and corporate-attributed removals. The SBTi FLAG Guidance V1.2 has been updated to reflect this Standard, and FLAG-eligible companies are expected to migrate to its accounting framework over the next reporting cycles.

Relationship with IPCC AR6 and 1.5°C Pathways

The SBTi’s reduction trajectories are derived from the IPCC’s 1.5°C-with-no-or-limited-overshoot scenarios, as assessed in the Sixth Assessment Report (AR6). The Absolute Contraction Approach takes the global remaining carbon budget consistent with limiting warming to 1.5°C and translates it into an annual reduction rate that, when applied across the corporate sector, results in cumulative emissions consistent with that budget.

The AR6 carbon budget framing carries with it a critical qualifier: the 1.5°C pathway requires emissions to peak before 2025 and decline rapidly through the 2030s. Delayed action shrinks the available budget and forces steeper reductions later. The April 2026 ACA refresh re-allocates ambition across remaining time on this basis.

Global Warming Potentials applied to non-CO₂ gases follow IPCC AR6 (the 100-year time horizon values from Working Group I, Table 7.SM.7). The GHG Protocol Corporate Standard requires AR6 GWPs for current reporting; AR5 values are retained only for legacy comparisons. See the GreenCalculus IPCC AR6 reference page for the GWP values applied to Kyoto gases.

The Sectoral Decarbonization Approach pathways draw additionally on the IEA Energy Technology Perspectives and IEA Net Zero Roadmap modelling. Pathways for power generation, cement, steel, buildings, and aviation are derived from this body of work and updated as IEA scenarios are revised.

Interaction with CSRD, IFRS S2, and the SEC

The SBTi standard is voluntary. The disclosure regimes that depend on or reference it are not. Three frameworks materially shape the operating environment for SBTi-aligned companies.

CSRD and ESRS E1

The European Union’s Corporate Sustainability Reporting Directive (CSRD) requires in-scope companies to disclose under the European Sustainability Reporting Standards (ESRS). ESRS E1 (Climate change) is the most material standard for SBTi-aligned companies. ESRS E1 disclosure datapoints align tightly with the inventory and target outputs the SBTi process produces:

• E1-1 Transition plan: requires a transition plan compatible with limiting warming to 1.5°C — directly addressed by an SBTi-validated target trajectory and (under V2.0) a publicly disclosed transition plan within 12 months of validation.
• E1-4 Targets: disclosure of GHG-emission reduction targets, base year, target year, scope, and methodology — directly addressed by SBTi target metadata.
• E1-5 Energy consumption and mix: closely linked to Scope 2 reporting and renewable-electricity targets.
• E1-6 Gross GHG emissions: Scope 1, Scope 2 (location-based and market-based), and Scope 3 by category.
• E1-7 GHG removals and storage: reporting on removals, including those used for residual neutralization.
• E1-9 Anticipated financial effects: the financial implications of climate-related risks and opportunities, including the cost of decarbonization implied by the SBTi trajectory.

An SBTi-validated target does not satisfy ESRS E1 disclosure requirements automatically — ESRS E1 requires substantially more granular disclosure than SBTi target metadata — but it is the most efficient single source of the underlying technical content. See the GreenCalculus CSRD / ESRS E1 reference page.

IFRS S2

The IFRS Sustainability Disclosure Standards, published by the International Sustainability Standards Board (ISSB), include IFRS S2 (Climate-related Disclosures). IFRS S2 references the GHG Protocol for emissions accounting and requires Scope 1, Scope 2, and Scope 3 disclosure for in-scope reporters. SBTi target validation is not required by IFRS S2, but SBTi-aligned target setting provides the substantive content that S2’s disclosure requirements call for.

SEC

The U.S. Securities and Exchange Commission’s climate disclosure rule, finalised in 2024, requires registrants to disclose material climate-related risks, GHG emissions for accelerated and large accelerated filers, and certain transition-plan information. Scope 3 was excluded from the final rule. SBTi target validation is not referenced in the SEC rule but is widely cited by registrants as the substantive basis for their climate-related targets.

The V2.0 Transition: What Changes from January 2028

Version 2.0 of the Corporate Net-Zero Standard is currently in its second public consultation, which closed on 12 December 2025. Publication is expected in 2026, with V2.0 becoming mandatory for new targets from 1 January 2028. Companies setting new targets in 2026 and 2027 may continue to use V1.3.1; targets validated under V1.3.1 remain valid for the duration of their target timeframe.

The V2.0 draft is the most significant revision to the standard since its launch. The structural changes below are drawn from the second consultation draft and are subject to refinement before publication. Treat them as the SBTi’s stated direction of travel rather than as final criteria.

Two company categories

V2.0 introduces two categories that determine which requirements apply to a company:

• Category A: large companies, plus medium-sized companies in higher-income geographies. Required to set near-term targets across Scopes 1, 2, and 3, and long-term targets for Scopes 1 and 2 (long-term Scope 3 targets are optional in the current draft, though under consultation).
• Category B: medium-sized companies in upper-middle, lower-middle, and lower-income geographies. Required to set near-term targets for Scopes 1 and 2 only. Long-term targets are optional. Strongly encouraged but not required to extend to Scope 3.

Separate Scope 1 and Scope 2 targets

The historic option to combine Scope 1 and Scope 2 into a single target is removed. Each scope must have its own dedicated target, ensuring that fast Scope 2 reductions (typically achieved through renewable-electricity procurement) cannot mask slow Scope 1 progress. Scope 1 must be reduced through equipment changes, process improvements, electrification, fuel switching, and other operational measures.

Hourly-matched zero-carbon electricity for Scope 2

The Scope 2 target tightens materially. Rather than relying on annual-average renewable electricity certificates, companies will be required to procure electricity from verifiable zero-carbon sources matched to their consumption on an hourly basis, sourced from the same market in which the consumption occurs. Implementation is phased.

Ongoing emissions responsibility framework

BVCM is reframed as part of a broader “ongoing emissions responsibility” framework. The draft introduces “supplementary climate contributions” as the umbrella term for various pathways through which a company takes responsibility for emissions it continues to produce while transitioning to net-zero. Traditional BVCM activities, including the purchase of high-quality carbon credits for verified reductions or removals, remain valid options within this broader framework.

Removals split for residual neutralization

The draft proposes an illustrative split for the residual emissions a company must neutralize at its net-zero target year: roughly 41% from long-lived storage solutions (centuries to millennia), with the remaining 59% addressable through short-lived removals with decadal storage timeframes. These percentages are flagged as illustrative in the draft and will be refined as climate science evolves.

Stronger assurance and transparency

Category A companies will be expected to publish credible transition plans within 12 months of target validation. Baseline emissions data must be independently verified for larger companies before targets are approved. Performance reviews are formalised every five years, and the SBTi may carry out spot checks between cycles in response to complaints, allegations, or follow-up.

Common Misinterpretations

Eight high-frequency misreadings of the standard. Each is the kind of error that makes its way into corporate sustainability reports, trade-press coverage, and consultancy decks — and each is the kind of error a careful validator catches.

Common Reporting Errors

Eight technical errors that surface repeatedly during validation review and during external assurance:

1. Choosing a non-representative base year. Selecting 2020 (a year of unusual operational disruption for many sectors) without documented justification or recalibration to a representative baseline.
2. Using different base years for Scope 1 and Scope 2. The standard requires the same base year. Using 2020 for Scope 1 and 2018 for Scope 2 because the data was more readily available is non-compliant.
3. Treating renewable energy certificates as Scope 1 reductions. RECs and equivalent instruments reduce market-based Scope 2 emissions, not Scope 1. Confusing the two is a common error during the early years of a renewable-electricity programme.
4. Treating offsets as reductions. Reporting “X tonnes of emissions, of which Y tonnes were offset” and then deducting Y from the gross figure to claim progress against a reduction target. The SBTi standard does not permit this.
5. Double-counting removals. A removal that is sold as a credit to a third party cannot also be claimed against the seller’s residual neutralization. Removal accounting must be clear about ownership.
6. Excluding more than 5% without rationale. Either at the inventory boundary, at the target boundary, or stacked across both. Any exclusion above 5% combined is non-compliant.
7. Using avoided emissions toward targets. Particularly common in technology-sector reporting, where productivity, efficiency, or substitution claims are converted into avoided-emissions estimates and then applied to the company’s own footprint.
8. Missing the 67% Scope 3 floor. Submitting Scope 3 targets that cover, for example, only Categories 1 and 6 when those represent 50% of Scope 3 emissions. The 67% floor applies to total Scope 3 coverage when Scope 3 is at least 40% of the total inventory.

Enterprise Implementation Workflow

For an enterprise approaching the SBTi process for the first time, the practical workflow runs roughly as follows. Each stage has a typical duration and a set of cross-functional dependencies that determine how quickly a company can move from intention to validated target.

1. Inventory build (3–9 months). Develop a complete GHG Protocol-compliant inventory across Scopes 1, 2, and 3. For most enterprises, this is the longest single stage. Scope 3 screening (rapid identification of material categories) precedes detailed measurement.
2. Boundary documentation (1 month). Document the consolidation approach (operational or financial control), the entities included, the entities excluded, and the rationale for any exclusions.
3. Materiality screening (1–2 months). Identify which Scope 3 categories are material under the standard. Test whether Scope 3 crosses the 40% threshold. Test whether FLAG-related emissions cross the 20% threshold.
4. Method selection (1 month). Choose between ACA, SDA, supplier engagement, and physical or economic intensity for each scope and category. Confirm sector requirements take precedence.
5. Target calculation (1–2 months). Apply the SBTi target-setting tools to compute near-term and long-term targets. Iterate to test alternative base years, target years, and exclusion rationales.
6. Internal sign-off (1–3 months). Secure executive and board approval. For most enterprises, this is the second-longest stage and frequently the most under-budgeted.
7. Commitment letter (optional, immediate). Companies new to the SBTi may submit a commitment letter to gain 24 months to complete validation.
8. Submission to SBTi Services (1 month preparation, several weeks for review). Submit the validation package with all required documentation.
9. Publication on the Target Dashboard. Validated targets are published, listing the technical metadata.
10. Annual progress reporting (ongoing). Annual disclosure of progress, typically through CDP and the company’s annual sustainability report.
11. Mandatory five-year review. At the trigger date, six months to complete the review and submit evidence; if updates are required, twelve months from the trigger date to submit revised targets.

Data Collection Challenges

The standard’s stated expectation is that companies should select data that is the most complete, reliable, and representative in terms of technology, time, and geography. In practice, this expectation collides with the reality of corporate data infrastructure — particularly for Scope 3.

Scope 3 data quality maturity ladder

Most companies climb a recognisable ladder over multiple reporting cycles:

1. Spend-based estimation. Procurement spend is multiplied by sector-specific economic emission factors (typically EXIOBASE, USEEIO, or equivalent EEIO databases). Acceptable as a starting point but limits the visibility of supplier-level reduction efforts.
2. Hybrid spend-and-activity-based. Material categories are upgraded to activity data (mass, distance, energy) where available; remaining categories stay spend-based.
3. Activity-based with secondary factors. All material categories use activity data with secondary emission factors (DEFRA, EPA, IPCC defaults).
4. Activity-based with primary supplier data. Material categories use supplier-specific factors collected through CDP Supply Chain or direct supplier engagement.

The SBTi expects companies to demonstrate a credible improvement trajectory across this ladder, not perfection at submission. Spend-based data is permitted as a starting point provided the company has a clear plan to migrate to activity-based and supplier-specific data over time.

Supplier engagement

Supplier engagement targets — committing to a defined share of suppliers (by emissions or spend) having their own validated science-based targets within five years — are an alternative to numerical Scope 3 reduction targets. They are particularly suited to companies whose Scope 3 is concentrated in upstream purchased goods and services, where the company has no direct operational control but can use procurement leverage.

Assurance and Audit Considerations

SBTi target validation is not assurance of the underlying inventory. The two activities are distinct and complementary:

• SBTi target validation reviews the target itself — its calculation, its alignment with operative criteria, its coverage, and its ambition.
• Independent assurance of the GHG inventory reviews the underlying emissions data, typically under ISAE 3000 (the general framework for assurance engagements other than audits or reviews) or ISAE 3410 (the assurance standard specific to GHG statements). The AA1000 family of standards is also widely applied.

Most jurisdictions are moving toward mandatory limited assurance of GHG inventories as a step toward eventual reasonable assurance. CSRD requires limited assurance of sustainability statements as of the first reporting cycle, with a planned transition to reasonable assurance once a dedicated assurance standard is developed.

What auditors look for

An assurance engagement on a GHG inventory underpinning an SBTi target focuses on:

• Boundary documentation. Has the consolidation approach been applied consistently? Are inclusions and exclusions explicit and justified?
• Factor traceability. Can every emission factor used be traced to a published, dated source (DEFRA, IPCC, EPA, IEA, ICE, supplier-specific)?
• Recalculation policy. Is there a documented policy for base-year recalculation triggered by acquisitions, divestments, methodology changes, or factor revisions?
• Internal controls. Are there documented controls around data collection, factor application, and GWP application?
• Reconciliation. Does the reported inventory reconcile to the underlying activity data and to the company’s financial systems where relevant (e.g. fuel spend reconciling to Scope 1 stationary combustion)?

Under the V2.0 draft, the SBTi expects to require independent verification of baseline emissions data for larger companies before target approval. This will further integrate the SBTi process with the broader assurance architecture that is converging across CSRD, IFRS S2, and ISO 14064-1.

Industry-Specific Implementation Notes

Brief, opinionated notes on what tends to dominate implementation effort by sector:

Manufacturing

Process emissions and on-site combustion typically dominate Scope 1; purchased electricity and steam dominate Scope 2; upstream purchased materials dominate Scope 3. Materiality screening should focus on Scope 3 Categories 1 (purchased goods), 4 (upstream transport), and 11 (use of sold products) where applicable. Sector pathways often apply.

Financial Services

Scope 3 Category 15 (investments) typically represents the overwhelming majority of total emissions and is governed by the Financial Institutions Net-Zero Standard rather than the Corporate Net-Zero Standard. The 5%-of-revenue test determines which standard applies.

Real Estate

Operational emissions of leased and owned buildings dominate Scope 1 and Scope 2. Embodied carbon of new construction and major refurbishment falls under Scope 3 Category 2 (capital goods). The Buildings sector pathway applies, with separate operational and embodied targets.

Apparel

Scope 3 typically represents over 90% of total emissions, dominated by Category 1 (purchased goods — fabric, dyeing, garment manufacture). Apparel sector guidance applies; supplier engagement is critical given the depth and fragmentation of upstream supply chains.

Food and beverage

FLAG targets are almost certainly mandatory. Scope 3 Category 1 (purchased agricultural commodities) and Category 12 (end-of-life of packaging and food waste) typically dominate. The FLAG no-deforestation commitment requires demonstrable supply-chain traceability, not just a policy declaration.

Technology and software

Scope 2 (data centre electricity), Scope 3 Category 1 (hardware procurement), and Scope 3 Category 11 (use of sold products — for hardware vendors) typically dominate. Avoided-emissions claims (productivity gains for customers) cannot count toward targets and must be reported separately if at all.

Oil and gas

Currently paused — companies in this sector cannot submit SBTi targets pending publication of sector-specific guidance. Companies should monitor the SBTi Sectors page for status updates.

Real-World Examples and Outcomes

The SBTi Target Dashboard publishes the technical metadata of every validated target. Reading the dashboard is the most direct way to develop intuition for what a credible SBTi target looks like in practice. The following examples illustrate three structural patterns that recur on the dashboard. All target details should be cross-checked against the live dashboard at the time of any external citation, as targets are subject to mandatory five-year review.

Pattern A — large industrial conglomerate using ACA + SDA in combination

A large diversified manufacturer with operations spanning chemicals, building materials, and consumer goods will typically apply the SDA pathway to operations covered by sector pathways (chemicals, cement) and the cross-sector ACA to remaining operations. Near-term targets often combine an absolute Scope 1+2 reduction with a supplier-engagement Scope 3 target. Long-term targets converge on the 90% absolute reduction floor.

Pattern B — fast-growing consumer technology company on cross-sector ACA

A consumer-technology company growing at 10–20% annually will typically apply the cross-sector ACA to all scopes. The fact that ACA is absolute, not intensity-based, means the company cannot grow its way out of its target — emissions reductions must outpace business growth. The April 2026 ACA refresh provides some relief on annual-rate steepness for companies setting targets later in the decade.

Pattern C — food retailer with FLAG mandatory

A multinational food retailer will almost certainly cross the FLAG sector membership trigger. Scope 3 Category 1 (purchased agricultural commodities) typically dominates the inventory and is treated under FLAG. The no-deforestation commitment applies, with a 2020 cutoff date and a 2-year-from-validation elimination timeline.

Median observed reduction performance

Independent academic analysis of the SBTi progress dataset has found that companies with validated targets are reducing emissions at a median annual rate of approximately 5.4%, with companies holding both Scope 1 and Scope 2 targets showing a higher median annual decrease of approximately 7.25%. Companies with separate Scope 3 reduction targets (excluding supplier-engagement targets) show a median annual rate of approximately 3% — reflecting both the difficulty of reducing value-chain emissions and the lower SBTi-required rate for Scope 3.

Criticisms and Limitations

The standard is the most rigorous and widely-adopted framework of its kind, and it is not above legitimate criticism. A complete reference must address the criticisms openly. Five recur with the highest frequency.

The 2024 carbon-credits-for-Scope-3 controversy

In April 2024, the SBTi Board issued a statement that opened the possibility of allowing carbon credits to be used against Scope 3 reduction targets, prompting a sharp internal and external backlash. Staff publicly pushed back, expert advisory members raised governance concerns, and the SBTi subsequently clarified that no policy change had been adopted and that any such change would proceed only through the standard consultation process. The episode exposed governance tensions between the standard-setting and validation arms and between the Board and the technical staff. The V2.0 consultation process has been partially shaped by the resulting institutional reflection.

The March 2024 removal of 239 companies

In March 2024, the SBTi changed the status of 239 companies — including Microsoft, Walmart, Procter & Gamble, Unilever, and Eurostar — to “Commitment Removed” for failing to submit validated targets within the 24-month window. Approximately 60% of those companies retained separately-validated near-term targets; the removal applied only to net-zero commitments. In an SBTi survey of approximately 971 companies that made commitments between 2019 and 2021, 54% cited Scope 3 complexity as the primary barrier to setting net-zero targets, and 53% cited technological uncertainty. The episode is interpreted by some as evidence of the standard being too demanding; by others as evidence that the standard works as intended — distinguishing companies that follow through from companies that do not.

Scope 3 data quality and the realism gap

The standard’s Scope 3 expectations exceed what most corporate data infrastructure can currently support. Independent surveys suggest fewer than 30% of companies have comprehensive Scope 3 data systems in place. The SBTi’s response — that companies are expected to demonstrate a credible improvement trajectory rather than perfection at submission — is correct in principle but offers limited practical guidance. The result is variation in the underlying data quality of validated Scope 3 targets that the validation process cannot fully resolve.

The Oil and Gas pause

The SBTi has not finalised sector-specific guidance for the upstream oil and gas sector and does not currently validate targets from companies in that sector. Critics argue that the pause excludes the sector with the most consequential emissions trajectory from the framework. The SBTi position is that publishing inadequate sector guidance for so material a sector would be more damaging than the pause itself.

Greenhushing and disclosure fatigue

A trend of “greenhushing” — companies deliberately reducing the visibility of climate commitments to avoid litigation, regulatory exposure, or activist scrutiny — has been observed in 2024 and 2025. Some commentators link the trend to the perceived risk-reward imbalance of voluntary commitments under the standard, particularly as the regulatory environment for unsubstantiated climate claims tightens. The SBTi’s response has been to emphasise that the standard provides exactly the substantiated, defensible language that the legal environment increasingly requires.

Future Evolution

Three trajectories will shape the standard between now and the end of the decade.

V2.0 publication and the January 2028 mandatory date. Publication of V2.0 is expected during 2026, following review and approval by the Technical Council and formal adoption by the Board of Trustees. Companies setting new targets in 2026 and 2027 may continue under V1.3.1; from 1 January 2028, V2.0 becomes mandatory for new targets. A transition guide for companies with V1.3 targets is expected.

New sector standards. The Power Sector Net-Zero Standard is in pilot following the September 2025 consultation. The Automotive Net-Zero Standard re-opened for consultation in February 2026. Additional sector standards remain on the SBTi Technical Work Plan and are reviewed quarterly.

Recognition framework for third-party certification schemes. The SBTi is developing a framework to recognise third-party certification schemes that align with its own requirements. The framework is intended to address the proliferation of overlapping voluntary commitments and to provide a single point of reference for what counts as science-based.

Frequently Asked Questions

Sources and References

Every numerical claim and methodological statement in this article reconciles to the primary sources below. Where the SBTi has published a definitive document on a topic, the primary source is cited directly; secondary commentary is used only for interpretation.

Primary SBTi documents

• Science Based Targets initiative, Corporate Net-Zero Standard, Version 1.3.1, April 2026. files.sciencebasedtargets.org/production/files/Net-Zero-Standard.pdf
• Science Based Targets initiative, Corporate Near-Term Criteria, Version 5.3.1, April 2026. files.sciencebasedtargets.org/production/files/SBTi-criteria.pdf
• SBTi Services, Criteria Assessment Indicators, Version 1.7, April 2026. docs.sbtiservices.com/resources/CriteriaAssessmentIndicators.pdf
• Science Based Targets initiative, Corporate Net-Zero Standard V1.3.1 Method Appendix. files.sciencebasedtargets.org/production/files/CNZS-V1.3.1-Method-Appendix.pdf
• Science Based Targets initiative, Corporate Net-Zero Standard Version 2.0 — Second Consultation Draft, November 2025. files.sciencebasedtargets.org/production/files/CNZS-V2-Second-Consultation-Draft.pdf
• Science Based Targets initiative, FLAG Science-Based Target-Setting Guidance, Version 1.2, March 2026. sciencebasedtargets.org/sectors/forest-land-and-agriculture
• Science Based Targets initiative, “The SBTi updates the Absolute Contraction Approach to improve consistency and implementation, while maintaining net-zero ambition”, 29 April 2026. sciencebasedtargets.org/news
• Science Based Targets initiative, Foundations for Science-Based Net-Zero Target Setting in the Corporate Sector, September 2020. files.sciencebasedtargets.org/production/files/foundations-for-net-zero-full-paper.pdf
• Science Based Targets initiative, Pathways to Net-Zero — technical summary on 1.5°C-aligned pathways. sciencebasedtargets.org/resources/files/Pathway-to-Net-Zero.pdf
• Science Based Targets initiative, SBTi Glossary. sciencebasedtargets.org/glossary
• Science Based Targets initiative, Target Dashboard. sciencebasedtargets.org/target-dashboard

Underpinning standards and scientific basis

• WRI & WBCSD, The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (revised edition).
• WRI & WBCSD, GHG Protocol Scope 2 Guidance.
• WRI & WBCSD, Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
• WRI & WBCSD, GHG Protocol Land Sector and Removals Standard, 2026.
• IPCC, Sixth Assessment Report (AR6), Working Group I, 2021. Table 7.SM.7 (100-year GWP values).
• IPCC, Special Report on Global Warming of 1.5°C, 2018.
• International Energy Agency, Energy Technology Perspectives and Net Zero by 2050 Roadmap.
• ISO 14064-1, Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals.
• ISO 14068-1, Climate change management — Transition to net zero — Part 1: Carbon neutrality.
• ISAE 3000 / ISAE 3410 — assurance standards for non-audit engagements and GHG statements.

Disclosure regimes referenced

• European Sustainability Reporting Standards, ESRS E1 (Climate change). EFRAG, 2023 (EU Delegated Act).
• IFRS Sustainability Disclosure Standards, IFRS S2 (Climate-related Disclosures). ISSB, 2023.
• U.S. Securities and Exchange Commission, climate-related disclosure rule, 2024.

Related GreenCalculus reference pages

• GHG Protocol Corporate Standard
• GHG Protocol Scope 3 Standard
• IPCC AR6 — Global Warming Potentials and pathways
• ISO 14064-1
• CSRD / ESRS E1
• UK DEFRA emission factors

What changed in this revision

Updated 7 May 2026. Initial publication. Reflects Corporate Net-Zero Standard V1.3.1, Corporate Near-Term Criteria V5.3.1, the 29 April 2026 Absolute Contraction Approach refresh, FLAG Guidance V1.2 (19 March 2026), and the Corporate Net-Zero Standard V2.0 Second Consultation Draft (November 2025).