Introduction: Why SBTi’s Net-Zero Standard v2 Matters
On March 18th, The Science Based Targets Initiative (SBTi) released its Net-Zero Standard v2 Consultation Draft, an update that will shape how companies set and track their decarbonization commitments. While SBTi has been instrumental in defining corporate climate action, the latest draft raises important questions — especially for those reporting to SBTi or building tools to support carbon tracking. We wrote a guide to make it easier to understand the what and why. If you’re working on net-zero strategies, developing climate impact tracking tools, or simply want to understand how this affects business decisions, this guide is for you.
In this guide, we’ll break down:
- Glossary of key terms
- What SBTi Net-Zero Standard v2 is and why it matters
- Key updates
- Implications for companies and tool builders
- A decision tree for companies to assess alignment with the standard
Glossary
See pages 86-89 of the draft document for additional terms SBTi offers. In addition, here are some key terms with context and examples to help unpack the nuances.
Absolute Emissions Reduction – A decrease in total greenhouse gas (GHG) emissions, not just emissions intensity. This is a core requirement for net-zero alignment, as companies must show real reductions in emissions. Example: A company cutting its total annual CO₂ emissions from 10 million tons to 7 million tons is demonstrating absolute emissions reduction.
Additionality – The principle that an emissions reduction or removal would not have occurred without a specific intervention. This is essential for ensuring carbon credits and offset projects provide genuine climate benefits. Example: A forest preservation project qualifies as additional if it prevents deforestation that would have happened otherwise.
Base Year – A reference year used to compare future emissions reductions or removals. Companies must select a base year that accurately reflects their emissions profile and update it when significant changes occur. Example: A company sets 2020 as its base year with 5 million tons of CO₂ emissions, against which it tracks progress toward net-zero.
Carbon Credit – A tradable certificate representing the reduction or removal of one metric ton of CO₂ or equivalent greenhouse gases. Used in voluntary and compliance markets, credits should be verified to ensure they deliver real and additional climate benefits. Example: A company purchases 100,000 carbon credits from a verified reforestation project to offset residual emissions.
Carbon Neutrality – Achieving net-zero carbon dioxide emissions by balancing emissions with removals or offsets. Carbon neutrality is different from net-zero, which includes all GHGs and requires deep emissions cuts before using offsets. Example: A company claims carbon neutrality by offsetting all its Scope 1 and 2 CO₂ emissions with renewable energy credits and forest-based removals.
Durability (of Carbon Storage) – The ability of a carbon removal or sequestration project to maintain stored carbon over time. Projects must demonstrate long-term permanence to ensure they deliver sustained climate benefits. Example: A direct air capture (DAC) project that stores CO₂ underground must ensure its storage site prevents leakage for centuries.
Emissions Factor – A coefficient representing the amount of GHG emissions released per unit of activity. Used in carbon accounting to estimate emissions from various sources based on standardized methodologies. Example: The emissions factor for grid electricity might be 0.4 kg CO₂ per kWh, meaning 1,000 kWh of electricity results in 400 kg of CO₂ emissions.
Emissions Reduction – A decrease in GHG emissions from a company’s operations, supply chain, or energy use. Reductions must be measurable, verifiable, and aligned with science-based targets. Example: A manufacturing company reduces emissions by switching from coal-fired power to renewable energy sources.
Environmental Attribute Certificate (EAC): A tradable certificate that represents an environmental benefit associated with a specific action, such as renewable energy generation, carbon reduction, or other sustainability benefits. These certificates exist in various environmental markets, including energy, carbon, and water. A company might purchase water restoration credits or biodiversity offsets in addition to carbon credits.
Greenhouse Gas (GHG) Inventory – A comprehensive accounting of all GHG emissions and removals associated with an organization. Companies must follow recognized standards (e.g., GHG Protocol) to ensure consistency and accuracy in reporting. Example: A multinational corporation compiles its annual GHG inventory to report Scope 1, 2, and 3 emissions.
Near-Term Targets – Emission reduction commitments set for the next 5 to 10 years, aligned with a 1.5°C pathway. These targets ensure companies take immediate action rather than deferring reductions to distant future goals. Example: A company sets a near-term target to reduce its Scope 1 and 2 emissions by 42% by 2030, compared to its 2020 base year, in line with SBTi requirements.
Net-Zero Target – A corporate commitment to reduce emissions to near-zero levels and balance remaining emissions with removals. SBTi requires deep reductions before using offsets, ensuring that net-zero claims are credible. Example: A tech company commits to reaching net-zero emissions by 2040 by reducing Scope 1, 2, and 3 emissions by 90% and using removals for the rest.
Offsetting – Compensating for emissions by funding projects that remove or prevent an equivalent amount of CO₂. Offsetting should only be used for residual emissions that cannot be eliminated through reductions. Example: A logistics company offsets its unavoidable emissions by purchasing carbon credits from a biochar project.
Permanence – The likelihood that sequestered carbon remains stored over the long term without being re-released. Different storage methods have varying risks of reversal, which must be accounted for in project design. Example: Soil carbon sequestration has medium permanence since land-use changes can disturb stored carbon, whereas mineralized carbon storage is highly permanent.
Removals – Actions that permanently capture and store atmospheric CO₂ or other GHGs to neutralize emissions.
Removals can be biological (e.g., afforestation, soil carbon sequestration) or technological (e.g., direct air capture, biochar) and are critical for achieving net-zero. Example: A company invests in a direct air capture project that removes CO₂ from the air and stores it underground to compensate for its residual emissions.
Residual Emissions – The greenhouse gas (GHG) emissions that remain after all feasible reductions have been implemented.
Companies must minimize these emissions first before using removals or offsets to neutralize them. Example: A steel manufacturer, despite efficiency improvements and renewable energy adoption, still has process-related emissions from metallurgy that qualify as residual emissions.
Scope 1, 2, and 3 Emissions – Categories of GHG emissions based on their source and relation to a company’s operations. Scope 1 covers direct emissions, Scope 2 covers purchased electricity, and Scope 3 covers supply chain and product lifecycle emissions. Example: A retailer’s Scope 1 emissions come from delivery trucks, Scope 2 from store electricity, and Scope 3 from the production of goods it sells.
Target (Science-Based) – A goal set by a company to reduce GHG emissions in line with the latest climate science. Science-based targets must be ambitious, measurable, and aligned with the 1.5°C pathway. Example: A food company sets a science-based target to cut Scope 1, 2, and 3 emissions by 50% by 2030 compared to its 2019 base year.
Third-Party Assurance – Independent verification of a company’s emissions data, targets, or offset claims. Assurance ensures credibility and compliance with standards like ISO 14064 and SBTi’s validation process. Example: A sustainability consulting firm audits a company’s net-zero claims to verify compliance with the GHG Protocol.
Validation (of Targets & Offsets) – The process of ensuring that emissions reductions or removals meet established criteria before certification. Validation is typically conducted by an independent verifier before a target or project is officially recognized. Example: A carbon removal project undergoes validation by Verra before it can issue credits for sale in the voluntary carbon market.
What is the SBTi Net-Zero Standard v2?
SBTi’s Net-Zero Standard provides a science-based framework for companies to set net-zero targets in alignment with the 1.5°C goal of the Paris Agreement. It ensures corporate decarbonization plans are ambitious, transparent, and based on credible science.
Version 2 of the standard is still in consultation, meaning that key elements could change before finalization. Stakeholders have until June 1, 2025 to respond. However, the overarching goal remains the same: help businesses establish a clear pathway to net-zero while ensuring reductions happen before relying on offsets.
What’s Different in Version 2?
In general, V2 includes greater specificity and stringency in reporting. Changes (outlined page 10-13) include:
- Greater emphasis on near-term targets: Companies must show immediate reductions rather than relying solely on long-term net-zero commitments.
- Clarification of residual emissions: What can and cannot be offset is more strictly defined.
- Sectoral guidance updates: More integration with industry-specific methodologies.
- Stronger requirements for removals: Aligning with GHG-P’s Land Sector and Removals Guidance (LSRG) and pilot frameworks.
- Alignment with UN Commitment Model: Alignment to the UN High Level Expert Group recommendations for a commitment model
- Greater assurances: Including the requirements for third party limited assurances on claims
- Disaggregation for scope targets: separating out scope targets with greater clarity on boundaries
- Bonus claims for over-achievers: option to obtain additional recognition for beyond value chain mitigation activities
- Transition plans required / recommended: not previously included and up for inclusion
- Target clarity: Moves from external benchmarks to performance benchmarks
Key Implications for Businesses & Tool Developers
The growing risk of greenwashing and legal scrutiny
With greater transparency requirements, third-party verification mandates, and clearer definitions of residual emissions, companies face rising legal and reputational risks if their targets lack integrity. Under the previous framework, companies could set distant net-zero goals with limited short-term accountability, but the new standard demands immediate, near-term reductions and verifiable progress tracking.
For businesses, this presents a critical reputational risk. Companies that publicly set net-zero targets but fail to align with SBTi’s stringent criteria—or that continue to rely on offsets instead of real reductions—could face litigation, consumer backlash, and investor pressure. In the EU, greenwashing lawsuits are already emerging, and with SBTi v2 aligning with the UN’s Commitment Model, regulatory scrutiny is likely to increase.
For tool developers, ensuring transparency and defensibility in carbon reporting is more critical than ever. Tools should enable audit-ready documentation, third-party assurance workflows, and built-in compliance checks to help companies protect themselves from misreporting risks and legal vulnerabilities.
💡 Takeaway: Companies must prioritize credible, verifiable, and science-aligned net-zero strategies to mitigate reputational and legal risks. Carbon tools should support transparent reporting, third-party validation, and defensible carbon claims to protect users from legal scrutiny.
The Evolution of Offsets & the Push for High-Integrity Removals
SBTi v2 makes a clear distinction between emissions reductions and residual emissions, placing tighter restrictions on the use of offsets. Under the new framework, companies cannot rely on offsets for emissions that can feasibly be reduced—offsetting is only permitted for residual emissions that remain after deep decarbonization.
For businesses, this means that offset-heavy net-zero strategies will no longer be acceptable. Companies must redefine their approach, prioritizing direct emissions reductions and high-durability removals. SBTi’s alignment with GHG Protocol’s Land Sector and Removals Guidance (LSRG) adds new layers of complexity, requiring companies to carefully evaluate the permanence, additionality, and verification of their removal projects.
For tool developers, automated residual emissions classification will become a critical feature. Tools must also integrate removal tracking capabilities that account for carbon permanence, durability risk, and verification requirements.
💡 Takeaway: Businesses must shift from offset-heavy strategies to high-integrity removals, while tools should offer robust tracking and classification features for removals vs. reductions.
The Pressure to Decarbonize Scope 3 & Supply Chains
Scope 3 emissions—often accounting for the majority of a company’s carbon footprint—are now subject to greater scrutiny and accountability under SBTi v2. Companies must not only track their own emissions but also engage suppliers in the decarbonization process.
For businesses, this creates new challenges in data collection, supplier engagement, and emissions reduction coordination. Companies with complex, global supply chains must develop Scope 3-specific reduction strategies, requiring greater collaboration and reporting standardization.
For tool developers, supplier integration features will become a competitive necessity. Platforms that enable automated Scope 3 emissions tracking, supplier data collection, and scenario modeling will provide critical value as companies face growing investor and regulatory expectations around supply chain transparency.
💡 Takeaway: Businesses must actively engage their suppliers in joint decarbonization efforts, while tools should integrate Scope 3-specific tracking and reduction planning features.
The Shift Toward Performance-Based Targets
A major shift in SBTi v2 is the move from external benchmarks to performance-based benchmarks. Rather than aligning with broad external pathways, companies must now demonstrate measurable progress based on their own operational realities.
For businesses, this means reassessing their target-setting methodologies. Companies can no longer rely on generic decarbonization trajectories—instead, they must define specific, achievable, and independently verifiable pathways.
For tool developers, this shift requires greater customization of target-setting tools. Platforms should allow users to define and track performance-based targets tailored to their industry, business model, and operational constraints.
💡 Takeaway: Businesses must transition to more precise, performance-based target setting, while tools should support customizable, data-driven benchmarking for target validation. Perhaps optimistically, this move will also enable the software that enables sound business and procurement decisions to be a by-product of, not the basis for net zero impact.
Is Your Company Aligned with SBTi Net-Zero Standard v2?
✔️ Has your company set near-term targets (5–10 years) that align with a 1.5°C pathway?
🔲 Yes → Proceed to the next question
🔲 No → Reassess your emissions reduction strategy
✔️ Are your residual emissions clearly defined and quantified?
🔲 Yes → Proceed
🔲 No → Identify which emissions must be reduced vs. what can be offset
✔️ Are you using science-based methods for removals (e.g., aligned with LSRG, AFOLU best practices)?
🔲 Yes → Proceed
🔲 No → Consider alternative methodologies
✔️ Is your scope 2 strategy aligned with evolving EAC guidance?
🔲 Yes → Proceed
🔲 No → Evaluate direct renewable energy investments
If you answered NO to any of these, your company may need to revisit its net-zero strategy under the new guidance.
Final Thoughts: Moving Forward with Confidence
SBTi’s Net-Zero Standard v2 is an important step in aligning corporate climate action with scientific consensus. However, the preference for estimates over real-time data, stricter rules on EACs, and ongoing integration with other evolving standards create uncertainty for businesses.
💡 What You Can Do Now:
✔️ Participate in the consultation process — provide feedback on the draft standard.
✔️ Review your net-zero roadmap — check if your strategy aligns with evolving rules.
✔️ Diversify your emissions reductions approach — move beyond EACs and ensure high-integrity offsets.
The net-zero journey is evolving. The companies that stay ahead understand the rules, adapt proactively, and ensure transparency in their claims.
One way to move forward — and stay ahead of the curve — is to join an interdisciplinary learning network. Filling out this form will get you a front row seat and invitations to a free – almost weekly “Call of the Wild” event. Here’s a link to the recording an event we hosted on the topic on March 21st.