Defining net zero targets: Understanding changes in SBTi’s V2 corporate standard

On 18 March 2025, the Science Based Targets Initiative (SBTi) released new draft guidance (v2) around corporate net zero target setting. Although the standard is only a draft and companies do not need to align to it before 2027, it is important for companies to be familiar with the changes proposed. SBTi has opened a public consultation period until 1 June 2025. For companies considering net zero targets now or in the future, this is the time to weigh in.

The draft v2 standard includes several major changes from the current standard (v1.2):

1. Increased focus on scope 1 emissions

• What’s changed – Companies must set specific scope 1 targets, including 100% of scope 1 emissions. Previous guidance allowed companies to combine scope 1 and 2 targets and only cover 95% of emissions.
• Why this matters - Many companies combine scope 1 & 2 targets and primarily use scope 2 reductions (e.g. purchasing renewable energy) to meet targets. Scope 1 emissions typically include many hard-to-abate sources, and it can be easier to reduce scope 2 emissions now and wait for advancements in scope 1 decarbonisation (e.g. green hydrogen). Going forward, companies will need to develop specific strategies for decarbonising scope 1, including initiatives such as energy-efficiency measures, electrification etc.

2) Increased granularity and ambition around scope 2 emission targets

• What’s changed – Companies must set two scope 2 targets: a location-based (LB) target and either a market-based (MB) target or a zero-carbon electricity target. Both targets will be aligned to a net-zero year of 2040. Previous guidance allowed companies to set targets using either LB-based or MB-based accounting and aligned to net zero by 2050.
• Why this matters - Under a LB approach, companies can only reduce emissions by reducing grid energy use (e.g. increasing energy efficiency, installing direct line renewables) and waiting for the grid to decarbonise. For companies that have relied on MB options (e.g. renewable energy credits), this may significantly change decarbonisation strategies. In addition, increasing ambition to align with a 2040 net zero target will require more effort and investment in the near term.

3) Increased coverage of scope 3

• What’s changed – Applicable companies must set scope 3 targets including all “relevant” scope 3 emissions (any category >5% of total scope 3 emissions). In addition, companies will need to set separate targets to address emissions intensive activities and supplier engagement. Previous guidance only required some companies to set scope 3 targets covering a minimum of 67% of scope 3 emissions (no mandatory categories or supplier engagement requirements).
• Why this matters – This change is intended to significantly increase the scope 3 emissions included in a company’s target, requiring companies to take action around emissions that may have been previously excluded. In addition, supplier engagement targets will result in increased efforts along the value chain for both companies and their tier 1 suppliers. These efforts could include more procurement screening, increased engagement / communication with suppliers, better data collection and management, and increased investment in decarbonisation.

4) More accountability and transparency

• What’s changed – Companies must meet more stringent reporting requirements, including obtaining limited assurance for scope 1, scope 2, and “relevant” scope 3 emissions in the base and target years and reporting on specific metrics at the end of their target cycle. Companies must also create a plan to improve data quality and traceability over time. Finally, SBTi may require companies to publish a transition plan within 12 months of target validation. Previous guidance only required companies to report out annually on GHG emissions and progress towards published targets.
• Why this matters – Increased disclosures may increase time or resources needed for emissions reporting for companies, particularly for those who don’t currently assure results. Furthermore, companies who don’t already have established data traceability plans or clear transition plans will need to create these to support net zero efforts.

5) More guidance around carbon removals and beyond the value chain mitigation (BVCM)

• What’s changed – SBTi introduced new requirements for addressing projected residual emissions between the present and the net-zero target year for scope 1, including setting separate near-term and long-term removal targets. In addition, SBTi created a process to discuss BVCM actions for companies seeking additional recognition.
• Why this matters – Inclusion of new removals targets may require companies to begin investing in removals far earlier, likely increasing the near-term financial investment required to meet SBTi standards. This, along with BVCM, has been controversial (both within SBTi and publicly) and will likely be a popular topic in the public consultation period.

What should companies do next?

Although the guidance isn’t finalised, any company considering science-based targets should consider providing input during the comment period. Even companies who may not want to set Science Based Targets could benefit from reviewing the draft, as SBTi is still seen as the gold standard for setting emission reduction targets, and best practices from its guidance will likely impact the rest of the market.

Going forward, companies should start thinking about where their current targets and strategies might not align with this new guidance. Companies setting new targets are not expected to begin using this version until 2027 as the earliest, but early planning can make adoption of the new guidance easier.

Not sure where to start? Reach out to our experts below with questions or support figuring out what the new draft guidance means for your company.