Posted by Myles Tatlock

SBTi's Net-Zero Standard V2.0 Draft is out, and things have changed for corporate climate action

The Science Based Targets initiative (SBTi) as of 6th November 2025 released the second consultation draft of its Corporate Net-Zero Standard Version 2.0. It’s a clear evolution from the previous consultation version. The draft is not the final answer, but it provides a much clearer direction of travel.

We have provided a few initial key takeaways on what’s fundamentally new outlined below.

Cyclical

1. The SBTi are trying to move away from set and forget targets. V2.0 introduces a cyclical validation system. It is designed to drive continuous accountability, requiring companies to prove progress and set new, more ambitious targets at the end of each cycle. The cycle model is a defined three stage process: entry check, initial validation and renewal validation with potential spot checks. This replaces the old “commitment” phase. The initial stage is important because it confirms a company’s readiness and intention to set SBTs, reviewing foundational criteria like organisational boundaries and net zero ambition.

Important detail. Companies can renew targets up to 24 months early, smoothing out strategic planning and avoiding a last-minute rush.

Pragmatic

2. The SBTi have introduced some pragmatism with Scope 3.   V2.0 finally acknowledges the real-world data and influence challenges. The new version offers a focused and flexible framework for Scope 3. It allows companies to exclude low-impact/hard-to-influence activities, key examples from C17.2 include:

  • Emissions from micro-SME suppliers
  • Purchase of second-hand goods
  • Employee commuting
  • Downstream emissions from sold intermediate products where the end-use is unknown

V2.0 provides three practical target-setting approaches

  • Emissions Intensity (e.g., tCO2e/ton of steel)
  • Activity Alignment (% of procurement meeting benchmarks)
  • Counterparty Alignment (% of spend with SBTi-committed suppliers)
    This acknowledges the real-world challenges of value chain decarbonisation while maintaining scientific rigor.

Important detail. The formal introduction of ‘activity pools’. For hard-to-trace emissions like the steel and agricultural commodities in products, companies can now act at the level of a regional supply shed or electricity grid, using unbundled environmental attribute certificates (EACs) as an interim solution.

When using EACs for activity pools or sector level intervention (C19, C20) the V2.0 mandates that this is an interim solution. Companies must “progressively reduce reliance on EACs, transitioning towards actions with direct physical connectivity to their value chain" (C20.3) an important guardrail.

Strategic

3. For heavy emitters, the SBTi introduces a new ‘asset decarbonisation plan’. It moves Scope 1 target-setting from a linear reduction model to a capital planning model. Companies can now create a project-based roadmap for retrofitting or replacing assets.

V2.0 (C12.2) also specifies that companies with more than 5% of emission from heavy industry and transport activities must set long term Scope 1 targets. Others are encouraged to. This makes the asset development plan particularly relevant for these sectors.

Important detail. The entire plan must be backed by a company-specific carbon budget. Companies have to demonstrate that project pipeline's cumulative emissions stay within this budget, directly linking decarbonisation to companies CapEx planning and investment committees.

If companies do not use asset decarbonisation plan companies can also choose from:

  • Traditional linear reduction pathways.
  • Increasing the share of low-carbon activities.

Stricter

4. The rules for claiming green electricity for Scope 2 have tightened. The draft mandates geographic matching and, most importantly, a phased introduction of hourly temporal matching but on a relatively extended timeline with initially only the largest power consumers needing to hourly match at least 50% from 2030, ramping up to 90% from 2040. The overarching goal is 100% low-carbon electricity by 2040, with credible contractual instruments.

A new rule (C16.3) is that low carbon attributes must be from generation facilities commissioned or re-powered in the past ten years, with a progressive tightening to five years by 2035. This pushes investment in new renewable capacity.

V2.0 also defines low carbon electricity as having direct GHG emissions ≤ 0.024 kg CO2/kWh, a conservative threshold that excludes unabated fossil fuels.

Important detail. This mandate starts with the largest consumers. If the company has aggregate annual electricity consumption of ≥10 GWh within a single region, the company falls under the first phase starting in 2030. This may require an upgrade in energy data management and procurement strategies as 2030 approaches.

Mandatory

5. The V2.0 draft establishes clear scaffolding for a future where paying for emissions is compulsory. It introduces a structured ‘ongoing emissions responsibility’ framework with an optional recognition program, ‘recognised’ and ‘leadership’ tiers to incentivise early action.

6. However, the headline is a new, mandatory requirement. From 2035, all large companies (Category A) will be forced to take responsibility for a portion of their ongoing emissions. This is an obligation that starts at a minimum level and increases each year, building the necessary capacity and market for full neutralisation by the net zero date. The bar is set low however with the minimum requirement of just 1% of ongoing scopes 1-3 from 2035 to “ensure feasibility and accessibility across all sectors”.

  • Important detail. The ‘Leadership’ tier is the gold standard for voluntary action. It requires applying a carbon price of at least $80/tCO2e to 100% of ongoing emissions to create a financial budget. Crucially, companies must also deliver verified mitigation outcomes equivalents to “at least 40% of their ongoing emissions” ensuring money is converted into tangible climate results.

7. The end state is now clearly defined. At the net zero target year, companies must neutralise 100% of their residual emissions. The draft specifies that at least 41% of these must be neutralised using long-lived carbon removals (such as geological storage), with the rest from a mix of shorter or longer-term solutions. This provides a concrete, science-based target for the carbon removal market.

Timing

8. While the V2.0 draft provides a clear vision for the future, it currently lacks a detailed timeline for the new criteria to come into affect, especially for those for companies with existing SBTi targets.

The core of the issue is a potential misalignment between the 5-year cycles of existing near-term targets and the new framework's timelines. The draft allows companies setting new targets under V2.0 to renew them up to 24 months early to smooth this cycle, but it does not yet specify how this will work for the thousands of companies with targets already in flight under previous standards. The core of the issue is a potential misalignment between the 5-year cycles of existing near-term targets and the new framework's timelines. The draft allows companies setting new targets under V2.0 to renew them up to 24 months early to smooth this cycle, but it does not yet specify how this will work for the thousands of companies with targets already in flight under previous standards.

Important detail. Targets set under the current Version 1.3 remain credible and form a strong foundation. The initiative has committed to providing detailed guidance in due course on the introduction of the new standard, but for now, the focus is on gathering feedback to finalise a robust V2.0 standard.

Climate Transition Plans

9. In the first consultation draft, the question of whether companies would be required to publish a transition was open for consultation. V2.0 has now made this a firm requirement. Category A companies shall develop a transition plan; Category B companies are strongly encouraged to do so. The plan must be published within 12 months of Initial Validation and approved at the highest governance level (e.g., the Board).

Wider considerations

The focus now shifts squarely from commitment to execution. The updated standard draft moves decarbonisation toward being treated as a core strategic business function.

Critically, the SBTI framework is for real world progress, not just for perfect outcomes. As the CEO stated “we are not in the shaming business if you have made serious efforts. Our framework allows for that, it sets out a process where you assess your progress, you identify your barriers, you set out remedial actions, and you reset your ambitions… The Standard is all about ambition to action”.

The central challenge is no longer whether to set a target, but how to deliver it. As the SBTi’s own report The-Impact-of-Setting-SBTs released 3rd November 2025 highlighted that while 31% of companies report short-term cost increases, these are investments that strengthen long-term financial resilience and support with significant cost savings of 22-33%.

The challenge is no longer if it's valuable, but how to realise that value. The power of a SBT’s is realised not in its announcement, but in its Delivery, a challenge of strategic investment and closing the CapEx Gap.