SBTi released version 2.0 of its Corporate Net-Zero Standard. Here’s how it impacts carbon credit use.
The Science Based Targets initiative (SBTi) has officially released its updated climate framework for businesses. The Corporate Net-Zero Standard Version 2.0 introduces structural updates to corporate target-setting, reporting methodologies, and the permissible use of market instruments. The standard is scheduled to become effective for corporate target validations starting February 1, 2027.
The revised standard addresses practical implementation barriers encountered by corporations over the last decade, shifting the SBTi’s role from target validation toward an action-oriented transition partnership. According to the report, more than 11,000 companies globally have validated climate targets under the SBTi framework. “Company after company told us the same thing: They had set their targets in good faith, and then found themselves navigating supply chains about which they had limited information and could not fully control. A standard that did not reckon with those barriers would not serve the companies, or the transition, as well as it should.” Francesco Starace, Chair of the Science Based Targets initiative shared.
The updated standard establishes distinct rules based on a company’s size and geographic location, splitting entities into two main classifications:
Category A: Comprises large global companies (net turnover ≥ €450 million or ≥ 1,000 full-time equivalents) and medium-sized companies in high-income countries. These corporations are required to set near-term targets across Scopes 1, 2, and 3.
Category B: Comprises small companies globally and medium-sized companies operating within lower-income countries. For this category, near-term Scope 3 target-setting, third-party base year data assurance, and public disclosures of transition plans remain optional.
Under Version 2.0, near-term targets operate on a strict five-year cycle. All participating companies are required to develop a time-bound corporate transition plan approved by their highest governing body. For Category A entities, this transition plan must be publicly disclosed within 15 months of completing validation.
To regulate how corporations deliver on their validated climate targets, the report introduces a formal implementation hierarchy. This framework prioritizes direct emissions reductions over the use of indirect market mechanisms:
Activity-Level Actions: Prioritizes direct mitigation at the source within a company’s immediate operations and physical value chains (e.g., operational efficiency improvements or switching fuels).
Activity Pool-Level Actions: Permits mitigation within shared systems, such as regional electricity grids, gas networks, or local supply sheds, supported by verified market instruments.
Sector-Level Actions: Allowed only when direct activity or pool-level actions are prevented by verified structural constraints, such as a lack of commercially available technology or regional infrastructure limitations.
For Scope 2 targets, the standard mandates that market instruments such as Power Purchase Agreements or Energy Attribute Certificates must carry a geographic connection to the deliverability region where the electricity is consumed. Furthermore, a generator age limit is introduced; instruments must be sourced from facilities commissioned or re-powered within 15 years preceding the consumption year. To increase transparency, Category A corporations with significant power loads (≥10 GWh annually in a single pool) are now required to track and report the percentage of electricity consumption matched with low-carbon sources on an hourly basis.
The report clarifies the role of carbon credits, explicitly stating that they cannot be counted as emissions reductions to meet near-term or long-term corporate target boundaries. Instead, carbon credits are constrained to two separate mechanisms:
The OER is an optional recognition program designed for companies to voluntarily fund climate mitigation outside their value chains to counter their ongoing emissions.
Tiers of Coverage: Companies can choose between Engaged (covering ≥ 1% of ongoing emissions), Advanced (covering ≥ 10%, including 100% of Scopes 1 and 2), or Leadership (covering 100% of global emissions).
Financial Benchmarks: Corporations can either choose from a tonne-for-tonne approach or the contribution budget approach, with conditions contingent on their goal recognition level. The contribution budget approach must allocate a set monetary rate per metric ton of covered emissions, with a suggested price of $20/tCO2e for the Engaged recognition level, a mandatory price of $20/tCO2e for the Advanced recognition level, and a mandatory $80/tCO2e for the Leadership recognition level, to fund certified mitigation outcomes or other climate solutions. These $20/tCO2e and $80/tCO2e rates land right in the middle of current benchmarks based on recent data, bridging the gap between accessible entry-level certification minimums and advanced corporate travel fees.
Credit Integrity: Sourced credits must represent realized, ex-post mitigation outcomes, be permanently retired in a secure registry, and satisfy third-party criteria regarding additionality, permanence, leakage mitigation, and environmental safeguards.
Looking ahead, the standard establishes that ongoing emissions responsibility will become mandatory for Category A companies starting in 2035. From that year, companies must support verified carbon removals starting at 1% of ongoing emissions and scaling linearly to 100% by their net-zero target year.
To achieve a verified state of net-zero under the standard, corporations must reduce absolute emissions to residual levels (typically a 90% or greater reduction) and neutralize 100% of any remaining residual emissions using eligible, durable carbon removals.
Version 1 of the Corporate Net-Zero Standard will remain open for new corporate target submissions until the end of 2027. However, companies that currently hold validated 2030 targets are instructed to begin planning and setting targets for their subsequent 2030–2035 cycle under the new Version 2.0 framework starting in 2028. Companies directly involved in the exploration, extraction, or refining of fossil fuels remain restricted from target validation until the SBTi finalizes its specific sector methodologies.
Invert Insights.
💡 The revised update sets the stage for the formalization of a multi-billion-dollar corporate demand curve that explicitly transitions from voluntary emission reductions today to mandatory, lasting carbon removals by 2035. As Sylvera points out, because SBTi-aligned companies currently offset only around 0.06% of their total emissions, these new thresholds represent a major shift in climate policy. If adopted, this framework is projected to drastically increase the global demand for carbon credits to hundreds of millions of tonnes by 2030.
💡 As Climeworks points out, SBTi is also moving the needle on a crucial missing piece of guidance for carbon removals: value chain collaboration. The new principle of shared responsibility provides companies with new pathways for Scope 3 removals. For many organizations, this creates a more tangible and credible business case for investing in carbon removals.
💡 The Corporate Net-Zero Standard 2.0 provides project developers with a clear, SBTi-sanctioned corporate purchasing framework for the next decade. The update embeds explicit financial benchmarks directly into the standard. While the SBTi notes these are benchmarks based on research rather than prescribed market floors, they effectively normalize high-value carbon pricing at the board level, giving developers a baseline to justify higher-cost, high-durability projects.
