Draft Corporate Net-Zero Standard V2 Explained: Scopes 1, 2 and 3
18th Mar 2025
This blog walks through the key changes to scope 1, 2 and 3 target setting proposed in the draft standard.
We are updating the Corporate Net-Zero Standard to support more companies to set targets and make corporate climate action more effective, to accelerate the pace of decarbonization.
We have published an initial draft of V2 of the standard for consultation and feedback. Anyone is encouraged to provide feedback until the survey closes on 1 June 2025. While we welcome all comments, input on certain topic areas are of particular interest, including scope 1, 2 and 3 target setting.
This blog walks through the key changes to scope 1, 2 and 3 target setting proposed in the draft standard. We have also published two other blogs on assessing and communicating progress against targets and environmental attribute certificates. You can find the full scope of proposed requirements in the consultation draft.
What are scope 1, 2 and 3 emissions?
Before examining the specific proposals contained in the draft standard, let’s start with a quick refresher of what scope 1, 2 and 3 greenhouse gas (GHG) emissions are. The definitions in the SBTi Glossary are:
Scope 1: Direct GHG emissions from operations owned or controlled by the reporting company.
Scope 2: Indirect GHG emissions associated with the generation of purchased or acquired electricity, steam, heating or cooling consumed by the reporting company.
Scope 3: Indirect GHG emissions (other than those covered in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.
New approaches to scope 1 and 2 targets
Based on feedback from companies as well as emerging academic research, the draft standard proposes changes to target setting for scope 1 and 2 emissions.
First, the draft splits out scope 1 and scope 2 targets to reflect the unique challenges in decarbonization in these categories. The current V1.2 of the standard allows companies to set targets aggregated across scopes. The aim of this proposed change is to increase the focus on action by requiring companies to source their electricity from zero carbon sources.
Scope 1 target setting
The draft standard proposes keeping the option for companies from certain high-emitting sectors to use the tailored sectoral decarbonization approaches (SDAs) but includes two potential variations of the absolute contraction approach (ACA) target-setting method.
The first variation aims to ensure that all companies have linear pathways to net-zero by 2050 that converge on the same point as the cross-sector pathway. The second variation aims to conserve the carbon budget by accounting for historical emissions, meaning that the decarbonization rate for companies is informed by the change in emissions from a reference year.
Check back here in the coming weeks for a training video on the proposals for scope 1 target setting.
Scope 2 target setting
The current version of the standard allows companies to combine scope 1 and 2 emissions under a single target, which was initially designed to simplify the target-setting process. However, academic research has identified that this practice, when combined with the use of unbundled renewable energy certificates (RECs) and guarantees of origin (GO) certificates, may delay decarbonization. That’s why the draft of V2 requires separation of scope 1 and 2 into distinct targets.
The draft also proposes requirements to set scope 2 targets using the two scope 2 accounting approaches currently under use. All companies are required to set targets to reduce location-based scope 2 emissions, and either a target to reduce market-based scope 2 emissions or a zero-carbon electricity target. Zero-carbon electricity targets are replacing the renewable electricity targets found in the current standard in order to remain technology agnostic and accommodate for grids with nuclear electricity capabilities.
To support effective grid decarbonization, the draft requires, where possible, companies to use time- and spatial-matched market-mechanisms sourced in the same market
We recognize that some companies don’t have access to grids with zero-carbon electricity, often due to regulatory constraints. That’s why the draft standard also enables these companies to contribute to zero-carbon electricity from other grids as a time-limited alternative.
Check back here in the coming weeks for a training video on the proposals for scope 2 target setting.
An enhanced scope 3 model
We know that scope 3 is a barrier to setting net-zero targets–more than half of businesses we surveyed said so. We also know that it is perhaps the largest opportunity for the private sector to decarbonize. That’s why the draft standard proposes a new, enhanced model for setting and achieving science-based scope 3 targets.
Scope 3 target-setting requirements
The first key difference is that the draft standard requires all Category A companies (i.e., large and medium-sized companies in higher-income countries; see ‘company categorization’ in the draft standard for more information) to set targets against scope 3 targets, regardless of their share of a company’s total emissions. Setting scope 3 targets is an option for Category B companies (small companies and medium-sized companies in lower-income countries).
Scope 3 target boundaries
The draft standard also reconsiders target boundaries for scope 3. The current standard uses a percentage boundary that treats all scope 3 emissions the same (minimum 67% for near-term targets and 90% for long-term targets). The draft V2 requires companies to consider scope 3 emissions based on both the intensity of activities and where they have the greatest influence.
Alignment targets
Accessing primary emissions data for activities in the value chain remains a challenge for many companies. That’s why the draft of V2 places greater emphasis on alignment metrics and targets to address scope 3 emissions. For example, alignment targets might focus on the share of procurement allocated to net-zero-aligned suppliers and activities, or the share of revenue derived from net-zero-aligned products and services.
The introduction of non-emission metrics provides greater flexibility on available methods to tackle scope 3 emissions.
Substantiating scope 3 mitigation measures
Direct mitigation that can be linked to specific emission sources with the company’s value chain continues to be the top priority of the Corporate Net-Zero Standard. When such traceability cannot be established, the draft standard proposes options for less traceable mitigation measures, all while incentivizing improvement over time to ultimately achieve full traceability.
These options include interventions at the activity pool level, as well as the use of indirect mitigation to address emission sources for which other interventions remain unavailable.
Check back here in the coming weeks for a training video on the proposals for scope 3 target setting.
Participate in the public consultation
The SBTi welcomes feedback from all interested parties, including industry professionals, business associations and collectives, academics and think tanks, public sector bodies and regulators, civil society organizations, other voluntary standard setters and actors across the corporate sustainability ecosystem. Before submitting your feedback, be sure to review the draft standard itself through our new digital consultation guide.
If you want to learn more, register for our Q&A webinar on 9 April and submit a question to be answered by our expert team.
