Net-Zero Jargon Buster: Corporate Net-Zero Standard Version 2 edition

An activity pool is related to emissions that are not directly traceable to the source but are traceable to a certain region, or other definable boundary. For example, a company purchasing an agricultural commodity might not know the specific farmer that grew it, but probably knows the region from which the commodity is sourced, which might serve as an upstream supply pool. Or, when looking downstream, the company may not know the exact product use-phase emissions for all electrified sold products, but they may know the electricity grid that powers the products that the company brings to market, or the waste disposal facilities where their sold products as disposed of, which could serve as a downstream activity pool.

The draft standard proposes that, when full traceability is not possible, data from activity pools can be used by companies to assess performance and substantiate progress.

The SBTi utilizes the technical definition of an activity pool established in Brander & Bjørn, 2023.

Alignment metrics are used to inform alignment targets, a target-setting method that is new to the draft standard (see more detail below). These metrics are indicators that measure the extent to which an organization's activity is in line with global climate goals. They might include measures such as the share of electricity sourced from zero-carbon sources, the share of procurement allocated to net-zero-aligned suppliers and activities, as well as the share of revenue derived from net-zero-aligned products and services.

Alignment targets are a target-setting method new to the draft standard. They use alignment metrics (see above definition) to achieve net-zero. They differ from emission reduction targets, which are designed to achieve a certain amount of emission reductions.

Alignment targets were designed in response to feedback about the challenges that surround GHG emissions accounting, especially in relation to scope 3.

Book-and-claim is a type of chain of custody model that does not always maintain physical traceability of goods and materials throughout the supply chain.

The draft standard proposes some uses of book-and-claim certificates (e.g., sustainable aviation fuel) to support indirect mitigation activities, such as where direct traceability is not possible or where persistent barriers prevent mitigation at the source.

Carbon dioxide removals (CDR) are anthropogenic activities that remove CO2 from the atmosphere and durably store it in geological, terrestrial, or ocean reservoirs, or in products (IPCC, 2018).

Removals, including emerging and innovative methods/technologies (which we call novel CDR in the draft standard), are one way that companies can meet the current Corporate Net-Zero Standard’s requirement to neutralize residual emissions at and after the net-zero year. The consultation draft is exploring the use of CDR in the transition to net-zero and presents three options for its use. Learn more in this video.

The concept of the chain of custody for a commodity involves documenting, controlling and tracing each stage of the commodity or product’s journey along the value chain to ensure that the material or product's origin, handling, and transformation meet specific standards and regulations. The primary difference between various chain of custody models lies in the separation of certified and non-certified products throughout the supply chain and the extent to which the final product and its related claims can be traced back to its origin.

Direct mitigation includes actions that a company takes to reduce scope 1, 2 and 3 emissions, where the mitigation measure can be directly linked to specific emissions sources within the value chain through a robust chain of custody model. For example, a delivery company that replaces its fleet of gas-powered vans with electric vehicles can demonstrate the reduction of emissions that result directly from its own actions.

Emissions-intensive activities significantly contribute to global GHG emissions or otherwise exacerbate climate change. They include activities in energy-intensive and land-use-intensive sectors.

The draft standard incentivizes companies to prioritize tackling emissions from these sources, and provides guidance on identifying the activities across both upstream and downstream segments of the value chain.

Indirect mitigation refers to emission reductions that are relevant to a company’s value chain and comparable to direct mitigation, but that lack a physical connection to the company’s value chain. For example, a company might procure sustainable aviation fuel through a book-and-claim system to address business-travel-related emissions.

The draft standard recognizes the time-limited role that indirect mitigation can play when traceability to specific emissions sources or the activity pool cannot be established. The SBTi is currently exploring how indirect mitigation could serve as an interim measure towards meeting targets, including guardrails for its use.

Ongoing emissions are those that a company continues to emit while decarbonizing in line with net-zero. The draft standard proposes stronger recognition of companies that address the impact of ongoing emissions through beyond value chain mitigation (BVCM).

Residual emissions are those that remain once long-term emissions reduction targets have been achieved. They represent the emissions that a company cannot completely eliminate despite cutting all possible emissions in line with 1.5°C. Companies calculate their projected residual emissions when developing long-term targets, which are usually less than 10% of base year emissions.

In both V1 and the draft V2 of the standard, companies must neutralize residual emissions by counterbalancing their impact through removal and storage. The draft standard proposes three approaches for how companies might address the impact of residual emissions during the transition to net-zero and from the net-zero year onwards. Learn more in this video.

Emissions data is considered traceable when a company can demonstrate:

• The emissions source in the value chain through a credible system (e.g., chain of custody model).
• The emissions profile of the emissions source, such as the type and amount of emissions produced.

The draft standard requires traceability to be established for direct mitigation to be substantiated. It includes some proposed options for when full traceability cannot be established, including the use of activity pools and time-limited use of indirect mitigation.

The reference year is a specific year chosen as a point of comparison. It may be the starting year of the scenario or pathway used in target setting, or the year from which a benchmark is created. In the draft standard, the SBTi uses 2020 as the reference year for the updated Absolute Contraction Approach (ACA) method – which is applied consistently to all companies. This starting point ensures the cross-sector pathway aligns with carbon budgets in IPCC modeling.

The base year is a specific year chosen as a baseline for greenhouse gas emissions targets, i.e. “Company X will reduce emissions 56% by 2030 compared to its 2023.” In this example, 2023 is the base year.

The most recent year is the latest year for which a company has reported and verified GHG emissions data. It can be used in comparison to the base year to assess progress toward meeting science-based targets.