Corporate Net-Zero Standard Version 2.0 Public Consultation

This revised criterion continues to reinforce the importance of setting targets with a comprehensive boundary, while strengthening disclosure requirements to improve stakeholder understanding of target coverage. It presents two options for defining organizational boundaries - alignment with the GHG Protocol, as in the current standard, or consolidation based on financial statements - both of which are open for consultation.

Under the current version of the standard, companies can choose any year from 2015 onwards as their base year. This consultation draft proposes that companies choose a base year no more than three years prior to their Initial Validation. The aim is to maximize ambition and prevent companies from selecting base years that minimize their obligation to reduce emissions, as academic research has shown can happen (Desmoitier, 2024).

GHG inventories prepared in accordance with the GHG Protocol continue to serve as the basis for target setting. The key updates to this criterion address exclusions from inventories and the frequency of scope 3 emissions reporting.

Companies setting targets under the current version of the standard may exclude up to 5% of emissions from their inventories but are nevertheless still required to estimate and disclose any excluded emissions during the validation process. Under Version 2.0, no exclusions are permitted. This strengthens the approach by ensuring a more complete representation of corporate emissions and consistency between information provided to the SBTi and the public, reinforcing accountability in the transition to net-zero.

While companies are still required to publicly report scope 1 and 2 emissions annually, the scope 3 reporting requirement has been revised. Under Version 2.0, companies are required to report relevant scope 3 emission sources annually, with full scope 3 reporting every three years. This revision is intended to incentivize companies to focus on reducing the most critical emission sources.

This new criterion requires companies to determine the applicability of SBTi Sector Standards. When a company falls within the scope of a sector standard, it shall apply the criteria within that standard in addition to the cross-sector criteria of the Corporate Net-Zero Standard to be eligible for validation. Please note that the SBTi is currently developing documentation that will support the process to assess applicability of sector standards.

Reaching a net-zero-aligned state requires companies to address all emission sources over time. However, given the complexities of value chain decarbonization, companies should prioritize the most impactful areas first.

The current version of this standard requires companies to set scope 3 targets using a minimum percentage coverage threshold (e.g., 67% for near-term targets and 90% for long-term targets). This approach presents several challenges, including the risk of misleading target formulations, the exclusion of significant emission sources, and difficulties in tracking progress over time.

To address these challenges, Version 2.0 introduces an impact-based prioritization process, ensuring companies focus on the most relevant scope 3 emission sources in their value chains. Given the dynamic nature of corporate value chains, companies are expected to reassess relevant scope 3 emission sources at each target cycle.

This draft introduces a set of indicators to evaluate performance, encompassing both emissions and non-emissions metrics, such as the percentage of energy sourced from clean sources or procurement from climate-aligned suppliers. By integrating both types of indicators, the framework ensures that companies stay focused on key emissions sources while also tracking actionable measures that can be more effectively assessed over time.

The quality of a company’s GHG inventory serves as the foundation of its emissions reduction targets and progress assessment. This draft introduces a new requirement for companies to obtain, at a minimum, limited assurance for their GHG emission inventories from independent third-party verifiers. This aligns with emerging frameworks (e.g. CSRD), as well as HLEG recommendations.

Data quality is critical to ensure the credibility of corporate climate claims. Today, corporate GHG inventories rely significantly on secondary data, introducing significant margins of error that limit the ability to assess changes in emissions and progress against targets over time.

Recognizing the operational constraints companies face today, along with the importance of improving data quality over time, this draft standard requires companies to gradually shift toward higher quality data. To focus efforts on relevant emissions sources, companies are required to determine the level of traceability for emission-intensive activities and significant scope 3 categories in their base year, and develop a plan to increase traceability over time.

This criterion mirrors the requirements of C33 in Version 1.2. However, the SBTi is consulting on which conditions related to data quality should lead to the recalculation of a company’s target base year emissions. The SBTi is aware of the significant effort required to undertake such recalculations and recognizes the need to incentivize data quality improvement. For this reason, the SBTi is exploring whether and how data quality improvements should lead to the recalculation of target base year emissions.