Corporate Net-Zero Standard V2 Second Public Consultation

The draft Standard sets out the foundational requirements for companies to set targets to address emissions from their operations and value chain, consistent with a net-zero ambition. It defines requirements for: 

• Separation of scopes
• Target timeframe
• Mid-term targets (under consultation)
• Target metrics
• Target ambition
• Maintaining net-zero alignment
• Aggregation of GHGs
• Separation of Forest, Land, and Agriculture (FLAG) targets
• Sector-specific targets
• Dependencies

Section 3.2 of the updated draft Standard proposes adopting the linear contraction approach as one of three target-setting methods. This recommendation is supported by research showing minimal ambition differences between linear and budget-conserving contraction methods when using recent base years, as well as feedback gathered from the first public consultation.

The section also introduces additional options for target setting, including alignment metrics and the Asset Decarbonization Plan. Under the Asset Decarbonization Plan, companies are required to determine the emissions of an asset, set a carbon budget for that asset dated to 2050, and define a plan to abate, replace or phase-out the applicable assets in line with the carbon budget. These targets are defined by absolute reductions over time, while also considering sector-specific mitigation opportunities, barriers and transition dynamics.

All companies are required to set near-term targets for scope 1 emissions using either alignment-based or emissions-based metrics. Long-term targets are mandatory only for those in heavy industry or transport sectors, and must be based on absolute emissions reductions. The draft Standard introduces more granular, activity-specific pathways to better reflect different industries and priority emission sources. 

The updated draft Standard strengthens scope 2 target setting by introducing clear near-term expectations for low-carbon electricity purchasing, aligned with the best available tools for a market-based approach. It also aligns long-term ambition for all scope 2 emissions with a fully decarbonized energy system by 2040. These updates aim to help companies manage their actual emissions exposure and transition risks, while supporting credible claims.

In the near term, the updated draft Standard requires companies to set targets for purchasing low-carbon electricity, and emissions targets for heat, steam, and cooling when these sources account for more than 5% of total location-based scope 2 emissions. In the long term, companies are required to set emissions targets (using a location or market-based approach) covering electricity, heat, steam, and cooling.  

SBTi criteria for low-carbon electricity purchasing require that contractual instruments convey environmental attribute certificates (bundled with or unbundled from electricity). Purchased low-carbon electricity must come from generators commissioned or re-powered in the past ten years, located in the same region of ‘physical deliverability’ as electricity consumption, and for the largest users, from generation occurring in the same hour as electricity consumption. Each of these three criteria (age limit, physical deliverability, and hourly matching) reference the RE100 and 24/7 frameworks. These frameworks provide guidance on exemptions, phase-ins and legacy clauses where not explicitly defined by the SBTi. These elements are also key areas to seek alignment on in future scope 2 accounting updates from the GHG Protocol.

The updated draft Standard has revised some scope 3 target-setting requirements to focus on the highest-priority value chain emission sources, allowing exclusions for lower-impact activities and areas where influence is limited, while requiring improvements over time.

The draft Standard requires Category A companies to set near-term targets and makes long-term scope 3 targets optional. For Category B companies, both near- and long-term targets are optional. Companies are required to assess which scope 3 categories contribute 5% or more of their total scope 3 emissions and set targets on those categories. Companies must also set separate targets for “priority commodities” in their supply chain that account for at least 5% of that category’s emissions.

To address the diversity of value chain emissions, the draft Standard introduces three target-setting approaches: emissions intensity, activity alignment, and counterparty alignment, including cascading engagement through the supply chain. The updated draft acknowledges a range of implementation options to catalyze value chain decarbonization, including at the emission source, counterparty, activity-pool and sector levels, and introduces the limited use of high-quality environmental attribute certificates.