SBTi Announces Updated SME Definition and Fees

Today, the Science Based Targets initiative (SBTi) announces it is updating its definition of Small and Medium-Sized Enterprises (SMEs) that qualify for the initiative’s SME target validation route. The new definition is part of the SBTi’s ongoing efforts to strengthen its compliance and increase ambition from the private sector. It will direct more companies to use the standard route for corporate target validation, helping scale the impact of science-based targets globally.

The updated SME definition will take effect on January 1, 2024 and apply to any SME wishing to set science-based targets:

Companies are eligible to use the SME route if they:

• Have <10,000 tCO2e across scope 1 and location-based scope 2 emissions
• Are not classified in the Financial Institution (FI) Sector or Oil & Gas (O&G) Sector
• Are not required to set targets using sector-specific criteria (such as the Sectoral Decarbonization Approaches) developed by the SBTi (see the SBTi’s sector guidance documents for requirements)
• Are not a subsidiary of a parent company whose combined businesses fall into the standard validation route

And three or more are true:

• Employ <250 employees*
• Turnover of <€50 million*
• Total assets of <€25 million*
• Are not in a mandatory Forest, Land and Agriculture (FLAG) sector

*Aligned to the European Union’s Corporate Sustainability Reporting Directive (CSRD) SME criteria. These figures were updated in December 2023 in line with the latest CSRD definitions and thresholds for SMEs.

The new SME definition is forward-looking, and will not require immediate action from companies that have already used the SME target validation route. Instead, starting on January 1, 2024, any businesses that wish to use the SME target validation route will need to adhere to the new SME definition. It will also apply to SMEs that resubmit their targets as part of a target recalculation or update after January 1 2024 when selecting the target validation route.

The SBTi is also announcing an increase in the validation fees for SMEs from $1,000 to $1,250. The increase accounts for a period of sustained inflation, and marks the first time the fee has been increased since the SME pathway was launched. Additionally, the initiative is reducing the threshold for SMEs to qualify for fee waivers to ensure that science-based targets promote ambitious and equitable corporate climate action. SMEs with less than $10 million in revenue that are based in developing countries and economies in transition (as defined by the United Nations Department of Economic and Social Affairs) will be eligible for a fee waiver. The updated fee and waiver threshold will also go into effect on January 1 2024.

To help companies and stakeholders understand the implications of the definition change, the SBTi has compiled this list of FAQs.

SMEs play an important role in corporate climate action, and the SBTi is committed to balancing ambition with practicality for small and medium businesses, providing they are low-emitters, while increasing ambition from the entire private sector. To stay informed on our latest work, join our mailing list and follow the SBTi on LinkedIn and X (previously known as Twitter).

This blog was updated on February 13, 2024 following minor revisions to the SME definition.