This past March, the Science Based Targets Initiative (SBTi) released an initial draft of its Corporate Net-Zero Standard V2. This draft, open for public consultation until June 1, proposes updates to its key standard, which provides guidance for companies to decarbonize their operations, reach net-zero emissions, and set science-based targets.
If your company has been preparing targets under SBTi Version 1.2, the Version 2 Consultation Draft introduces critical updates that reflect a more robust and standardized approach to climate action. While companies have until 2027 to set targets under the new standard, understanding new requirements and preparing to comply is important. Here’s what’s changing, how to determine if you’re prepared to align with the new standard, and how to get there, with a sector lens in mind.
Key Changes to the SBTi Standard
| Area | OLD STANDARD (V1.2) | NEW STANDARD (V2 DRAFT) |
|---|---|---|
| Base Year | Flexible (any year since 2015) | Must reflect current operations; ≤3 years old |
| Emissions Coverage | Up to 5% emissions could be excluded | No exclusions; full Scope 1, 2, and 3 required |
| Target Methodology | Aggregated targets allowed | Separate targets for Scope 1, 2, 3 |
| Scope 3 Targets/td> | Based on % coverage (67%/90%) | Focus on “most relevant” sources using impact-based mapping |
| Assurance | Not required | Required for Category A (limited assurance of GHG inventory) |
| Progress Monitoring | Annual reports with no standardized method | Mandatory end-of-cycle assessment using defined methods |
| Bioenergy & FLAG | Not consistently required | Mandatory for companies using biomass or in FLAG sectors |
| Sector Guidance | Optional if available | Mandatory if sector-specific standard exists (e.g., Power, Finance, FLAG) |
Determining Your Company’s Readiness
You are likely on the right track if:
- You’ve already inventoried Scope 1, 2, and key Scope 3 emissions
- Your base year is recent and reflects current business structure
- You’ve engaged your value chain to improve data quality
- You’ve followed early sector-specific guidance (like FLAG or Power)
You’ll need to step up in the following:
- Formal third-party assurance (especially if you’re Category A)
- Developing a traceability plan for Scope 3 emissions
- Using the SBTi-required algorithms for progress evaluation
- Assessing and applying sector-specific standards
What Should I Know To Be Ready?
1. Know Your Category. The categories below will determine the extent to which the new requirements apply to your company:
- Category A: If you are a large or medium-sized company in a high-income country, full requirements apply
- Category B: If you are a small or medium-sized company in a low-income country, flexibilities exist
2. Check Sector Relevance. If you’re in power, financial institutions, FLAG sectors (agriculture, forestry, food, apparel), or high-emissions industries (cement, steel, real estate), you must apply sector-specific standards where available.
3. Understand the New Validation Model. V2.0 introduces a target cycle approach with:
- Initial validation (target ambition)
- End-of-cycle assessment (actual performance)
- Renewal validation (new targets)
4. Prepare for No Loopholes. There’s no leeway for exclusions or unclear data. Transparency and methodological rigor are emphasized at every step.
Preparing for SBTi Version 2
If Version 1.2 was about setting goals, Version 2 is about delivering results with accountability. It brings more structure, transparency, and scrutiny, especially for high-emitting and high-influence sectors. Companies can still set targets through 2025 and 2026 using Version 1.2; however, from 2027, new targets must align with the updated standards. Existing targets under the original version remain valid until the end of their cycle or 2023, whichever comes first.
The SBTi will offer guidance to help companies transition Scope 3 targets to the updated standard. In the meantime, it is important for companies to start preparing systems, data, and teams to align with Version 2 by 2027.
To ensure you are on the right track, start with a gap assessment between your current approach and the new criteria, prioritize data upgrades and assurance, and confirm if sector-specific standards apply.
Need help calculating carbon emissions or setting SBTi-aligned targets? Novata’s flexible carbon solutions and Advisory expertise can help. Learn more or start a free five-day trial of Novata Carbon Navigator.
