Widely considered the de facto framework for setting science-based emissions reduction targets, SBTi’s methodology plays a central role in helping companies align with the goal of limiting global warming to 1.5°C by 2050. However, following recent controversy over the role of carbon credits – which sparked internal disruption and a leadership change – all eyes are now on what Version 2 brings to the table.
What does Version 2 propose?
Version 2 aims to shift the focus from simply setting climate targets, to tracking real progress and holding companies accountable. It does so through the following:
- Categorisation: The draft introduces a new way of grouping companies based on their size and location, with requirements adjusted to reflect these differences. Company size is determined using definitions from EU regulations, while location is classified according to the World Bank’s income-level categories.
- Encouraging stronger corporate net-zero commitments: Version 2 replaces the current commitment letter with a more robust process. It requires companies to publicly commit to net zero by 2050 and set targets within 12 months (for larger firms in wealthier countries) or 24 months (for smaller businesses in lower-income countries) and publish a climate transition plan within 12 months of target validation.
- New target setting: The standard introduces a new benchmarking approach, allowing companies to identify gaps between current performance and science-based pathways. Companies that have already achieved net zero in parts of their value chain can maintain that performance and focus targets on areas still needing decarbonisation.
- Scope 1 and 2 emissions: Key updates include adjustments to the Absolute Contraction Approach target-setting method (with two variations open for consultation), the separation of scope 1 and 2 targets, a requirement to set both location- and market-based scope 2 targets, and clearer guidance on the use of unbundled energy certificates.
- Scope 3 emissions: The draft standard promotes a more targeted approach, encouraging companies to focus on the most climate-relevant parts of their value chain rather than using fixed percentage-based targets. It also supports using non-emissions metrics, such as sustainable procurement or net-zero aligned revenue when direct emissions data is difficult to obtain.
- Carbon removals: The draft standard permits companies to use carbon removals to address residual scope 1 emissions – those that are hardest to eliminate. However, the SBTi maintains its prohibition on offsetting, meaning companies cannot meet targets by buying carbon credits from unrelated projects. Emissions reductions must come from direct actions or efforts within or closely linked to the company’s value chain.
- Weightier beyond value chain mitigation (BVCM): While direct emissions reductions remain the priority, the draft standard places greater emphasis on recognising and incentivising companies that invest in climate action beyond their operations, helping address current emissions and support broader climate transformation.
What’s next?
Version 2 is open to consultation from 18 March until 1 June 2025. This is an opportunity for businesses to review the draft and contribute feedback to help shape the final version. Input from companies will be crucial in making sure the standard effectively supports ambitious corporate action towards a net-zero future.
If your business already has, or is planning to, set near-term or net-zero targets, taking part in this consultation is strongly encouraged through the online survey. Over the summer, SBTi will review feedback and determine necessary adjustments, publishing a summary of the input and how it will be addressed, though no timeline is set. Changes will be added to a revised draft for a second public consultation before being submitted to the SBTi technical council for approval. The final step is a vote by the SBTi board of trustees.
Whether you’re new to climate reporting or have years of experience, evolving frameworks like these are reshaping the landscape. If you need help thinking about how you can communicate your carbon reduction journey, please get in touch with anokhi.kalayil@luminous.co.uk.
