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The Science Based Targets initiative has released version 2.0 of its Corporate Net-Zero Standard, replacing binary compliance with a “best-efforts” approach that allows companies to remain aligned even if interim targets are missed, provided execution and constraints are transparently disclosed.
Investors must now judge whether companies are genuinely deploying all available levers, how convincingly they explain barriers to progress, and whether those explanations are consistent with capital allocation and ongoing business decisions, rather than relying on whether targets are formally met.
Under SBTi 2.0, companies can remain aligned even where targets are missed if they demonstrate that all available operational and strategic levers have been deployed and that barriers are clearly explained. The emphasis moves from outcomes to process, governance and decision-making. In practice, this makes credibility harder to assess and increases reliance on qualitative judgement, particularly where companies cite external constraints that are difficult to verify.
SBTi has moved away from a single methodology, introducing multiple pathways across Scopes 1, 2 and 3. Companies can choose between absolute reductions, emissions-intensity metrics or asset transition pathways, alongside more tailored approaches for value chain emissions. While this flexibility may improve relevance for companies operating in complex or asset-heavy sectors, it reduces comparability by introducing divergent methodologies, timelines and baselines. As a result, benchmarking becomes more difficult and changes in targets over time are harder to interpret, weakening the usefulness of headline targets as standalone indicators.
The revised framework narrows mandatory Scope 3 coverage by requiring only Category A companies - defined as companies with annual turnover above €50 million in high-income countries and above €450 million in lower-income countries - to set near-term targets, while allowing companies to focus on the most material emissions categories and exclude areas where influence is limited. This is likely to produce a more uneven disclosure landscape, with narrower system boundaries, less consistent coverage across markets and more selectively defined emissions footprints.
In practice, sector differences will intensify these effects. A large industrial company may attribute missed interim targets to grid constraints or slow deployment of low-carbon technologies while maintaining capital expenditure on production assets, raising questions about whether all available levers are being used. A consumer-facing company may instead concentrate on a subset of suppliers, relying on engagement metrics rather than comprehensive emissions reduction targets, which can limit visibility over full value chain exposure. These divergent approaches reduce comparability and increase reliance on company-specific analysis.
For Category A companies, SBTi 2.0 introduces explicit transition plan disclosure requirements and limited assurance over base year data. This elevates the importance of whether targets are supported by credible implementation plans, including the alignment of capital expenditure, the robustness of governance structures and the extent to which transition plans address, rather than defer, structural constraints.
“As companies move from ambition to implementation, alignment between emissions accounting and target-setting frameworks is essential. The Greenhouse Gas Protocol welcomes the continued evolution of SBTi’s Corporate Net-Zero Standard and its integration of emerging areas such as Scope 2 updates and enhanced reporting approaches. Through ongoing collaboration, we aim to promote interoperability, provide clarity for companies, and enable credible, science-based climate action at scale.”
Tim Mohin
CEO - Greenhouse Gas Protocol
The introduction of the Ongoing Emissions Responsibility framework adds forward-looking disclosure on residual emissions and carbon removals. While initially voluntary, it will require Category A companies from 2035 to neutralise residual emissions. This creates greater visibility around expected residual emissions volumes, sourcing strategies for removals and associated costs, giving investors a clearer line of sight into potential long-term liabilities while highlighting uncertainty around feasibility and scalability.
SBTi has formalised an implementation hierarchy that prioritises direct emissions reductions, followed by market-based mechanisms and then sector-level interventions. Disclosure against this hierarchy allows investors to assess whether companies are prioritising direct abatement or relying on indirect measures such as certificates or offsets where operational reductions may be feasible.
The shift introduced by SBTi 2.0 is from binary signals to judgement. Investors will need to place greater weight on the quality and consistency of disclosures, apply closer scrutiny to how companies explain constraints and deploy flexibilities, and adapt engagement approaches to account for wider variation in methodologies and scope. The use of “best efforts” flexibilities may itself become an indicator of risk where explanations are not supported by observable changes in strategy or investment.
