Net zero has become a hot topic (no pun intended) in recent years with discussions aplenty from politicians and business leaders.
A few years back, a much-needed standard for net zero for businesses was introduced, providing a sort of clarity for businesses on what net zero is and what they needed to do to achieve it.
I say a ‘sort of’ clarity, as the standard and associated guidance was extremely complex. Experienced and highly qualified sustainability professionals get into a lot of debates about how to interpret the standard, so for any poor person who’s new to this, it’s a lot to digest.
Last year, the Science-based Targets Initiative (SBTi), the folks behind the standard, hinted that a new version was coming out. After a lot of speculation, the proposed new standard is finally with us and, to help cut through the jargon, I’ve put together a summary of the key changes they’re recommending.
What is the net-zero standard?
Formally known as the ‘corporate net-zero standard’, the net-zero standard defines how much a business needs to reduce its greenhouse gas emissions by to achieve net zero, and when it should do this.
Before the standard was introduced, there was no formal definition of net zero for businesses. This was confusing and meant that companies could make claims that weren’t credible and didn’t align with science.
The current version of the standard is V1.2, and the proposed new version would be V2.0.
Who are SBTi?
SBTi are the clever people in charge of creating and enforcing the standard.
The initiative is a UK-based charity and is supported by big names involved in tackling climate change – CDP, the United Nations Global Compact, the We Mean Business Coalition, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF).
SBTi has a subsidiary, SBTi Services Limited, that validates any target claims made by businesses. It’s a rigorous process, as they have to make sure any claims made are credible.
Why is the standard changing?
The original standard was designed to make sure that claims made by businesses aligned with science. Since its original release in 2021, SBTi has gathered a lot of feedback on both the challenges faced by businesses and the progress we’ve made in tackling climate change.
The new standard considers these challenges and looks at how we can help businesses make progress more rapidly. In particular, it looks at making improvements in the following five areas:
- Focussing on action
- New options for tackling scope 3 (indirect) emissions
- Greater investment in removing carbon from the atmosphere
- Tracking and communicating progress against targets
- Simplifying requirements for SMEs and businesses in developing countries
When are these changes taking place?
At time of writing (May 2025), the V2 standard is a proposal which is out for public consultation. SBTi is aiming for targets to be set against the new standard from 2027 onwards, so it’s unlikely we’ll get a final version of this standard until 2026.
Size matters (geography too)
Net zero is a challenge for any business, but it’s a particular challenge for small businesses, and companies in developing countries.
The proposed standard breaks companies down into two categories – A and B.
- Category A companies are large businesses in higher income countries and, as you might imagine, they have to adhere closely to the standard.
- Category B companies are small and medium businesses in lower income countries, and they don’t have to do everything in the standard.
There’s also good news for small businesses in higher income countries, as they also don’t need to do everything in the standard.
More than just emissions
Perhaps the biggest change to the standard is allowing companies to set targets that aren’t just about emissions reduction. Although that initially sounds odd, the proposed changes make a lot of sense.
The standard provides a range of what they call ‘benchmarks and indicators’ that serve as both potential targets and guidance on what companies can do. Examples include:
- 100% zero carbon electricity consumed by 2040 or earlier
- 100% of tier 1 suppliers to have net-zero targets by 2050 or earlier
- 0% of revenue from products that use fossil fuels by 2050 or earlier
Greater flexibility on targets
The current net-zero standard looks for businesses to reduce direct and indirect emissions (scopes 1-3) by 90% by 2050 or earlier. The proposed new benchmarks and indicators give a lot more flexibility.
This is important, as we’ve often found that executives are reluctant to commit to a percentage reduction when they don’t understand how they can achieve it. The proposed approach would help them understand what actions they could potentially take.
The standard also proposes allowing companies to set target reductions based on emissions intensity, which means reducing the amount of greenhouse gas emissions per unit – e.g. “We aim to reduce our emissions from cement manufacturing by X% per tonne produced by 2040 compared to 2023”.
Intensity targets are complex and contentious as, ultimately, they still need to result in a company reducing its overall greenhouse gas emissions. The proposed standard has options around both economic intensity, e.g. CO2e per £m, and physical intensity, e.g. CO2e per unit sold, however there are some quite tight criteria around these.
Also, the new standard proposes to no longer combine scope 1 (fuel / refrigerants) & 2 (purchased energy) emission targets. Businesses now need to set individual targets for each of these, with a requirement to be using 100% zero-carbon electricity by 2040.
A stronger commitment process
To set a target, the current process requires businesses to first make a public commitment to set a target and then have it validated within two years. This has resulted in lots of businesses committing to set targets, and then not doing it within the timeframe.
The new process looks for businesses to propose a target as part of their commitment, and to then have it validated within 12 months (two years for category B companies).
Organisations should break down targets into near and long-term, but small businesses and category B companies don’t need to set long-term targets. The proposal defines “near-term targets” as up to five years.
Businesses need to prioritise their approach based on how material an area is to their business and how much they can influence it, e.g. by focussing on tier 1 suppliers first. Small businesses and category B companies get it much easier, as they don’t need to set scope 3 targets.
Oh, and when setting targets for purchased energy (scope 2), organisations will need to consider not only their purchase of green energy, but also the overall amount of energy purchased from the grid, as this encourages energy efficiency. In technical terms, this means they need both location-based and market-based targets.
Making sure you have a plan
At the moment, businesses can set a target with no real idea how they’ll achieve it. The proposed standard tackles this by requiring companies to produce a “transition plan” – a plan to transition to net zero – within 12 months of having their target validated.
A focus on reporting
The current standard’s requirements for reporting how you’re doing against your target are minimal to non-existent. The proposed standard gets tough by asking companies to report on a defined set of criteria that are aligned with the EU’s Corporate Sustainability Reporting Directive (CSRD).
Not only that, but all emissions reporting needs to be assured by a third party unless you’re a small business or a category B company.
Checking in on progress
The new standard asks companies to check their performance against set criteria at defined intervals and to set new targets if they haven’t met the requirements.
SBTi may carry out ‘spot checks’ on companies to see if they’re on track.
Investing in nature
Although it’s important that companies reduce their greenhouse gas emissions to net zero by 2050, we also have to do something about the emissions produced up until that time.
This means we need to work out ways to remove carbon (and other greenhouse gases) from the atmosphere, either by technological means or through the miracles of mother nature – e.g. planting trees, restoring peatland, growing seagrass, etc.
We ideally need companies to keep investing in nature to achieve this, although doing this clearly won’t reduce the carbon they’re putting up into the atmosphere. SBTi use the horrendous term of “Beyond Value Chain Mitigation” for this, or BVCM for short.
The challenge here is that, if it doesn’t reduce their footprint, companies have no real incentive to invest in nature. The proposed standard partially deals with this by introducing a scheme to recognise a business’s investments, though the details on how this will work aren’t clear at this stage.
What about offsets?
In 2024, there was a big worry that the new net-zero standard might allow “carbon offsets” – schemes where businesses could buy carbon credits equivalent to the amount of greenhouse gases they produced, which got invested in various schemes.
This raised a concern that it might allow businesses to make themselves look good by buying credits without making the necessary reductions.
The proposed standard still hints that SBTi is looking at options as to how to recognise “carbon removals”, i.e. schemes that remove carbon from the atmosphere, but doesn’t yet give detail on these. The standard does suggest, however, that these may be limited to tackling scope 1 emissions, as scope 2 emissions are planned to fall to zero, and scope 3 emissions are complex.
There is also a suggestion that the use of what are technically known as “unbundled EACs” may be tightened up. These are energy credits that can be bought to invest in renewable energy schemes and are often used by companies to lower their emissions from purchased electricity when they aren’t able to directly buy renewable energy.
What should businesses do now?
As the new standard is currently only a proposal, businesses shouldn’t make any changes to their plans yet. It does, however, give an indication of the SBTi’s direction of travel, so a wise sustainability leader may wish to align at least some of their thinking with the ideas outlined in the standard.
If you’d like more information on the proposed net-zero standard, do please drop me a line at colin.curtis@tbl-services.com
