The Science Based Targets initiative (SBTi) just released its draft Corporate Net-Zero Standard 2.0, and it's a significant upgrade. The new standard expands beyond simple target-setting to include performance assessment, implementation, progress evaluation, and claims. It introduces a more structured validation process, categorizes companies based on size and location, and strengthens the approach to Scope 3 emissions. For the first time, it also proposes clearer pathways for incorporating carbon removal into corporate climate strategies and recognition for using high integrity carbon credits in beyond value chain mitigation (BVCM) activities, potentially opening new doors for high-integrity carbon markets.

‍Analysis: SBTi has taken a step in the right direction with their proposal for more optionality for carbon dioxide removal (CDR), but since removals targets are only proposed for Scope 1 emissions, this isn’t the strong signal the CDR market was waiting for. Furthermore, SBTi could have been stronger with regard to requiring the use of high-integrity carbon credits in BVCM rather than considering it nice to have. Corporations need a stronger business case than a recognition program for optional additional action.

What is SBTi’s Corporate Net-Zero Standard?

The SBTi Corporate Net-Zero Standard is the world's first framework for corporate net-zero target setting in line with climate science. It provides guidance, criteria, and recommendations to help businesses set science-based net-zero targets consistent with limiting global temperature rise to 1.5°C. Since its initial release in 2021, it has become the leading standard for credible corporate climate commitments.

On March 18, 2025, SBTi released an initial consultation draft of Version 2.0, the first major revision since the standard was launched. This isn't just a minor update — it represents a significant evolution in how companies set and deliver on climate targets. The draft proposes to transform the standard from a primarily target-setting framework to a comprehensive system covering the entire journey from baseline assessment to implementation and claims.

Key proposed changes in the new standard

The SBTi Corporate Net-Zero Standard Version 2.0 consultation draft introduces the following proposed major revisions:

1. Expanded framework from target-setting to include performance assessment, implementation, progress evaluation, and claims
2. Company categorization (Category A: large companies and medium companies in wealthy countries; Category B: smaller companies and those in lower-income regions)
3. Three-stage validation model: Entry Check, Initial Validation, and Renewal Validation
4. Strengthened Scope 3 approach focusing on relevant emissions sources rather than percentage coverage
5. Clearer distinction between direct mitigation, indirect mitigation, and beyond value chain mitigation (BVCM)

Overall, the philosophy from SBTi seems to be increasing the level of accountability around meeting corporate targets while also providing a clearer pathway to doing it over time. Net-zero is a journey, and SBTi is trying to provide a map as well as milestones to ensure progress.

What does this mean for carbon markets?

Last year, we called on SBTi to provide swift and decisive guidance for companies to use high-integrity carbon credits for Scope 3 abatement. It seems like SBTi is proposing Scope 1 guidance instead. What effect this will have on carbon market demand is unclear. While certain big emitters could be incentivized into joining CDR markets, these companies tend to be less likely to have SBTi targets. 

Furthermore, they also have lower ability to pay based on their ratio of profits to emissions compared to lower Scope 1 emitting companies. Scope 3 is where the greatest proportion of emissions are for companies with the greatest ability to pay for high-integrity carbon credits. It’s also where they have the fewest options for immediate reductions.

This draft guidance does provide more optionality for corporates within Scope 1, which is a step forward. Let’s take a closer look.

Residual emissions and removal credits

The standard proposes three options for addressing residual emissions, which apply only to Scope 1 emissions (projected to be <10% of base year emissions):

1. Required removal targets (separate from reduction targets)
2. Optional recognition for setting removal targets
3. Flexibility to address residual emissions through either additional reductions, removals, or both

Analysis: The limited scope of removals requirements (Scope 1 only) means the direct impact on CDR markets would be modest. Even if mandatory removal targets are adopted, they would apply to a fraction of corporate emissions, likely generating limited CDR demand beyond hard-to-abate sectors — and even in hard-to-abate sectors, other factors could limit those increases.

Ongoing emissions and BVCM

The standard introduces optional recognition for companies addressing "ongoing emissions" (those released during the transition period) through BVCM, which can include high-integrity carbon credit purchases.

Analysis: It’s unclear whether this “recognition” approach would incentivize corporates to do more through BVCM. If it does prove to drive net new demand, this approach could significantly boost carbon credit markets, particularly by:

• Creating clearer differentiation between removal credits (for residual emissions) and avoidance/reduction credits (for ongoing emissions)
• Establishing a credible framework for companies to match annual emissions with high-integrity credits as a complementary strategy to internal reductions
• Providing market recognition for "early action" beyond value chain

What this means for carbon credit buyers

The increasing complexity of carbon accounting standards will underscore the need for expertise in navigating the nuanced distinctions between mitigation approaches. Companies will need to make strategic choices on when to apply direct versus indirect mitigation options, how to properly balance removal and avoidance credits, and the appropriate handling of credits for both residual and ongoing emissions.

Quality assurance becomes paramount as the standard introduces specific criteria and durability thresholds for carbon removals. This heightened focus on quality will necessitate more rigorous verification processes and transparent methodologies.

Enhanced reporting services will be essential to help companies track and accurately disclose:

• Required removals (pending Option 1 adoption)
• BVCM contributions addressing ongoing emissions
• Different approaches to managing Scope 3 emissions

The evolving standards create opportunities for targeted portfolio development aligned with new categorizations, including:

• Long-duration removal credits that meet stringent durability requirements
• Indirect mitigation solutions specifically designed for value chain emissions
• Sector-specific BVCM packages that address industry-specific challenges

While the standard's focus remains firmly on internal abatement over offsetting, the recognition of BVCM for ongoing emissions and the potential requirements or incentives for removal targets create defined spaces for carbon credit markets to contribute to corporate climate strategies in a more structured, transparent way.

The proposed new standards create much more optionality for buyers, but with those added choices comes uncertainty: what’s right for you and your business? The added complexity necessitates the need for expert guidance. Patch’s team has a broad and deep bench of experts who can help you navigate the standards landscape — including SBTi. If you have questions, please reach out to us today.

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‍*SBTi welcomes feedback on the consultation draft until June 1, 2025. Companies setting new near-term targets in 2025 and 2026 can still use Version 1.2, with a transition pathway to Version 2.0 planned. Existing targets will remain valid until 2030 or the end of their target timeframe, whichever comes first.*

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