The Science Based Targets Initiative (SBTi) has released the final version of its Corporate Net Zero Standard version 2, representing a significant shift in how corporate climate ambition is measured and recognized. Over 11,000 companies and financial institutions have adopted Science Based Targets since SBTi was founded in 2015.
The new standard differs significantly from prior drafts. It opens more flexible pathways for target creation, separates scope 1 and 2 target ambition, and clarifies reporting and assurance requirements. The standard also recognizes “best efforts,” meaning companies that do not meet their targets while demonstrating good faith action can continue along the net zero trajectory.
You can read the full Corporate Net Zero Standard version 2 here. Below, we break down what companies need to know about the standard, and what they should do next.
Timing
Companies can continue using version 1.3.1 (and near-term criteria v5.3.1) until January 31, 2028. After that date, all new targets must use version 2. Companies can voluntarily choose to set targets against the new standard starting in February 2027 through SBTi’s online validation portal.
Companies that have not yet set an SBTi commitment can continue to do so and validate to the existing standard until January 31, 2027; all companies committing to SBTi after that date will need to validate their targets to version 2.
Companies with existing targets should check their mandatory five year review trigger date to determine when they will need to set new targets under version 2. Existing near-term targets will remain valid until the end of their target timeframe, or the mandatory five year review timeframe, whichever is sooner.
Key changes in detail
The final version of the updated standard differs from the latest draft version—released in November 2025—in meaningful ways. Here’s what’s changed:
New tiered requirements based on company size: The standard introduces the concept of “Category A” and “Category B” companies based on their size and geography, with different ambition levels required for each tier.
Inventory and base year: Companies must base their targets on the most recent year of emissions using their physical, rather than market-based, inventory.
- Companies will be able to use market-based instruments to demonstrate target progress, with alignment and system contribution claims serving as eligible markers of target progress along with emissions reduction claims.
- Larger companies must include all major scope 3 categories representing more than 5% of their total scope 3 emissions in targets. It is now recommended, rather than required, that companies set long-term targets.
Target ambition: Companies must now disclose separate scope 1, 2, and 3 targets, with optional subtargets for scope 3 categories.
- Scope 1: A new asset transition target has been added, to allow asset-specific reduction plans for companies with long term decarbonization ambition for physical assets. Companies can set absolute contraction, sector-specific intensity, or asset transition targets for scope 1.
- Scope 2: Companies can set absolute contraction or low carbon electricity alignment targets, committing to a threshold of 0.048 kgCO2e/kWh. Large electricity users will need to report hourly matching performance; and companies with more than 20% annual increases in electricity consumption must set absolute emissions reduction, rather than low carbon electricity alignment targets.
- Scope 3: Companies can set absolute emissions reduction, intensity reduction, supplier/customer alignment, volume alignment, and product alignment targets. Specific pathways have been defined for upstream and downstream categories and exclusions have been identified for low impact activities, and activities where companies have little influence. Companies may elect to (but are not required to) set targets for emissions-intensive activities in their scope 3.
Reporting: Companies will be required to report their Scope 1+2 footprints on an annual basis, with a five year end of cycle reporting process, including a complete Scope 1-3 footprint, to SBTi.
Ongoing emissions: The revised draft brings together Beyond Value Chain Mitigation (BVCM), carbon removals, and neutralization under one integrated framework that defines how companies take responsibility for emissions that persist on the path to net zero. It introduces a tiered recognition system for companies addressing their emissions through verified mitigation measures:
- Engaged: 1% of scope 1-3 emissions
- Advanced: 100% of scope 1-2 and 10% of scope 3 emissions
- Leadership: 100% of scope 1-3 for Category A companies and 10% for Category B
Category A companies will be required to neutralize 1% of their scope 1-3 footprint by 2035, increasing to 100% by their net zero target year.
Interaction with broader standards updates
This standard was released as the Greenhouse Gas Protocol (GHGP) is underway with significant updates to GHG accounting standards, including the Corporate Standard, Scope 2 Standard, Scope 3 Standard, Actions and Market Instruments Standard, and Product Standard. SBTi has committed to aligning with GHGP as those updates are finalized.
What should companies do now?
Companies with SBTi-validated targets:
- Identify the trigger date for your mandatory five-year review (five years after targets are set) to determine when you will need to update your targets.
- Identify potential target approaches and language associated with the new standard, and assess feasibility for scope 1, scope 2, and relevant categories of scope 3.
Companies considering setting targets:
- Compare potential target pathways for SBTi version 1.3.1/near-term guidance version 5.3.1 against the new standard. Assess feasibility as you decide which version you wish to pursue validation against.
- For companies that wish to set targets under legacy guidance, ensure that you register your commitment with SBTi before January 31, 2027.
All companies: SBTi’s new scope 3 guidance places more emphasis and provides more options for supplier engagement approaches to scope 3 reductions. If you are part of a company’s supply chain and they have committed or adopted SBTi-aligned targets, it is possible that they will ask their suppliers to establish targets of their own. We recommend determining whether your decarbonization plans will align with target requirements, which you can visualize in SBTi’s interactive online tool.
Watershed can help you assess what the new standard means for your targets and build a plan to navigate them. Reach out today.
