A Fundamental Shift in the SBTi Framework
The Science Based Targets initiative (SBTi) has released Version 2 of its Corporate Net-Zero Standard, marking a profound methodological overhaul. As carbon consultants advising SMEs and large corporates alike, we see this as a double-edged evolution: it introduces some proportionality for smaller entities while layering on complexity that could overwhelm even well-resourced organisations. The result? A standard that’s technically superior but risks uneven adoption, with potential unintended loopholes for strategic gaming by those with the expertise to exploit them. The implications of this structural shift become clear when examining how Version 2 reshapes each emissions scope in turn.
Separating Scope 1 and Scope 2 Targets
Version 2 mandates separate targets for Scope 1 and Scope 2, closing the door on combined approaches that previously allowed Scope 1 stagnation to be masked by Scope 2 renewable procurement. This demands granular, evidence-backed pathways: absolute contraction or sector-specific for Scope 1, and explicit low-carbon electricity commitments by 2040 for Scope 2. The upside is clear; compliance will force genuine operational decarbonisation. However, the analytical lift is substantial, requiring sophisticated modelling of fuel switches, efficiency gains, and energy sourcing. For SMEs, this could stretch limited resources thin; for corporates, the detail invites creative interpretation, such as over-relying on market-based Scope 2 claims that may not reflect physical grid realities, potentially gaming the system without true emissions impact.
A Materiality-Led Approach to Scope 3
Shifting from rigid coverage thresholds (67% for FLAG, 90% for non-FLAG), Version 2 adopts a materiality and influence-based model for Scope 3. Companies must rigorously assess high-impact categories and demonstrate leverage before including them in targets, with justified exclusions for non-influenceable areas.
This is a pragmatic pivot, aligning targets with actionable levers like supplier contracts or product redesign. Yet, the process which involves supplier emissions profiling, influence audits, and boundary justifications, clearly demands advanced data ecosystems. SMEs may struggle with the upfront data burden and the knowledge required to successfully monitor delivery. We should also remember that complexity in any system always invites evasion and gaming. Corporates with legal and sustainability teams could, theoretically, manipulate materiality thresholds to exclude inconvenient categories, creating loopholes that undermine the standard’s integrity while appearing compliant. Confirming true corporate compliance will require something akin to corporate audit.
Expanded Scope 3 Target Types
The draft expands near-term Scope 3 options to include physical/economic intensity, supplier engagement, and revenue/index-aligned metrics, which is a far cry from V1’s rigid absolute-heavy mandates. This flexibility acknowledges growth dynamics, allowing high-growth firms to decouple emissions without output contraction. Intensity-based approaches can be maintained across successive near-term 5-year cycles, provided they demonstrate consistency with the long-term trajectory through cumulative emissions assessments or benchmark alignment.
However, long-term targets (net-zero by 2050) must be set on an absolute emissions metric basis, requiring 90–95% gross reductions across 100% of Scope 3 from the base year. This layered distinction adds significant complexity: while near-term cycles permit intensity to manage expansion, the cumulative pathway must ultimately deliver absolute cuts. Companies need credible transition plans to bridge this gap, modelling scenarios to ensure near-term flexibility ladders up without abrupt shifts later. For SMEs, forecasting this transition could be daunting; corporates might exploit the flexibility by front-loading intensity targets during growth phases, only to face verification challenges as 2050 nears.
Category A vs Category B Differentiation
The A/B split represents one of Version 2’s most positive advancements, directly addressing our longstanding criticisms that the SBTi framework was inherently biased toward large, well-resourced organisations, and effectively excluding the “little guy” from meaningful participation. In our past analyses, this lack of proportionality was our primary concern, as it sidelined SMEs and entities in emerging markets, despite their critical role in global supply chains and decarbonisation efforts.
Version 2 tackles this head-on with Category B, designed specifically for SMEs, companies with revenue below €500m, or those primarily operating in non-high-income economies. These organisations receive targeted relief: exemptions from Scope 3 internal carbon fees, simplified reporting templates, lighter verification burdens, and more lenient recalculation triggers (e.g., higher thresholds for inventory changes). This proportionality is a clear and commendable win, making SBTi alignment genuinely more viable for smaller players who were previously sidelined by the one-size-fits-all demands of Version 1.x, however this does not fully remove the structural complexity SMEs must navigate.
It lowers entry barriers, allowing SMEs to engage with science-based targets without the overwhelming administrative or financial overhead that once made compliance feel unattainable. Category A companies, by contrast, must adhere to the full rigour of the standard, including comprehensive Scope 3 pricing and detailed disclosures. This tiered structure strikes a better balance, fostering broader adoption while maintaining scientific integrity for larger emitters. That said, even with these accommodations, Category B entities must still navigate the framework’s baseline complexity, such as materiality assessments and cyclical renewals, which could deter adoption unless external support, like accessible guidance or affordable consulting, is available. Overall, whilst challenges remain for Category B, this differentiation is a step forward, moving SBTi from an elite club into a more inclusive system for climate action.
Recurring Performance Cycles
Version 2 institutes mandatory five-year cycles: set targets, monitor annually, achieve ≥90% at cycle end (or justify trajectory), and renew with third-party verification. This is a very welcome change which will require higher quality planning and execution and will hopefully force the thousands of companies that signed up to SBTi for the marketing credentials but had no idea how they were going to deliver it, to get serious.
Triggers for recalculation include ≥5% Scope 1+2 or ≥10% Scope 3 inventory shifts. This cyclical model embeds accountability, preventing “set and forget” complacency. But the ongoing disclosure of deviations and spot-check risks do add administrative weight. SMEs might find the rhythm burdensome without dedicated staff and potential gaps in carbon literacy, while large corporates with compliance infrastructures should be able navigate it adeptly.
Enhanced Requirements for Residual Emissions
The standard also strengthens expectations around residual emissions and long-term carbon removals. Early modelling of residuals and planning for durable removals (via the new Ongoing Emissions Responsibility framework) is now required, with voluntary Recognised ($20/tCO₂e fee) or Leadership ($80/tCO₂e) labels for pre-2050 action. Contributions (credits or finance) can’t offset reductions but reward early neutralisation. This forward-thinking element strengthens long-term viability, but the scenario analysis and quality criteria (forthcoming) demand expertise in CDR markets and fee mechanisms. SMEs benefit from Category B exemptions (no Scope 3 fee), easing one barrier to entry, although Category B will still face significant thresholds to modelling requirements. Furthermore, additional guidance is needed to avoid vague “high-quality” definitions of carbon credits and gaming for labels without commensurate climate benefit.
Implications: Progress for SMEs, Pitfalls for Corporates
Version 2 advances SBTi toward a more defensible, flexible system, directly benefiting SMEs through Category B and near-term options. It lowers some barriers for the “little guy,” potentially boosting supply chain participation. For corporates, though, the order-of-magnitude complexity; layered pathways, gates, and still to be defined guidance, will almost certainly lead to practical challenges like extended planning timelines, higher internal resource allocation for data management and modelling, and increased reliance on third-party verification to ensure compliance during renewals. These demands may strain sustainability teams, particularly in dynamic sectors with frequent inventory changes or acquisitions, requiring more frequent recalculations and adjustments.
As consultants, we specialise in helping organisations navigate these realities, from conducting data gap audits and developing tailored pathway models to establishing robust governance for ongoing compliance. If you’re assessing how Version 2 impacts your targets, we encourage you to get in touch; practical support can make the difference in turning this complexity into a strategic advantage.
Ethan Baddeliyanage
Senior Carbon Footprint Consultant
Ethan specialises in carbon footprint calculations and analysis. His experience stems from working in the public sector within the food industry, developing carbon footprint analysis and carbon reduction strategies for a range of clients. Ethan is an expert at understanding an organisation’s emission sources and quantifying these, the results of which are key to informing the sustainability strategy and identifying areas for reducing. His interest in the industry began by studying for a degree in Global Sustainable Development and Sustainability Studies, at the University of Warwick. Since graduating and beginning his career, Ethan also worked at the NHS during Covid-19 as an Operational Response Support.
