The Science Based Targets initiative (SBTi) has released a draft update of its Corporate Net-Zero Standard. This framework helps companies set and reach science-based emissions reduction targets.
The 132-page document, Corporate Net-Zero Standard Version 2.0, shares important updates. These changes focus on flexibility, accountability, and aligning corporate actions with global temperature goals.
The draft is open for public feedback until June 1, 2025, after which it will undergo further revisions before final approval.
SBTi Chair Francesco Starace emphasized the importance of the net zero standard overhaul, noting:
“The draft standard addresses complex, emerging issues and lays the foundation to enable more companies to move further and faster towards net zero. Working hand-in-hand with stakeholders across the ecosystem to seek and consider a diverse range of views, we aim to produce a standard that is both rigorous and practical, and works for businesses and the planet. With a limited carbon budget left, this is more important than ever.”
The Major Revisions in SBTi’s Net-Zero Standard
The new draft has several key changes. These include Scope 3 emissions accounting, carbon removal targets, and governance expectations.
Stronger Requirements for Scope 3 Emissions
Scope 3 emissions, which cover indirect emissions from a company’s value chain, have long been a challenge for corporations. Over half of the companies surveyed by SBTi said Scope 3 is their biggest hurdle to reaching net zero. The updated draft proposes new rules for this emission:
- Large companies, those earning over $450 million, must set Scope 3 targets. This rule applies no matter how much they contribute to total emissions.
- Businesses should identify high-emission activities. These should account for at least 1% of their Scope 3 footprint or exceed 10,000 metric tons of CO₂ annually.
- The old fixed-percentage rules for Scope 3 targets are gone. Now, there’s a flexible system that highlights high-impact emissions categories.
- Companies need to use their influence to make sure top suppliers set net-zero targets. This can be done through commitments to cut emissions or by using procurement practices that align with net-zero goals.
This approach seeks to balance what is doable and what is ambitious. It helps companies focus on the biggest sources of emissions in their value chains.
New Approach to Carbon Removal Targets
The draft also sets carbon removal targets to help reduce residual emissions. Companies can add high-integrity carbon removal efforts to their path toward net zero. Three pathways are under consideration in the updated standard:
- Mandating carbon removal targets alongside emissions reduction commitments.
- Providing recognition for voluntary carbon removal efforts in corporate strategies.
- Allowing flexibility in how companies address their residual emissions.
This proposal shows a significant change. It aims to include more carbon removal solutions in corporate net-zero strategies. This shift could boost investment in technologies like direct air capture and nature-based solutions.
Tighter Governance and Monitoring
To enhance credibility and accountability, SBTi is introducing stricter governance measures:
- Large companies must set net-zero targets within 1 year of commitment, down from the previous 2-year timeframe.
- Organizations will be subject to random audits to verify compliance.
- Companies should check their baseline emissions every year. They need to update their targets if big changes happen, such as mergers or acquisitions.
- A formal climate transition plan must be published within 12 months of target validation.
These measures aim to prevent greenwashing and ensure that companies remain on track to meet their commitments.
What Is the Potential Impact on Carbon Markets?
The new SBTi standard will likely impact voluntary carbon markets, corporate sustainability plans, and rules.
Potential Boost for Carbon Credit Markets
One of the most debated aspects of the revised standard is its evolving stance on carbon credits. SBTi is looking for new ways to include Beyond Value Chain Mitigation (BVCM) in offsetting Scope 3 emissions, even though its use is still limited. This idea lets companies fund emissions reduction projects beyond their own operations. These include reforestation or carbon capture.
If SBTi accepts specific high-integrity carbon credits, demand may rise. This could lead companies to fund big mitigation projects outside their immediate operations. However, concerns remain about ensuring the integrity and permanence of these credits.
Implications for Corporate Climate Strategies
The proposed changes mean companies can’t just focus on overall emissions targets anymore. They need to take a more strategic and data-driven approach to manage emissions. Businesses will need to keep in mind these things:
- Improve supply chain transparency and engagement to meet stricter Scope 3 requirements.
- Invest in renewable energy and zero-carbon electricity procurement.
- Consider carbon removal projects earlier in their net-zero planning rather than treating them as a last resort.
Pressure on Regulators to Align Standards
As SBTi’s framework gets stricter, regulators might feel pressure to match their policies to the standard. This could lead to:
- Stricter mandatory reporting requirements for large corporations.
- Increased scrutiny of corporate climate claims and carbon offset use.
- Greater integration of voluntary carbon market mechanisms into national and regional climate policies.
The Key Challenges and What Comes Next
The proposed updates are a step forward for corporate net-zero strategies, but challenges remain:
Balancing ambition and feasibility can be tough. Some businesses might find it hard to meet the new rules, especially when it comes to Scope 3 emissions tracking.
Ensuring high-integrity carbon removal. The effectiveness of proposed carbon removal targets depends on rigorous verification and permanence criteria.
Industry adaptation. Companies will need time and resources to adjust to the new reporting and compliance standards.
SBTi is currently accepting feedback from corporations, NGOs, policymakers, and other stakeholders until June 1, 2025. The team will publish a second draft after this consultation phase, and they expect to receive final approval by 2026.
Companies that set new near-term targets in 2025 and 2026 can use the current Corporate Net Zero and Near-Term Criteria methods. However, from 2027 onward, all targets must follow Version 2.0.
SBTi’s updated net zero standard marks an important step in corporate climate governance. The new framework seeks to speed up real climate action. It does this by strengthening Scope 3 requirements, adding carbon removal strategies, and boosting accountability.
The standard has challenges, but it can greatly impact corporate sustainability and global carbon markets. Businesses need to get ready for these changes so they can stay credible as part of the global move to net zero.
The post SBTi’s Version 2.0 Standard Pushes Companies to Net Zero: What Are the Key Updates? appeared first on Carbon Credits.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
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