“…Human subtlety… will never devise an invention more beautiful, more simple or more direct than does nature, because in her inventions nothing is lacking, and nothing is superfluous…”
Corporate climate strategy has decisively shifted from a specialized sustainability function to a central pillar of enterprise risk management. Today, boards of directors and executive teams face intensifying pressure from investors, regulators, and customers to deliver defensible, science-aligned decarbonization plans. In this environment, vague sustainability marketing and weak carbon claims are no longer just ineffective—they are significant reputational and compliance liabilities.
As you evaluate pathways to net zero, Nature Based Solutions are frequently presented as a crucial mechanism. But for executive decision-makers, navigating the noise around these solutions requires a clear, commercially grounded understanding of what they actually mean, how they mitigate risk, and how they fit into a rigorous corporate climate strategy.
Beyond the Hype: Defining Nature Based Solutions
The term “Nature Based Solutions” is often misused as a catch-all phrase for any environmental project, leading to justified skepticism among risk-aware leaders. According to the globally recognized framework established by the UN Environment Assembly and the International Union for Conservation of Nature (IUCN), true Nature Based Solutions are strictly defined. They are actions to protect, sustainably manage, and restore natural and modified ecosystems in ways that effectively address societal challenges, simultaneously providing human well-being and biodiversity benefits.
When properly designed, these solutions are a powerhouse for climate mitigation. Research indicates that agriculture, forestry, wetlands, and bioenergy could feasibly contribute about 30% of the global mitigation needed to limit warming to 1.5°C by 2050, and up to 37% of the emissions mitigation needed by 2030.
However, the commercial reality is that not all nature-focused projects meet this high standard. Poorly executed initiatives, such as planting monoculture non-native forests solely for rapid carbon sequestration, can actually increase a region’s exposure to hazards like wildfires, exacerbate biodiversity loss, and alienate local communities. For your organization, investing in low-quality projects translates directly into stranded assets and accusations of greenwashing. High-integrity Nature Based Solutions require a holistic approach that balances carbon sequestration with ecological stability, inclusive governance, and strict safeguards.
The Commercial Case: Risk Management and Enterprise Value
For CEOs, CFOs, and supply chain leaders, the value of Nature Based Solutions extends far beyond greenhouse gas accounting. These interventions serve as highly effective tools for managing acute and chronic business risks driven by climate change.
Consider physical risk and supply chain resilience. Companies highly dependent on natural capital can utilize Nature Based Solutions to secure their operations against environmental shocks. For example, a food and beverage company might invest in restoring degraded landscapes ecologically linked to its agricultural sourcing, thereby mitigating the risk of supply disruptions and price volatility caused by shifting precipitation and extreme weather. Similarly, restoring coastal ecosystems like mangroves can provide billions of dollars globally in avoided losses from coastal flooding, directly protecting adjacent manufacturing facilities and infrastructure.
Beyond physical risk, these solutions protect long-term enterprise value by addressing shifting market expectations. Demonstrating a tangible commitment to the climate and nature crises helps secure your organization’s social license to operate, avoiding costs linked to stakeholder backlash. It also serves as a powerful differentiator in talent acquisition and retention, particularly among younger demographics who increasingly prioritize corporate purpose when choosing employers.
Furthermore, financial markets are rapidly integrating nature-related risks into their capital allocation models. Integrating Nature Based Solutions into your transition planning signals to investors that you are proactively managing systemic risks and positioning your firm favorably within a nature-positive global economy. The Taskforce on Nature-related Financial Disclosures (TNFD) provides a structured LEAP approach—Locate, Evaluate, Assess, and Prepare—enabling businesses to rigorously quantify how ecosystem degradation threatens future cash flows and where strategic interventions can mitigate these financial risks.
Integrating Nature into a Defensible Net Zero Plan
Understanding the strategic value of Nature Based Solutions is only the first step. The critical challenge is integrating them into a credible corporate climate strategy without exposing your brand to claims of offsetting out of convenience.
Leading frameworks, including the Science Based Targets initiative (SBTi), establish a clear mitigation hierarchy: your primary imperative must be deep, rapid decarbonization within your own value chain. You cannot simply buy your way out of your direct emissions footprint. However, the science is equally clear that solving the climate crisis requires both internal abatement and external investment.
This is where the deployment strategy diverges based on your business model:
- Insetting for Land-Intensive Sectors: If your company operates within the Forest, Land and Agriculture (FLAG) sector, you can deploy Nature Based Solutions directly within your own supply chain. This practice, known as “insetting,” involves working with suppliers to implement regenerative agriculture, agroforestry, or conservation practices that actively reduce your Scope 3 emissions while increasing the resilience of your raw materials.
- Beyond Value Chain Mitigation (BVCM): For companies outside the FLAG sector, or for investments made above and beyond internal targets, Nature Based Solutions fall under Beyond Value Chain Mitigation. The SBTi emphasizes that the private sector must engage in BVCM to avert devastating climate impacts. By channeling finance into high-impact jurisdictional forest protection or wetland restoration, you help protect irrecoverable carbon sinks and scale up the carbon dioxide removal technologies needed to neutralize global residual emissions by 2050.
Navigating Carbon Markets with High Integrity
For organizations looking to execute these strategies, the voluntary carbon market offers a mechanism to finance Nature Based Solutions globally. Yet, the market’s historical lack of transparency has made many compliance leaders and Corporate Affairs teams hesitant to engage.
To safely utilize carbon credits, your organization must adopt a stringent, data-driven approach centered on high integrity. The Integrity Council for the Voluntary Carbon Market (ICVCM) has established the Core Carbon Principles (CCPs), setting a global benchmark to ensure credits create real, verifiable climate impact. High-quality carbon credits must be strictly additional—meaning the mitigation would not have occurred without the carbon finance—and they must ensure permanence while preventing emissions leakage to other areas.
On the demand side, how you communicate your investments matters just as much as the investments themselves. The Voluntary Carbon Markets Integrity Initiative (VCMI) Claims Code of Practice outlines clear rules for how companies can make credible claims about their use of carbon credits. Under these rules, Carbon Integrity Claims (Silver, Gold, or Platinum) are reserved for companies that maintain transparent emissions inventories, set science-aligned near-term reduction targets, and use high-quality credits to go above and beyond their internal decarbonization trajectory.
Following these guidelines ensures that your claims are transparent, traceable, true, and verifiable. It fundamentally separates your brand from competitors relying on weak “carbon neutral” marketing, transforming your climate strategy into a defensible demonstration of environmental leadership.
The Path Forward
Navigating the intersection of net-zero planning, climate finance, and environmental markets is undeniably complex. Distinguishing between a high-impact Nature Based Solution and a high-risk carbon project requires deep technical evaluation of greenhouse gas accounting methodologies, biodiversity co-benefits, and regulatory governance.
However, the risks of inaction—or poorly guided action—far outweigh the challenges of implementation. Nature Based Solutions offer a scientifically rigorous, commercially viable pathway to manage climate risk, secure supply chains, and prepare your organization for the impending wave of climate and nature disclosures.
At Carbon Credit Capital, we help organizations understand, evaluate, and confidently integrate high-integrity carbon credits and Nature Based Solutions into defensible net-zero strategies. We bring the domain expertise required to mitigate reputational risk, clarify complex market developments, and ensure your climate investments deliver measurable value to both the planet and your enterprise.
Schedule a consultation with carboncreditcapital.com today to learn how we can help you build a resilient, high-integrity corporate climate strategy.
Key takeaways
- SBTi is the default reference point for corporate climate action: 51% of Fortune Global 500 companies now hold net-zero targets, up from 8% in 2020, and over 11,000 organizations worldwide have SBTi-validated targets.
- Net Zero Standard V2 redefines climate leadership as reducing emissions and mitigating ongoing emissions, not reduction alone.
- The new standard adds flexibility through five-year cycles, a “best efforts” standard, and an Asset Transition Method for companies whose path to net-zero doesn’t fit a straight-line trajectory.
- Voluntary carbon credits are formally recognized for the first time, with reduction and removal credits accepted from 2027, and removals required from 2035.
- Companies with 2030 targets keep using V1 for their current cycle and move to V2 in 2028; companies without targets can start using V2 on February 1, 2027.
Why every business needs to understand the SBTi Net-Zero Standard revision
The Science Based Targets initiative (SBTi) has become the default reference point for credible corporate climate action. Net-zero targets are now held by 51% of Fortune Global 500 (FG500) companies, up dramatically from just 8% in 2020, and more than 11,000 organizations worldwide have set SBTi-validated targets.
However, SBTi’s influence extends well beyond the companies formally participating in the program. Every business in the value chain of an SBTi participant will have to reduce its own carbon emissions, and businesses that aren’t SBTi participants themselves still look to the program for guidance on climate action.
In short, SBTi gives every business a credible blueprint for climate action, and companies that follow its principles can pursue climate action with confidence, whether or not they’re formally part of the program.
How will the Net Zero Standard revision affect business climate action?
SBTi participation is expected to grow. Despite strong target-setting participation among the F500, only 17% of companies use the SBTi Net Zero Standard V1 beyond target setting, largely because its rules have been seen as too rigid to apply in practice. Much of the Net Zero Standard revision has focused on creating more flexibility to enable higher participation. Medium and small businesses will also increasingly feel pressure for climate action, since SBTi mandates that its participants reduce carbon emissions across their value chains.
Net Zero Standard V2 also redefines climate leadership: leading climate action now means reducing emissions and mitigating ongoing emissions. Reducing your own emissions while ignoring the emissions you continue to release along the way is no longer considered leadership. Supporting voluntary carbon projects with high-integrity carbon credits is now backed by the leading authority on corporate climate action.
What lessons shaped the Net Zero Standard V2 revision?
The revision reflects a few learnings about what actually drives climate progress, and how SBTi built those lessons into the new standard.
| Net Zero Standard V1 Learnings | Net Zero Standard V2 Implementation |
|---|---|
| Making real short-term progress is more important and more difficult than making big long-term promises | Focus on short-term climate progress |
| Every company has a different path to net zero that doesn’t always fit generalized net-zero rules | Create asset transition plans based on each company’s unique asset lifecycles and capital planning |
| We need to mitigate our ongoing emissions to keep global carbon emissions in check | Reduce global carbon emissions by financing voluntary carbon projects with high-integrity carbon credits |
What are the key changes between the old and new Net Zero Standard?
Both versions of the standard are grounded in net-zero by 2050. However, the old standard treated climate leadership as simply reducing emissions, expected a long-term commitment to net zero, based emission reduction targets on generalized net-zero goals, revoked status from companies that fell behind on targets, and ignored voluntary carbon projects entirely.
The new standard treats climate leadership as reducing emissions and mitigating ongoing emissions. It shifts the focus to short-term progress through five-year cycles, and it bases emission reduction targets on both the net-zero goal and a company’s own asset decarbonization plan. A new Asset Transition Method lets companies set decarbonization targets through asset plans with committed, verifiable steps; an ambitious but achievable path based on a company’s starting point, financial resources, and technology, with multiple pathways to reflect the unique opportunities and constraints of different industries and companies.
Crucially, the new standard moves to a “best efforts” basis that creates real flexibility on progress against targets. Businesses that miss their targets can keep their status if they’ve used “every lever” within their control, and minimum progress rules will be set out in the SBTi Assurance Manual.
Finally, the new standard formally uses voluntary carbon projects to mitigate ongoing emissions. From 2027 through 2034, this mitigation is recognized, and both carbon reduction and removal credits are accepted. From 2035 forward, mitigation with carbon removal credits becomes required, with durability matching between the removal and the emission it offsets.
| Old Net Zero Standard | New Net Zero Standard |
|---|---|
| Grounded in net-zero by 2050 | Grounded in net-zero by 2050 |
| Climate leadership is reducing emissions | Climate leadership is reducing emissions and mitigating ongoing emissions |
| Make a long-term commitment to net-zero | Focus on short-term progress in 5-year cycles |
| Emission reduction targets are based on net-zero goal |
|
| Businesses who fall behind targets lose status |
|
| Ignores voluntary carbon projects |
|
When does the new Net Zero Standard take effect?
Companies with existing 2030 targets should continue using the old Net Zero Standard for their current cycle, and start using the new Net Zero Standard in 2028 to set targets for the next cycle (2030–2035).
Companies that don’t yet have targets can use the new Net Zero Standard starting February 1, 2027.
What are SBTi’s Category A and Category B companies?
The new Net Zero Standard splits companies into two categories, with different requirements attached to each.
Category A covers large companies from all countries and medium-sized companies from high-income countries. A company from any country qualifies if it meets at least one of: net turnover of €450 million or more, or 1,000 or more full-time employees. A company from a high-income country qualifies if its Scope 1 and 2 emissions are 10,000 tCO2e or more, or if it meets at least two of: balance sheet of €25 million or more, net turnover of €50 million or more, or 250 or more full-time employees.
Category B covers small companies from all countries and medium-sized companies from lower-income countries.
How do Scope 1 targets work under Net Zero Standard V2?
Scope 1 targets aim to transition companies to net-zero direct emissions by 2050 or sooner, and companies can choose from three approaches.
- Absolute emissions reduction follows a straight-line emissions trajectory from the target base year to the net-zero year.
- Emissions intensity reduction lets companies follow sector-specific pathways designed to reflect the reduction opportunities available in sectors like steel, cement, or chemicals.
- Asset transition is designed for companies whose capital stock turnover doesn’t follow a linear or sector pathway. These companies design a transition plan to operate existing assets efficiently and replace them with low-carbon assets, using predetermined milestones.
How do Scope 2 targets work under Net Zero Standard V2?
Scope 2 targets address emissions from purchased electricity through three pathways:
- Reducing electricity consumption,
- Reducing grid consumption by installing onsite or direct-line offsite clean energy generation, and
- Cleaning up the regional grid using market-based tools like PPAs, RECs, and GOs that drive clean energy development.
V2 introduces a dual Scope 2 framework requiring two separate targets, with an overall goal of 100% low-carbon electricity by 2040.
The location-based target addresses the carbon intensity of a company’s physical power use, and requires companies to show that their grid consumption is falling and/or that their physical grid use is getting cleaner; in other words, that their market-based solutions are actually making the grid cleaner.
The market-based (or zero-carbon electricity) target tracks a company’s use of low-carbon power generation contracts and Energy Attribute Certificates. It requires geographical matching of these certificates with electricity consumption based on deliverability regions (grid regions); annual matching is allowed, though hourly matching is encouraged. Category A companies with large electricity loads must report the percentage of their Scope 2 electricity consumption matched with low-carbon attributes on an hourly basis, and there’s an optional recognition framework for companies that meet hourly matching thresholds.
How do Scope 3 targets work under Net Zero Standard V2?
Scope 3 targets share the same 2050-or-sooner net-zero goal, but companies set near-term targets only for material emissions sources in their value chain and areas where they have real influence. Long-term Scope 3 targets are generally not required.
Limited, justified exclusions are allowed for near-term targets, including categories that individually account for less than 5% of total Scope 3 emissions, and activities where a company lacks practical influence, like leased assets it doesn’t operationally control, or the processing of sold products. Optional exclusions are also available in specific categories.
Companies can choose from three approaches to near-term Scope 3 targets:
- An overarching emissions reduction target, which follows a linear contraction of emissions from the base year to residual emissions of 10% or less by 2050 or sooner;
- An overarching supplier/customer alignment target, benchmarked against a growing share of tier 1 suppliers and customers reaching net-zero by 2050 or sooner; or
- A category- or activity-specific target, tailored for companies with concentrated emissions in particular Scope 3 categories or high-emitting activities.
What is “ongoing emissions mitigation” under the new SBTi standard?
This is one of the most significant additions in Net Zero Standard V2. Accelerated climate contributions are needed to help the world achieve climate objectives, limit temperature overshoot, mitigate transition risks, and support the scale-up of climate solutions, and V2 formally recognizes that. Ongoing emissions mitigation runs as a parallel track to companies also reducing their own emissions.
The framework is initially voluntary, with recognition available at three contribution levels to encourage early action.
- Engaged companies address more than 1% of total Scope 1, 2, and 3 emissions.
- Advanced companies address more than 10% of total Scope 1, 2, and 3 emissions, including 100% of Scope 1 and 2 emissions.
- Leadership companies address 100% of total Scope 1, 2, and 3 emissions with a contribution budget of $80/tCO2e.
Carbon credits used for this purpose have to meet certain quality standards. They must be ex-post (issued after the mitigation has actually occurred), independently third-party-assured, emissions reductions or removals, measured in tCO2e, that occur within five years prior to the reporting year. They must be sourced from outside the company’s own value chain. Further minimum criteria will be set to align with high-integrity frameworks, with additional details on the recognition program expected in the second half of 2026.
Starting in 2035, carbon removals become mandatory for Category A companies. From that point, the carbon removal coverage requirement rises linearly from 1% of Scope 1–3 emissions to 100% by a company’s net-zero year. Within that, 10% of long-lived GHG emissions must specifically be covered by durable removals, also rising linearly to 100% by the net-zero year.
How must companies neutralize residual emissions?
At a company’s net-zero target year and thereafter, it must reduce its Scope 1, 2, and 3 emissions to zero or to residual levels, and neutralize all residual emissions using eligible carbon removals. Those removals have to meet two conditions: they must occur within the same reporting period as the residual emissions they’re neutralizing, and long-lived GHGs must be neutralized with long-lived removals, matching the durability of the removal to the atmospheric lifetime of the emission being addressed.
What is the SBTi implementation hierarchy?
Net Zero Standard V2 also lays out how companies should prioritize their actions for credible target delivery, in three tiers.
- Direct actions, at the activity level, are actions that reduce emissions at the source within a company’s own operations and value chain; things like efficiency improvements, fuel switching, and engaging suppliers and customers to reduce their emissions.
- Actions within shared systems, or activity pools that reduce the emissions of shared systems like electricity or gas grids. This includes market instruments that convey low-carbon attributes, such as PPAs, RECs, and GOs, all of which must meet minimum integrity criteria that SBTi will elaborate on in future guidance.
- Sector-level actions relate to the same type of activity occurring in a relevant geography or system, in a way that meaningfully reduces the emissions a company is responsible for.
How Terrapass helps businesses meet the new SBTi standard
As the rules around carbon credits become more rigorous, the quality of the credits behind them matters more than ever. Terrapass has expanded our global network of carbon projects: more project types, locations, prices, ICVCM CCPs, and UN SDGs, spanning super-pollutant destruction, nature-based solutions, and durable removals. We offer Green-e® Climate Certification and we only source from third-party-verified projects on ICVCM-Eligible registries.
We also help clients with impact beyond carbon: EACs, RECs, and GOs including Green-e® Certified credits that support leading renewable energy projects; water credits that support water restoration projects; and custom environmental product needs like RNG and SAF. Wherever your organization is on its sustainability journey, we help clients around the world address climate risk, advance their environmental and social goals, and get the most out of their sustainability budgets.
FAQ: SBTi Net-Zero Standard revision
What is the SBTi Net-Zero Standard?
It’s the framework the Science Based Targets initiative publishes for companies that want validated, credible net-zero targets tied to limiting global warming.
What is changing in the SBTi Net Zero Standard V2 revision?
The biggest changes are more flexibility (five-year cycles and a “best efforts” standard), a new Asset Transition Method for companies whose emissions don’t follow a straight-line path, and formal recognition of voluntary carbon credits for mitigating ongoing emissions.
When do companies need to switch to the new SBTi standard?
If your company already has 2030 targets, you keep using V1 for your current cycle and move to V2 in 2028. If you don’t have targets yet, you can start using V2 as of February 1, 2027.
Can companies use carbon credits to meet SBTi targets?
They can. Under V2, high-integrity carbon reduction and removal credits count toward mitigating ongoing emissions from 2027 through 2034. Starting in 2035, only removal credits count, and they need to be durability-matched to the emissions they offset.
What’s the difference between Category A and Category B companies under SBTi?
Category A is large companies everywhere plus medium-sized companies in high-income countries, based on thresholds like revenue, headcount, or emissions. Category B is small companies everywhere and medium-sized companies in lower-income countries.
What happens if a company misses its SBTi target?
Under the old standard, falling behind could cost a company its SBTi status. Under V2’s “best efforts” approach, a company can hold onto its status as long as it’s used every lever within its control, with minimum progress rules coming in the SBTi Assurance Manual.
Sources: This post is based on Terrapass’s internal analysis of the SBTi Corporate Net-Zero Standard V2.0. Facts and figures were checked against SBTi’s official V2.0 announcement, SBTi’s Corporate Net-Zero Standard V2.0 — Chapter 6: Ongoing Emissions Responsibility, Trellis’s coverage of the standard, Trellis’s reporting on Ongoing Emissions Recognition costs, Sylvera’s analysis of what comes next, Anthesis Group’s Fortune 500 net-zero commitments research, and Climate Impact Partners’ seventh annual FG500 analysis, as reported by CarbonUnits.com.
The post SBTi Net-Zero Standard V2: What the Revision Means for Every Business appeared first on Terrapass.
For most businesses, the emissions that matter most sit outside their own walls. Scope 3 emissions, everything generated across your value chain, from the suppliers who make your inputs to the customers who use your products, typically make up the majority of a company’s total carbon footprint. Under the Corporate Sustainability Reporting Directive (CSRD), those value-chain emissions now have to be measured and disclosed with a rigour that spend-based estimates alone struggle to satisfy. This guide sets out how to improve Scope 3 data accuracy for CSRD: the calculation methods open to you, how to move from estimates to verified supplier data, and how to govern that data so it holds up to audit.
A carbon credit is a commitment that extends well into the future. The tonne of CO₂ compensated for today from a nature-based carbon project must remain out of the atmosphere for good, which means the forest behind the credit has to remain standing long after the transaction is complete. For any buyer, this raises a defining question: What ensures that the forest endures?
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