On 18 March 2025, the Science Based Targets initiative (SBTi) released a draft of its Corporate Net-Zero Standard (CNZS) Version 2.0 for public consultation. The long-awaited update includes revisions related to carbon removal credit use for Scope 1, enhanced Scope 3 guidelines, refined target-setting processes, strategies for managing ongoing emissions, and Beyond Value Chain Mitigation (BVCM). As the leading global standard-setting organization for corporate climate action, SBTi’s updated CNZS could significantly impact the demand and supply dynamics for the Voluntary Carbon Market (VCM).
Background
SBTi's Corporate Net-Zero Standard Version 2.0 represents the first major overhaul since the original framework was released in 2021. The update addresses several challenges identified in the implementation of the first version, particularly regarding Scope 3 emissions management, which over half of surveyed companies identified as their most significant obstacle to setting net-zero targets. More recently, SBTi faced controversy when it announced its intention to allow offsetting for Scope 3 emissions, a decision deemed by many as too flexible.
Carbon Removal Targets
One of the most significant changes for VCM participants in the Version 2.0 draft is the introduction of a structured approach to carbon dioxide removal (CDR). This addresses a key gap in the previous standard, which required removals for residual emissions by 2050 but provided little guidance on interim progress. As in previous versions of the standard, companies are required to neutralize the impact of residual emissions with permanent removals starting from the net-zero year and thereafter. However, the draft proposes two approaches to proactively address residual emissions, both limited to Scope 1 emissions. This assumption is based on projections that energy generation will have no associated residual emissions (i.e., Scope 2) in scenarios aligned with limiting warming to 1.5°C. The consultation presents two options for Scope 1 residual emissions, which are projected to be less than 10% of base-year emissions:
- Option 1: Companies set separate near- and long-term removal targets to address projected residual emissions (distinct from abatement targets), with removal volumes increasing over time in line with climate scenario growth rates. By the net-zero target year, 100% of residual emissions must be matched by carbon dioxide removal (CDR).
- Option 2: Companies have flexibility in addressing residual emissions through additional reductions, removals, or both, without a mandated removal target. The maximum volume of removals allowed is the same as the removal target volume in the first approach.
A notable improvement is the potential for separation of targets for CO₂ and other greenhouse gases, rather than requiring a combined approach. Under Option 1, the Removal Growth Target (RGT) establishes an interim removal target at the company level, measured as the volume of durable removals over a five-year period. In Case 1(a), removals must have a minimum durability aligned with the atmospheric lifetime of the respective GHG, ensuring long-term equivalence between emissions persistence and removal durability. By contrast, Case 1(b) proposes a gradual shift from temporary to more permanent removals within the 2030–2050 timeframe, aligned with the deployment pace of removal solutions observed in climate scenarios.
While limiting removal requirements to Scope 1 emissions reduces the overall impact on carbon removal markets, this structured approach could still generate important early demand signals, especially for hard-to-abate sectors. Market participants should closely monitor which option gains favor during the consultation, as mandatory removal targets would drive significantly higher demand than voluntary recognition programs.
Scope 1 and 2 Emissions Targets
A significant change in the Version 2.0 draft is the separation of Scope 1 and Scope 2 targets, which were previously permitted to be combined. This distinction requires companies to address direct emissions (Scope 1) and purchased energy emissions (Scope 2) through separate, targeted strategies, potentially leading to more effective decarbonization efforts.
For Scope 2 emissions, companies can still use renewable electricity certificates, but they must now meet considerably stricter quality criteria. These new standards include time and location matching requirements to ensure the renewable energy claimed directly reduces emissions at the time and place the company consumes electricity. This represents a substantial tightening of regulations compared to traditional annual matching approaches, which currently dominate voluntary renewable energy markets.
This change will likely boost demand for high-quality, time-aligned renewable energy certificates while potentially decreasing the value of standard, non-matched certificates.
Scope 3
The draft for Version 2.0 introduces significant changes to Scope 3 requirements, enhancing rigor while providing greater flexibility in implementation approaches. The standard now categorizes companies based on size and geography: Category A companies (large and medium-sized companies operating in higher-income geographies) are required to follow all criteria, while Category B companies (small and medium-sized companies operating in lower-income geographies) are offered increased flexibility by making some criteria optional.
The draft shifts focus from a fixed percentage of Scope 3 emissions to the most material sources within the value chain, offering companies additional options such as green procurement, revenue generation targets, and "insetting" practices. It also emphasizes supplier engagement and data collection. For carbon market participants, this approach creates opportunities in supplier-driven carbon programs and value chain emissions reduction projects, encouraging targeted investment in high-impact supply chain sectors over broad-based offsetting.
Oversight and Accountability
Version 2.0 significantly enhances the accountability framework, moving beyond target-setting to ensuring companies demonstrate measurable progress. Companies must now report on progress every five years and adjust their targets to become more ambitious if they fall behind. This evolution transforms SBTi from a target-setting framework into a comprehensive system that includes baseline assessment, implementation, progress evaluation, and claims verification.
The updated standard introduces a three-stage validation process: Entry Check, Initial Validation, and Renewal Validation. This structured approach ensures continuous compliance rather than a one-time validation. Additionally, the draft incorporates spot checks and auditing measures to verify reported progress. These mechanisms establish a more rigorous framework for companies to address baseline emissions and demonstrate tangible progress toward climate goals.
BVCM and Ongoing Emissions
The Version 2.0 draft formally recognizes Beyond Value Chain Mitigation (BVCM) as a complementary strategy for companies to address “ongoing emissions” released during the transition to net zero. This marks a significant departure from Version 1, clearly distinguishing removal credits (for residual emissions) from avoidance and reduction credits (for ongoing emissions).
The standard proposes optional recognition for companies engaging in BVCM through the purchase of high-integrity carbon credits. While this remains voluntary, it establishes a credible framework for companies to match annual emissions with high-quality credits alongside their internal reduction efforts, potentially providing market recognition for “early action” beyond the value chain.
Going Forward
The deadline to submit feedback on the second version draft of the standard is 1 June 2025. The finalized standard is expected by the end of 2026, enabling corporations to begin target setting in 2027. A priority for SBTi will continue to be addressing the challenges of setting guidelines for Scope 3 emissions. During 2025 and 2026, companies may still use the existing methodologies for setting science-based emissions reduction targets for 2030, with goals valid for up to five years or until the end of 2030, whichever comes first.
SBTi's draft Corporate Net-Zero Standard Version 2.0 highlights the ongoing evolution of the VCM and corporate climate target setting. The challenge of balancing rigor with flexibility will remain a central theme in climate policy, with significant implications for market participants.