SBTi's net-zero overhaul creates two tiers of credibility

Five years after launching the Net-Zero Standard, the Science Based Targets initiative has rewritten it, ESG News reports. Version 2.0 revises a validation process used by more than 11,500 companies. It also tries to reward what happens after a target is set. The update has split companies and climate experts over whether that flexibility will speed up decarbonisation or dilute it.

The balance is deliberate, says SBTi CEO David Kennedy. The standard must reflect “the way the world actually is,” not a “predefined algorithm” for climate action. That view underpins the biggest addition: the Ongoing Emissions Responsibility framework, which recognises companies that exceed their validated targets and take responsibility for the emissions that remain.

The revision tightens the endgame. Companies can no longer lean on offsets in the years immediately before their net-zero target date. At the target date, emissions must be cut to zero or neutralised with carbon removals. From 2035, large companies in the recognition programme — those in high-income countries with annual turnover above €50 million — must support carbon removals to stay in it.

Amy Merrill, chief executive of the Integrity Council for the Voluntary Carbon Market, said the update clarifies where carbon credits belong. High-integrity credits sit inside a company's responsibility strategy, not as an alternative to it.

The controversy sits in the target details. Small companies no longer need external verification of base-year or target-year emissions. Scope 3 targets beyond five years are encouraged rather than required. For Scope 1 and 2, the menu widens: emissions-intensity targets, asset-transition targets and low-carbon electricity targets.

Esther Finidori, Schneider Electric's sustainability chief, argues the near-term emphasis is what makes Version 2.0 work. “Nobody can credibly model emissions out to 2050,” she said; the pace and depth of change, including major technology disruptions, are not knowable. “Five-year targets are what actually drive the machine.” She expects the Scope 3 changes to help companies tailor decarbonisation across sourcing, supplier engagement and product design.

For asset managers, the overhaul changes what a validated target means. Because the recognition programme is voluntary, the standard now carries two tiers: one for a company with a validated target, another for a company that goes further. ESG Capital Daily has traced the same rising credibility bar elsewhere: shareholder votes at FTSE 100 companies, CPP Investments adding a governance check to its carbon footprint disclosures, and Ceres concluding that written transition plans turn climate analysis into decisions.

The practical effect is likely to put the recognition programme at the centre of sustainable-investment due diligence. The strongest marker in the standard now moves from target-setting to emissions responsibility. Managers running climate mandates will need to ask whether a company participates in the Ongoing Emissions Responsibility framework, and what that participation actually requires. The Scope 3 loosening matters too: for many companies, most emissions sit within supply chains, according to ESG News. An encouraged target is not a required one, and that gap becomes an engagement question for investors.

The 2035 removal requirement is a promise of future demand for the carbon-removal market. It carries weight after a period in which that market lost its anchor buyer: as ESG Capital Daily has reported, Microsoft's retreat from carbon-removal purchases helped shrink global credit sales through mid-2026. What the SBTi timeline adds is something the market has lacked — a known, compliance-driven source of demand, however distant.

The broader disclosure regime is moving in the same direction. Transition plans have become a governance document: shareholders vote on them, pension funds ask who has one, and standard-setters have begun to codify what a plan should contain. SBTi v2.0 feeds directly into that process. Companies validating under the new standard will be expected to state where they stand on the recognition programme and how they treat Scope 3 — and those statements will land in the sustainability reports that asset managers already read.

Kennedy's declared aim — a standard that reflects the world as it is — is now the test. The revision gives companies room to be honest about uncertainty while holding the endgame firm. Whether that trade-off holds will be settled in the years after a target is validated, inside the framework that now rewards what companies actually do.