The Science-Based Targets initiative (SBTi) has released a draft version (v2.0) of its Corporate Net-Zero Standard (CNZS v1.2) for public consultation, introducing significant updates aimed at enhancing target-setting, implementation, and accountability. These changes reflect a more comprehensive approach to corporate decarbonization, incorporating new requirements for transition planning, progress tracking, and emissions reduction strategies. This blog explores the key updates in the draft and their implications for companies committed to science-based climate action.
SBTi is a globally recognized framework for companies to set greenhouse gas (GHG) reduction targets aligned with climate science. By setting science-based targets, organizations commit to reducing their emissions in line with the Paris Agreement’s goal of limiting global warming to 1.5°C. The initiative plays a crucial role in driving corporate climate action by providing clear methodologies and validation mechanisms for emissions reduction pathways.
Key Updates in CNZS v2.0 (Initial Consultation Draft)
The updated standard (CNZS v2.0) introduces several critical modifications and additions that enhance the rigor and scope of corporate net-zero commitments. The top 10 proposed changes are listed below:
1. Expanded Scope
- Previous Standard (v1.2): Focused primarily on target setting.
- Updated Standard (v2.0): Now includes base-year performance assessment, target setting, implementation, progress assessment, and communication of results.
2. Stronger Validation Model
- v1.2: Assessed only target ambition upfront (ex-ante), with no standardized process for assessing progress (ex-post).
- v2.0: Introduces a full-cycle approach, requiring companies to track and validate progress periodically.
3. Differentiated Requirements
- v1.2: One-size-fits-all requirements; SMEs followed a separate validation process.
- v2.0: Introduces differentiated criteria based on company size and geographic location.
4. Mandatory Transition Plans
- v1.2: Companies committed to targets through the SBTi but had no formal requirement for transition planning.
- v2.0: Companies must develop and publicly disclose a climate transition plan within 12 months of validation, in line with UN High-Level Expert Group (HLEG) recommendations.
5. Stronger Data Assurance Requirements
- v1.2: No mandatory third-party assurance for GHG emissions data.
- v2.0: Requires Category A companies to obtain third-party (limited) assurance for base-year GHG inventories.
6. Updated Emission Reduction Benchmarks
- v1.2: Used benchmarks based on IPCC AR5 pathways.
- v2.0: Aligns with the latest IPCC AR6 pathways.
7. Enhanced Scope 1, 2, and 3 Targets
- v1.2: Allowed sectoral decarbonization (SDA) and absolute contraction (ACA) for Scope 1; required either location-based or market-based targets for Scope 2 with optional renewable electricity targets; Scope 3 had a fixed minimum boundary (67% for near-term, 90% for long-term) without specific criteria for relevant emissions.
- v2.0: Introduces a revised ACA for Scope 1 to ensure budget conservation and reward early action; requires both location-based and either market-based or zero-carbon electricity targets for Scope 2, emphasizing direct procurement of zero-carbon energy; Scope 3 is now mandatory for Category A, remains optional for Category B, and defines relevant emissions based on significance (≥5% of scope 3) and intensity (≥1% or 10,000 tCO₂e/year), with clearer tracking through supplier engagement.
8. New Approach to Residual Emissions and Removal Targets
- v1.2: Addressed residual emissions only from the net-zero target year onward.
- v2.0: Proposes three different approaches to handle residual emissions, including setting specific removal targets or additional abatement measures.
9. Stronger Beyond Value Chain Mitigation (BVCM)
- v1.2: Recommended but not incentivized.
- v2.0: Strengthens incentives for companies that invest in mitigation beyond their value chains.
10. Defined Progress Substantiation and Target Renewal
- v1.2: Required annual reporting but lacked clarity on progress assessment.
- v2.0: Introduces predefined algorithms for determining progress and mandates setting new targets at the end of each cycle.
Way Forward
The proposed updates mark a significant step forward in corporate climate accountability. Companies aiming to align with SBTi’s Net-Zero Standard should:
- Review the draft changes and provide feedback during the consultation period.
- Assess their existing targets and transition plans to ensure alignment with the proposed revised framework.
- Strengthen internal data assurance and monitoring systems to comply with the enhanced progress validation requirements.
- Prepare for mandatory transition plans and residual emissions mitigation strategies.