SBTi Corporate Net-Zero Standard V2.0

What Every Company Needs to Know

If you have an SBTi-validated target, the rules just changed. On 11 June 2026, SBTi published Version 2.0 of its Corporate Net-Zero Standard - the first full revision since the original launched in October 2021. More than 11,000 companies have set targets under that original framework. Most of those targets stay valid for now. What changes is what comes next.

V2.0 shifts the SBTi from a credentialing body to an accountability structure. Target setting under V1 was a one-time event: validate, publish, report annually, wait for the end date. V2.0 replaces that with a five-year cycle that has a formal checkpoint at both ends, required annual reporting in between, and no option to reset if you fall behind. SBTi Chair Francesco Starace describes it in his foreword as "a navigation tool for companies to manage their transition risk and unlock economic benefits in the world as it actually is" - an action framework, not a one-time ambition statement.

This guide covers every material change in V2.0: what is new, what the numbers mean, what is required versus recommended, and what to do now.

Key Changes in SBTi V2.0 at a Glance

*See the "Category A and Category B" section below for the full breakdown

SBTi V1.3 vs V2.0: The Biggest Changes

For organisations already holding validated V1.3 targets, the table below maps exactly what changes when the next cycle begins.

*See "Carbon Credits and the OER Framework" below for the full tier structure.

The Five-Year Cycle: How the New Accountability Structure Works

The most significant structural change in V2.0 is not any single target rule - it is the replacement of one-time validation with a continuous cycle. Under V1, validation marked the finish line, with annual reporting as a formality after. V2.0 turns validation into where the work begins.

Target Validation confirms that targets conform to the Standard. For subsequent cycles, companies submit new targets within the defined window around their previous target year end. This is largely unchanged from V1.

Annual reporting of emissions and implementation actions is required throughout the cycle. This too existed under V1, but V2.0 makes it formally part of the cycle structure rather than a reporting expectation.

The new addition that closes the loop is the End-of-Cycle Assessment. At the close of each five-year cycle, companies prepare a progress assessment covering what was achieved, what fell short, and why. For Category A companies, it must be independently assured and reviewed by an SBTi-recognized validation body. Crucially, if emissions at the target year are higher than planned, the reductions required in the next cycle steepen accordingly. There is no resetting the clock.

"Set targets based on science accompanied by reasonable implementation plans, deploy every lever within your control, be transparent about where barriers have limited what was possible, and demonstrate what you are doing to address those barriers over time." - Francesco Starace, SBTi Chair, Foreword to V2.0

Falling short of a target does not automatically disqualify a company from the SBTi framework. What it does require is transparent reporting, credible evidence of implementation efforts, and clear explanations of what prevented delivery. The shift is from achieving a number to demonstrating genuine accountability across the full cycle.

Category A and Category B: Which Rules Apply to You

V2.0 replaces the old SME/non-SME distinction with a formal two-category classification that determines mandatory versus optional obligations. Classification is confirmed at every Target Validation and locked for the five-year cycle - so it is worth getting right.

Category A covers large companies from any country (net worldwide turnover above €450 million, or 1,000 or more full-time employees). It also covers companies in high-income countries that either emit 10,000 tCO2e or more from Scope 1 and 2 or meet at least two of three smaller-company thresholds: a €25 million balance sheet, €50 million turnover, or 250 employees.

Category B covers small and micro companies globally, and medium-sized companies in lower-income countries. Requirements are deliberately proportionate - but the commercial reality is that Scope 3 compliance flows downward. If your customers are Category A, your emissions are part of their target whether you are formally subject to V2.0 or not. Expect more supplier questionnaires and more weight placed on the answers.

Scope 1: Three Methods, One Non-Negotiable Requirement

Under V1, Scope 1 and Scope 2 were typically set as a combined target. V2.0 ends that. Scope 1 now requires a separate target covering 100% of direct emissions, and companies must choose one of three methods.

Absolute emissions reduction is the default: a straight-line trajectory from the target base year to residual emissions by 2050 at the latest. This is the simplest path and the one most companies will take.

Emissions intensity reduction is available where sector pathways exist - steel, cement, and chemicals, for example. Targets follow the sector-specific trajectory rather than a flat cut, which better reflects how decarbonization happens in capital-intensive industries.

For companies whose capital stock doesn't decarbonize in a straight line - industrial equipment or vehicle fleets with long replacement cycles, for instance - asset transition targets are the better fit. These companies build an Asset Decarbonization Plan scheduling the abatement, retirement, or decommissioning of emitting assets using milestones or a carbon budget from science-based pathways. A transition plan must be published at Target Validation.

One procedural note: if a company chooses the intensity or asset-based method, a long-term Scope 1 target to reach residual levels by 2050 also becomes mandatory. Companies using the default absolute method are only recommended, not required, to set one.

Scope 2: Stricter on Geography, Stricter on Timing

Scope 2 targets must cover 100% of purchased electricity, heat, steam, and cooling. Companies can choose either a low-carbon electricity (LCE) alignment target or a straightforward absolute reduction - but both paths now have tighter rules on what counts.

The Standard sets an explicit threshold for low-carbon electricity: generation at or below 0.048 kg CO₂e/kWh under the near-term trajectory, tightening to 0.024 kg CO₂/kWh from 2035. Anything above that bar does not qualify, regardless of how it is labelled.

Geographic matching is also now stricter. Market instruments - renewable energy certificates, power purchase agreements - must correspond to the actual grid region serving the consumption they are applied to. Existing long-term contracts signed before the effective date are grandfathered for their remaining duration, but renewal resets that protection. Companies relying on unbundled certificates sourced from distant grids will need to review their procurement approach.

From 2030, Category A companies consuming 10 GWh or more in any single activity pool must report consumption matched to low-carbon electricity on an hourly basis - not the annual average that most companies currently use. This starts as a reporting duty rather than a target threshold, but companies reaching defined matching levels early can earn optional recognition on the SBTi Dashboard.

Scope 3: Materiality Replaces the 67% Rule

It is also where V2.0 makes the most practically significant change. The old 67% coverage rule required companies to set targets across categories summing to at least two-thirds of total Scope 3 emissions. Category A companies under V2.0 must instead set targets for every category representing 5% or more of total Scope 3 emissions - regardless of what that adds up to. Category B companies retain the option but are not required.

Three approaches are available for each material category:

• Overarching absolute reduction targets apply a linear reduction trajectory across total Scope 3 emissions.

• Supplier or customer alignment targets measure the share of Tier 1 suppliers or customers that are transitioning or net-zero aligned - useful where direct emissions reduction is harder to control.

• Category-specific targets use sector methodologies where available and are often the most credible path for high-emitting categories like purchased goods or use of sold products.

Commodity certificates are also part of the toolkit now. They let companies buy and claim the environmental attribute of a lower-carbon commodity, such as steel, cement, or ammonia, separately from the physical product, through a book-and-claim model. They count toward Scope 3 only as an interim lever, after direct cuts and shared-system action are exhausted and must meet integrity criteria so the underlying market is genuinely pulling in more low-carbon supply, not just relabeling what already exists. SBTi added this because the old Scope 3 rules left sectors like automotive manufacturing few realistic paths to a validated target.

The 5% materiality screen in practice

To make the threshold concrete, consider a hypothetical consumer goods manufacturer with a total Scope 3 footprint of 500,000 tCO₂e. A basic screen across the GHG Protocol's 15 categories produces the following picture:

In this example, the company must set targets for Categories 1, 11, and 4 - together covering 87% of Scope 3. The 5% rule has effectively concentrated the requirement on exactly the categories that matter most commercially. Category 12 can be excluded but only with a public justification and a documented plan to address it over time. Category 7 is a named exclusion in the Standard, though justification is still required.

That concentration is intentional. The 5% materiality threshold does not reduce accountability - it focuses it where emissions reduction is achievable and measurable. For a financial institution, the equivalent would be financed emissions. For a technology manufacturer, it would typically be purchased components and product use.

V2.0 also introduces Emissions-Intensive Activities (EIAs) in Annex A of the Standard: a defined list of high-impact value-chain activities that companies must identify, quantify, and report separately. Category A companies must additionally assess what share of each significant EIA already meets the "lower-carbon" or "net-zero aligned" benchmark - making the materiality assessment more granular than a category-level view alone.

The Target Base Year: Recent Data Only

One of the quieter but more operationally demanding changes in V2.0 is the requirement for a current base year. Each new target cycle must use a GHG inventory that is no more than two years old at the time of submission. The approach common under V1 - where companies sometimes anchored new cycles to historical baseline years established years earlier - is no longer permitted.

For Category A companies, that inventory requires third-party limited assurance before it can serve as a base year. This covers Scope 1, 2, and 3 emissions, low-carbon electricity calculations, and EIA emissions. For Category B, assurance is recommended rather than mandatory, but the data quality expectation is the same.

In practice, this means the inventory work needs to start before the target-setting process, not during it. Companies that have historically treated base-year setting as an administrative step will need to adjust their planning horizon.

Transition Plans: Required Across the Board

Every company setting targets under V2.0 not only those disclosing under CSRD or similar regulatory frameworks - must develop and maintain a transition plan showing how it intends to deliver its validated targets.

For Category A companies, the plan must be board-approved, published within 15 months of Target Validation, and reviewed at least every five years. The practical good news: SBTi has designed V2.0 to align explicitly with CSRD's ESRS E1-1 and the UK Transition Plan Taskforce framework. If your organisation already produces a transition plan under either framework, that plan meets the SBTi requirement. There is no separate document to produce.

Carbon Credits and the OER Framework: What Changes, What Stays the Same

The Ongoing Emissions Responsibility (OER) framework replaces the earlier Beyond Value Chain Mitigation (BVCM) guidance and is the most debated element of V2.0. What matters most is understanding what it does and does not change.

What does not change: carbon credits still cannot be used to meet Scope 1, 2, or 3 reduction targets. Emissions reductions must be real and within the value chain. OER operates as a separate recognition layer - it rewards companies for taking responsibility for ongoing emissions while reduction work continues, not as a substitute for it.

What changes: that recognition is now formalized into three tiers with defined coverage and commitment levels, and from 2035, participation stops being fully optional for Category A companies.

From 2035, mandatory OER coverage for Category A companies starts at 1% of ongoing Scope 1, 2, and 3 emissions and rises linearly to 100% by each company's net-zero target year. A second, separate ramp applies to durability: the share of that coverage which must come from long-lived removals, such as biochar, BECCS, direct air capture, or enhanced rock weathering with storage of 200 years or more, starts at 10% in 2035 and also rises to 100% by the net-zero year, covering ongoing CO2, N2O, and halogen emissions. The two ramps compound, so a company partway through its transition could need verified removal covering close to half its ongoing emissions, with a similar share of that needing to be long-lived. SBTi has flagged this 2035 requirement as illustrative, noting it will be reviewed ahead of the next major revision of the standard, so the exact mechanics could still shift before it takes effect.

One procedural detail worth flagging: removals counted toward OER must be ex-post, meaning verified after the mitigation has occurred, not purchased against a future delivery date. Early supplier engagement still matters given how constrained durable removal supply currently is, but credits aren't required to come from the same year as the emissions they offset.  

At target validation, every company must publicly declare whether it participates in OER. Declining requires a written explanation to SBTi, and the answer appears on the public SBTi Dashboard. Early engagement is also practically relevant: high-integrity removal credit supply is currently limited, and prices are widely expected to rise as the 2035 mandatory threshold approaches.

One notable change from the consultation draft concerns corresponding adjustments. Earlier proposals would have limited the eligibility of some high-integrity carbon removals commonly used in Europe. The final Standard softened this requirement, keeping a wider pool of removal credits available for OER participation while maintaining transparency through additional reporting requirements.

The Full V2.0 Timeline

What to Do Now

If your targets are already validated under V1, nothing requires immediate action. Those targets remain valid through their current cycle. The question is whether your organisation is positioned to meet V2.0 requirements when the next cycle begins.

Four areas where early preparation pays off:

• Get your GHG inventory current. V2.0 requires a base year no more than two years old. If your current inventory is older than that - or still relies heavily on spend-based Scope 3 estimates where activity-based data is achievable - the upgrade needs to start before target setting does, not during it.

• Run the Scope 3 materiality screen. Even informally, knowing which categories cross 5% tells you where target-setting obligations will land and where exclusion justifications will be needed. The analysis is straightforward; the data gathering rarely is.

• Confirm your company category. If you sit near the €450 million revenue or 1,000-employee threshold, classification matters. It determines which obligations are mandatory, and it is locked in at validation for five years.

• Start the governance conversation early. Board approval of a transition plan and third-party assurance of a base-year inventory both take longer to arrange than most sustainability teams expect the first time through. Neither can be compressed to the last few weeks before submission.

For organisations approaching a target refresh, the time to evaluate V2.0 requirements is now, before the submission window, not during it.

How KarbonWise Can Help

Reading a 60-page standard is one thing. Knowing what your specific obligation looks like, what your base year needs to be, which Scope 3 categories cross the materiality line, and what it's all going to cost, is another. That gap between "I've read V2.0" and "I know what this means for us" is where most teams get stuck, and it traces back to the same root cause every time: a current, complete, audit-ready GHG inventory. Without one, setting a defensible base year is guesswork, identifying material Scope 3 categories is incomplete, and the End-of-Cycle Assessment has nothing credible to build from.

KarbonWise builds activity-based Scope 1, 2, and 3 inventories aligned with the GHG Protocol, with Scope 2 tracking that supports deliverability-region matching and Scope 3 analytics that flag categories crossing the 5% materiality threshold and identify where data quality needs upgrading. Where the inventory is ready, our consultants develop the transition plan - documented, time-bound, and structured to meet what SBTi expects of Category A companies.

Before that conversation, you can get a first read on where your own inventory stands using KarbonWise's carbon footprint calculator.

If you are working through a first V2.0 submission, approaching a next-cycle target renewal, or trying to understand where OER participation sits in your timeline, get in touch with the KarbonWise team.

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