Revision of SBTi Net Zero Standard and the Role of Carbon Credits
The Science Based Targets Initiative (SBTi) is undertaking its first broad revision of the Net Zero Standard. That involves a big effort to evaluate successes and weaknesses of the past 4 years. That also involves the challenge of adhering to science-aligned business emission reductions while at the same time accommodating the many real and difficult barriers to supply chain transformation that face businesses who in many cases are just trying to survive. The revision introduces improvements in many areas, but this discussion focuses on the use of carbon credits, which is one of the most significant elements.
A gap in the current Net Zero Standard is the absence of criteria to drive global climate finance. To fix this, SBTi seeks to:
“Provide a stronger incentive by recognizing companies that not only set science-based targets to reduce emissions within their operations and value chain but take responsibility for addressing the impact of emissions released into the atmosphere as they undergo their net-zero transformation.” (1)
SBTi’s solution in the Net Zero Standard revision is to create a two-tier program. The top-tier continues to be science-aligned business emission reduction. SBTi adds a new second-tier which they refer to as “recognition” for companies who achieve net-zero progress and then address Scope 1 Residual Emissions and Ongoing Emissions annually with high-integrity carbon credits.
Two Key Elements of the Net Zero Standard Revision Related to Carbon Credits
- Companies have the option to start using Carbon Removals now to achieve near-term and long-term carbon removal goals for Scope 1 Residual Emission requirements in their net-zero plan.
- SBTi will recognize companies who use Beyond Value Chain Mitigation (BVCM) to address their Ongoing Emissions annually, but only if they also achieved their carbon reduction goals for the year.
This solution “maintains its focus on the mitigation hierarchy by prioritizing the reduction of emissions across company operations and value chains” while it also “acknowledges the urgency of addressing emissions released into the atmosphere today and the critical role that companies can play in mobilizing finance for mitigation activities beyond their value chain.” (1)
This formal recognition by SBTi of companies who immediately start using Carbon Removals and BVCM has the potential to make a big impact. By shifting its view of high-integrity carbon credits from encouraged but ignored in the first Standard to reported and recognized in the new Standard, SBTi can bring significant visibility to much-needed global climate finance. This is an important signal for SBTi participants as well as non-participants who look to SBTi for guidance on credible climate action.
What is SBTi?
The Science Based Targets initiative (SBTi) is a corporate climate action organization that develops guidance on how companies can set greenhouse gas (GHG) emissions reduction targets to reach net-zero by 2050. Its founding partners are CDP, the United Nations Global Compact, the We Mean Business Coalition, the World Resources Institute (WRI), and the Worldwide Fund for Nature (WWF).
The first Corporate Net-Zero Standard was launched in 2021. Upon launch, it was quickly adopted by leading corporate sustainability organizations across the world and looked to informally by many more, making SBTi an important business climate action framework. More than 1,700 businesses globally have had their science-based net-zero targets validated. (15) SBTi has had great success in focusing companies on reducing their carbon emissions on a science-aligned trajectory, and SBTi participants have made significant progress.
SBTi Definitions
Before we discuss Net Zero Standard revisions, we first need to introduce some of the language of SBTi:
- Residual Emissions: A company’s carbon emissions that remain after a company has achieved its long-term net-zero emission target and after all possible abatement measures have been implemented, likely around 2050. Residual Emission are projected to be <10% of base year emissions.
- Ongoing Emissions: The carbon emissions that occur every year while a company works to achieve its long-term net-zero emission goal.
- Beyond Value Chain Mitigation (BVCM): BVCM is defined in the SBTi Corporate Net-Zero Standard as “mitigation action or investments that fall outside a company’s value chain, including activities that avoid or reduce GHG emissions, or remove and store GHGs from the atmosphere.” (1) This includes funding carbon reduction projects outside of a company’s value chain through the purchase of high-integrity carbon credits (removals or reductions).
- Carbon Removal: A Carbon Removal is a specific type of carbon credit that is generated when a project removes a greenhouse gas from the atmosphere. Carbon Removals are part of the voluntary carbon market and Terrapass has offered high-integrity Carbon Removal credits for several years.
- Carbon Reduction (Avoidance): A Carbon Reduction (Avoidance) is another type of carbon credit that is created when a project prevents a greenhouse gas from entering the atmosphere. Terrapass also offers high-integrity Carbon Reduction credits.
What is Happening to the SBTi Net Zero Standard?
On March 18, SBTi released a draft revision to its Corporate Net-Zero Standard (v2.0). A consultation process for feedback on the revision will last a minimum of 60 days. The final version is expected to go live in spring 2026. While there have been isolated changes to the Net Zero Standard in the past, this is the first broad revision.
In the Corporate Net-Zero Standard (v1.0), it was generally accepted that SBTi required the use of Carbon Removals to neutralize Residual Emissions only after a business achieved its net-zero goal, most likely around 2050. Also, while SBTi informally encouraged companies to use high-integrity carbon credits to address Ongoing Emissions, it did not recognize companies for taking this action. In fact, SBTi is commonly viewed as driving a single-minded focus on reducing business emissions.
How Does the Net Zero Standard Revision Use Carbon Removals?
As mentioned earlier, in the first Net Zero Standard it was generally interpreted that Carbon Removals were only required once companies reach net-zero, typically around 2050, and only for up to 10% of base year emissions. However, we can’t just flip a switch in 2050 and suddenly remove all Residual Emissions. For voluntary carbon markets to build that capacity, we need decades of investment and development.
The new Net Zero Standard recognizes the need to scale-up Carbon Removal capacity over time so that we can achieve our full Carbon Removal goals by 2050. In the new Net Zero Standard:
- SBTi will require companies to set near-term and long-term carbon removal targets for projected Scope 1 Residual Emissions.
- Interim removals can be done for up to 10% of projected baseline Scope 1 Residual Emissions. SBTi will recognize interim removals, and they are considering making interim removal targets mandatory.
- SBTi is also considering whether the carbon removals must be durable like direct air capture or whether companies can start with less durable nature-based removals like reforestation.
At Terrapass, we have offered Carbon Removals for years and we are continuing to build our supply capacity to meet the growing demand. We have also included Carbon Removals in our online Global Portfolio since 2023. Terrapass values the guidance from Oxford Principles for Net-Zero Aligned Carbon Offsetting. It recognizes the emerging state of Carbon Removal generation capacity and prescribes a gradually increasing adoption of Carbon Removals supplemented by high-integrity Carbon Reduction credits in the near term.
Wrap-Up
Without question, we need SBTi to set our north star for business emission reduction. It has always successfully maintained a strict science-aligned roadmap. Practicality has been the issue. We urgently need many more companies taking action on their carbon emissions and on global carbon emissions. It is now up to SBTi whether they can modify the Net Zero Standard to achieve exponential growth in climate action.
Based on the draft Net Zero Standard revision, it is clear that SBTi will continue to set the standard for science-aligned business emission reduction, but their potential to bring more companies into climate action is still unclear. Does the revision give companies enough alternatives to accommodate highly varying capabilities and resources? Should it allow carbon removals in more areas? Or will SBTi be a smaller, exclusive program that only some companies can follow? Time will tell.
Ready to Take Climate Action Beyond Your Value Chain?
At Terrapass, we help medium and large businesses accelerate their net-zero journey with high-integrity carbon credits, removals, and custom sustainability strategies. Whether you’re aligning with the revised SBTi Net Zero Standard or launching your carbon reduction plan, our experts are here to guide you.
Connect with us today and discover how we can help your organization achieve measurable climate impact.
Note: This write-up is intended to provide high-level commentary on the proposed Net Zero Standard revision. SBTi is a complex and technical program. Please refer to SBTi resources for specific details and technical guidance.
References
- https://sciencebasedtargets.org/resources/files/Net-Zero-Standard-v2-Consultation-Draft.pdf
- https://www.energy.gov/topics/carbon-negative-shot
- https://sustainabilitymag.com/articles/why-sbti-has-delisted-more-than-200-high-profile-companies
- Microsoft, P&G, Unilever and Walmart among 239 companies to miss net-zero deadline | Trellis
- https://www.weforum.org/stories/2023/03/ippc-report-natural-climate-solutions-for-financing-nature/#:~:text=Natural%20climate%20solutions%20consist%20of,or%20highly%20dependent%20on%20nature.
- https://www.un.org/sg/en/content/sg/statement/2023-03-20/secretary-generals-video-message-for-press-conference-launch-the-synthesis-report-of-the-intergovernmental-panel-climate-change
- https://climate-advisory-board.europa.eu/reports-and-publications/scaling-up-carbon-dioxide-removals-recommendations-for-navigating-opportunities-and-risks-in-the-eu
- https://www.energy.gov/fecm/carbon-dioxide-removal
- https://www.ipcc.ch/report/sixth-assessment-report-working-group-3/
- https://marginalcarbon.substack.com/p/what-needs-to-change-in-the-sbti
- https://www.forbes.com/sites/phildeluna/2025/02/17/why-the-science-based-targets-initiative-are-turning-to-carbon-removals/
- https://climate-advisory-board.europa.eu/news/new-report-from-the-eus-climate-advisory-board-outlines-recommendations-to-scale-up-carbon-dioxide-removals-while-addressing-opportunities-and-risks
- https://marginalcarbon.substack.com/p/what-needs-to-change-in-the-sbti
- https://www.milkywire.com/articles/bvcm-is-back
- https://sciencebasedtargets.org/target-dashboard
