Raising the bar on Net Zero

The Science Based Target initiative (SBTi) has published the second draft of their revision to their Corporate Net Zero Standard. It’s not final but it’s in its latter stages and this is likely to be the last public consultation opportunity, which is important because this latest version raises the bar considerably. If you want to share your feedback you need to do so by December 12^th 2025. 

In terms of the changes proposed, we think the ones that will most impact whether non-financial companies set (and achieve) an SBTi-aligned Net Zero target are as follows: 

1. Public disclosures have expanded to include more specific and transparent information on target progress, mitigation measures and plans to close gaps, plus an end of target cycle level of performance achieved. Companies must consent to the SBTi publishing this information themselves (presumably a new/updated SBTi database is on the horizon). 

2. FLAG (forest, land and agriculture) emissions must be calculated by all companies. For many companies these will be tiny (for example, for an office based service company this likely relates only to paper purchases) but it does mean additional calculations and crucially additional emission factors will be needed, which may come at a cost. 

3. A company’s base year must now be the most recent year of data. There used to be some flexibility in this but not anymore (except for extreme events like covid). For some companies this will make target achievement harder as they can no longer benefit from historic reductions already achieved.  

4. Targets for scope 1 and 2 must now be separate i.e. a scope 1 target and a scope 2 target. With the latter being generally far easier to reduce this will for many make target delivery more challenging. 

5. Use of purchased renewable energy to achieve target reductions is more complex and seemingly may largely preclude the use of nuclear (because generation facilities must be commissioned/re-powered in the past 10 years) and will require country/market matching which could make achievement particularly difficult for non-UK operating companies. 

For larger “Category A” companies there are additional and much more demanding requirements. At the minute it’s difficult to identify which UK companies will fall into Category A because the thresholds (two of balance sheet >EUR/USD 25m; net turnover >EUR/USD 50m; and employees >250) are stated in both EUR and USD but for now we would assume the lower of these two would apply. The most impactful additional requirements are: 

1. Companies must publish a transition plan within 12 months of target validation. Personally we wouldn’t recommend setting science-based targets (SBTs) without having a delivery plan, but there are some specific requirements of the transition plan that companies may not feel comfortable putting in the public domain – like the plan costs and indicative approach to financing.  

2. Additional metrics must be measured and disclosed in the validation process. These largely fall into what would be measured anyway but there are some additional requirements relating to transport which could put a additional data burden on the business. For example, companies must report the percentage of light-duty vehicles that are electric; and emissions from scope 1 and 2 related travel must be reported as gCO₂ per vehicle km. 

3. Third party assurance will be needed for base year emissions, any recalculation thereof and data substantiating target performance. Not only is this going to be a significant extra cost but it will add time to the pre-validation process. 

4. Purchase of carbon removals will likely be mandatory from 2035 for a defined % of emissions (value TBC in the coming years but the current suggestion is 17%). 

5. Scope 3 targets are more complex and granular. Instead of a single scope 3 target multiple category-specific targets will need to be set, including individual targets for all supply chain (category 1 and 2) commodities that represent more than 5% of scope 3 emissions. 

   
   

In terms of timing, whilst companies can still set new targets under current Corporate Net Zero Standard until December 2027, all companies will be ‘encouraged to adopt’ the new standard from January 2028.  

So what’s our take? Well we’re passionate about companies doing their bit to limit global warming and the SBTi is currently poor at checking on progress post target setting, so we support that. But, the extra bureaucracy around transition planning, reporting and assurance, plus the future requirement to invest in carbon removals will significantly increase costs for the largest companies that may well deter them from setting targets altogether. And if that happens, the influence on the supply chain to set targets diminishes and ultimately the environment could be the loser. Ultimately we think a less rigorous and scientifically perfect approach that is actually delivered is likely to be better than a comprehensive solution that never gets implemented. 

If you want to share your views with us our talk through the impact on your targets, contact us. 

Authored by Caroline Johnstone.