SBTi Net Zero Standard V2: From Abatement Only to Abatement Plus Responsibility

The V1 Implementation Gap

Scope 3 paralysis: Companies reporting that 80–95% of their total emissions sit in Scope 3 found the V1 framework offered no viable pathway for emissions they could influence but not directly control.

Validation backlogs: SBTi faced growing demand with limited capacity to validate increasingly complex targets, particularly net-zero submissions.

One-size-fits-all: V1 applied identical requirements to a 200,000-employee multinational and a 500-person mid-cap in a developing economy. The standard didn’t account for capacity, geography, or resource constraints.

Credits sidelined: By treating carbon credits as entirely separate from target achievement, V1 inadvertently suppressed corporate demand for high-quality credits — weakening the very markets that could accelerate abatement in hard-to-reach sectors.

Pillar 1: Company Categorisation (A / B / C)

Different rules based on size, geography, and resources

For the first time, SBTi differentiates requirements by company type. Category A covers large and medium enterprises in higher-income countries — the cohort with the most resources and the greatest obligation. Category B targets large enterprises in lower-income countries, while Category C covers SMEs globally.

This tiering is significant: it means the most stringent requirements — particularly around ongoing emission responsibility — fall squarely on the companies best positioned to act. For most readers of this article, that is Category A.

Pillar 2: Scope-Specific Target Flexibility

Multiple pathways for each emission scope

Scope 1 now offers three target-setting approaches: linear reduction on a pathway to net-zero, increasing the share of low-carbon activities over time, or implementing Asset Decarbonisation Plans tied to technological readiness. Companies choose the approach that matches their sector and asset profile.

Scope 2 introduces enhanced requirements for Environmental Attribute Certificates (EACs), including new spatial and temporal matching criteria. Companies must demonstrate that the EACs they purchase are geographically and temporally linked to their consumption patterns — tightening the rules on where and when renewable energy claims count.

Scope 3 becomes “focused and flexible.” All Category A companies must set ambitious Scope 3 targets, but V2 opens pragmatic engagement pathways that acknowledge the limits of supply chain control. Near-term targets must cover at least 67% of Scope 3 emissions (where Scope 3 exceeds 40% of total emissions); long-term targets must reach 90% reduction by 2050.

Pillar 3: The 90/95 Long-Term Threshold

Deep decarbonisation remains non-negotiable

V2 maintains the fundamental ambition: companies must reduce at least 95% of Scope 1 and 2 emissions and 90% of Scope 3 emissions before their net-zero target year (no later than 2050). The flexibility is in how you get there, not in how far you go.

Pillar 4: The Language Shift

Subtle but significant

V1 required companies to “publicly commit to reaching net-zero greenhouse gas emissions by no later than 2050.” V2 shifts this to: “Companies shall set an ambition to transition their operations and value chains to align with the goal to be net-zero by no later than 2050.” The change from “commit to reaching” to “set an ambition to transition” is a recognition that net-zero is a direction of travel, not a binary outcome — and that the journey matters as much as the destination.

The Consultation Process

V2 has gone through two public consultation rounds. The first draft was released in March 2025, attracting broad feedback. The second consultation draft followed in November 2025, with over 900 stakeholders submitting responses. This is now with the SBTi Technical Council for review. Once finalised, it goes to the Board of Trustees for formal adoption, with publication expected mid-to-late 2026.

The Backstory: Why This Is Contentious

V2’s journey has not been smooth. In April 2024, the SBTi Board of Trustees released a statement signalling openness to allowing carbon credits within abatement pathways — a sharp departure from V1’s credits-only-for-neutralisation stance. The statement triggered significant backlash, with coverage across the Financial Times, Bloomberg, and the Guardian.

A coalition of over 80 NGOs publicly opposed the move, arguing it risked undermining abatement ambition. SBTi staff members published an open letter calling for Board resignations, and the internal rift became one of the most visible governance crises in climate standard-setting history.

Separately, SBTi commissioned a Carbon Credit Synthesis Report to evaluate risks and opportunities. The report acknowledged that credit markets face quality, permanence, and additionality challenges — while also recognising that well-structured credit use can accelerate climate finance at scale. The second consultation draft reflects these competing pressures.

The structural architecture of V2 — company categories, scope flexibility, and the OER framework — will almost certainly make it into the final standard. These address real implementation failures from V1 and have broad stakeholder support.

The numbers — tier percentages, carbon price floors, phase-out dates — will move. But the direction of travel is clear: SBTi is building a framework where companies take quantified, priced responsibility for their ongoing emissions. Whether the Recognised floor lands at 1% or 3%, whether avoidance phases out at 2035 or 2037, the fundamental demand signal for high-quality credits is locked in.

Our recommendation: Plan for the framework, not the exact numbers. Build procurement infrastructure now; adjust thresholds when the final standard drops.

3a. How the Recognition Tiers Work

The Bottom Line

The transition from avoidance to removals is the single biggest demand signal the voluntary carbon market has ever received from a standards body. It tells the market: avoidance credits have a shelf life. Companies that build removal portfolios early will be positioned for V2 compliance. Those that wait will face a supply squeeze.

If all SBTi-aligned organisations signed up to the Recognised tier at the minimum 1% level, this implies demand for carbon credits totalling approximately 100 million credits per year. For context, the entire voluntary carbon market retired around 160 million credits in 2023.

At the Leadership tier — 40% of ongoing value chain emissions — demand scales to potentially billions of credits per year, a volume the current market cannot supply.

Financial value: MSCI estimates the additional capital flowing into mitigation could reach $19 billion in the near term, rising to $65+ billion by 2030.

The Supply Gap

Current global CDR capacity is approximately 0.01 GtCO₂/year (excluding conventional afforestation). V2’s mandatory removal requirements for 10,000+ companies will demand orders of magnitude more. This creates a massive origination opportunity for removal project developers — and a procurement headache for sustainability teams that delay portfolio construction.

Related: EACs & Book and Claim

V2’s supply-shed EAC rules directly validate emerging frameworks like the RMI/GMA Book and Claim framework for cement and concrete. If your Scope 3 includes hard-to-abate materials, EACs could become a critical component of your V2 strategy alongside carbon credits and removals.

Platform + Expertise

Canopy works seamlessly with Climate Decode’s advisory team. From target setting and residual strategy through procurement, due diligence, and reporting across CORSIA, TNFD, and SBTi FLAG — your advisory team works directly alongside the platform. Canopy’s AI handles discovery and optimisation; our experts handle the nuance and relationships.

V2 Readiness Starts with Infrastructure

The companies that build their residual emission procurement infrastructure now — before V2 becomes mandatory in 2028 — will secure the best pricing on removal offtakes, establish relationships with high-quality project developers, and enter the mandatory OER era with portfolios that meet both Recognised and Leadership tier requirements.