Science-Based Targets Initiative (SBTi): Goals, Process and Reduction Path
Laws and regulations
The Science-Based Targets initiative (SBTi) defines how companies can set emissions reduction targets scientifically based on the 1.5-degree pathway of the Paris Agreement. This article explains the Corporate Net-Zero Standard, the validation process, the regulations for small and medium-sized enterprises, as well as the significant changes introduced by the final Corporate Net-Zero Standard V2.0 published on June 11, 2026, which will become mandatory for new targets starting February 1, 2028.
What is the Science-Based Targets Initiative?
The Science-Based Targets initiative is a joint initiative of CDP, UN Global Compact, We Mean Business Coalition, World Resources Institute (WRI), and World Wide Fund for Nature (WWF), founded in 2015. It develops standards, tools, and guidance that companies can use to set climate targets compatible with the 1.5-degree pathway of the Paris Agreement. By June 2026, more than 11,000 companies and financial institutions worldwide had set SBTi-validated targets – representing about 41 percent of global market capitalization. The central framework is the Corporate Net-Zero Standard, which defines both near-term reduction targets (5 to 10 years) and long-term net-zero targets by 2050 at the latest.
How many companies already have SBTi targets?
The number of validated companies increased by 40 percent in 2025 to 9,764 (as of the end of 2025), and the number of validated net-zero targets even rose by 61 percent. In January 2026, the milestone of 10,000 validated companies was surpassed; by the publication of V2.0 in June 2026, the SBTi counted more than 11,000 companies and financial institutions. Particularly remarkable is the momentum in Asia: there, the number of validated companies rose by 53 percent in 2025, almost matching European growth. Japan leads with over 2,000 validated companies worldwide, followed by the UK, the US, and China. In Europe, penetration in leading indices such as CAC 40, DAX 40, and FTSE 100 is exceptionally high – meaning SBTi targets have de facto become the market standard for listed German industrial enterprises.
Would you also like to set SBTi targets? Feel free to use our free SBTi template for businesses to get started:
SBTi and the Paris Agreement: Criteria and Benefits for Companies
The Paris Agreement obliges the international community to limit global warming to well below 2 degrees – ideally 1.5 degrees – compared to pre-industrial levels. The SBTi translates this goal into methodological requirements for companies. Decisive tools are the Cross-Sector Pathway according to the Absolute Contraction Approach as well as sector-specific pathways according to the Sectoral Decarbonization Approach methodology. The basis of accounting is the Greenhouse Gas Protocol, which defines Scope 1, Scope 2, and Scope 3. An overview of the three accounting levels is offered in our glossary on Scope 1, 2, and 3 explained.
Science-based targets pay off for companies on multiple levels. They lower costs through energy efficiency and facilitate access to capital, as investors and banks increasingly include climate-related metrics in their financing decisions. A study by the European Central Bank shows that banks that have joined the SBTi charge lower interest rates to companies with emissions reduction targets compared to companies without such targets. They strengthen reputation and credibility among customers, investors, and talent, drive innovation along the value chain, and reduce regulatory risks in the context of ESRS and sustainability reporting.
How does the Science-Based Targets Initiative work?
The SBTi process leads companies to science-based climate targets in five steps. In the first step, the company makes a public commitment (Commitment Letter), signaling its intention to develop SBTi-compliant targets. In the second step, emissions are recorded across all relevant scopes and a base year is established. In the third step, the company defines near-term reduction targets (5 to 10 years) as well as long-term net-zero targets by 2050 at the latest. In the fourth step, the targets are submitted to SBTi Services for independent validation and checked against the current criteria. In the fifth step, companies report publicly on their progress annually and adjust their measures. Following validation, companies also commit to communicating their targets publicly within six months.
Near-term vs. long-term SBTi targets
Near- and long-term SBTi targets form a two-tier system. Near-term targets compel immediate action with a time horizon of 5 to 10 years. Since the ACA update of April 2026, the annual minimum reduction is no longer based on a fixed rate but is calculated dynamically: the Absolute Contraction Approach (ACA) adjusts the required annual rate to the remaining time between the chosen base year and the company's net-zero target date. The absolute lower limit of 4.2 percent per year remains in effect.
The following coverage thresholds apply to targets under Version 1.3.1: a near-term target must cover at least 95 percent of Scope 1 and Scope 2 emissions. If Scope 3 emissions account for more than 40 percent of total emissions, a Scope 3 target must also be set, covering at least 67 percent of these emissions. With V2.0, this logic changes (see section on V2.0). The long-term targets define the ultimate goal: at least a 90 percent reduction across all Scopes by 2050 at the latest, with remaining residual emissions neutralized through permanent carbon removal. Both target levels must be submitted together.
How can small and medium-sized enterprises set SBTi targets?
Small and medium-sized enterprises (SMEs) with fewer than 500 employees can choose between two paths. The simplified SME approach (SBTi Small and Medium Enterprises Route) offers a standardized target-setting process with predefined ambition levels: at least a 42 percent reduction of Scope 1 and Scope 2 emissions by 2030 compared to a recent base year; Scope 3 emissions do not need to be quantitatively reduced but must be measured and managed. The regular route is also open and makes sense for companies whose Scope 3 emissions represent a high share of their total footprint. The SME approach significantly shortens the validation process and reduces costs.
Corporate Net-Zero Standard V2.0: the key changes
On June 11, 2026, the SBTi published the final Version 2.0 of the Corporate Net-Zero Standard. It shifts the focus from target-setting to implementation, separates the targets for Scope 1, 2, and 3, and introduces a new framework for ongoing emissions with the Ongoing Emissions Responsibility. V2.0 becomes mandatory for new targets starting February 1, 2028.
Clear deadlines apply to the transition. Companies can continue to submit targets according to Version 1.3.1 (Corporate Near-Term Criteria v5.3.1) until January 31, 2028; for target-setting in 2026, the SBTi explicitly recommends this path. Starting in the first quarter of 2027, voluntary submission according to V2.0 is possible through the validation portal. From February 1, 2028, all new targets must mandatorily be set according to V2.0. Already validated near-term targets remain valid until the end of their time horizon or until the mandatory five-year review is triggered, whichever comes first. A detailed representation of the final standard is provided on the official SBTi page on the Corporate Net-Zero Standard V2.0.
V2.0 follows a clear implementation hierarchy consisting of three pillars. First is the deep emission reduction along a science-based path across all Scopes; this remains the foundation. Additionally, the Ongoing Emissions Responsibility (OER) addresses ongoing emissions during the transition, merging the previous Beyond Value Chain Mitigation, Removals, and Neutralization into one framework. At the target year, companies neutralize their remaining residual emissions through permanent carbon removal.
Area | Change in V2.0 (final, June 2026) |
|---|---|
Scope 1 & 2 | Fully separated targets. For Scope 1, three methods are available (Absolute Contraction, sector-specific intensity, asset transition). For Scope 2, in addition to absolute reduction, a low-carbon electricity alignment target with a threshold of 0.048 kg CO₂e/kWh is possible; large electricity consumers must report their hourly coverage, and if annual consumption increases by more than 20 percent, an absolute reduction target is mandatory. |
Scope 3 | The flat 67 percent quota is eliminated. Targets are set per category; all categories accounting for more than 5 percent of total Scope 3 emissions must be addressed. The method menu is expanded (including intensity targets, supplier/customer alignment, volume and product alignment). |
Base Year & Inventory | Targets are based on the most recent emissions year and on physical (not market-based) accounting. Market instruments serve to demonstrate target progress. |
Ongoing Emissions Responsibility (OER) | Replaces the BVCM guidance. Voluntary recognition program with three levels (Engaged, Advanced, Leadership). From 2035, responsibility for ongoing emissions becomes mandatory for Category A companies: 1 percent of the Scope 1–3 footprint starting in 2035, increasing linearly to 100 percent in the net-zero year. |
Company Categories | New classification into Category A and Category B by size and geography (classified according to World Bank income groups). Category A (roughly: from around 1,000 employees or EUR 450 million in revenue, with lower thresholds in high-income countries) carries the strictest obligations. |
Climate Transition Plan | Mandatory transition plan for Category A companies, due within 15 months of validation. It documents operational implementation. |
Best-Efforts Principle | Targets are considered set on a best-efforts basis. Companies that miss their targets despite proven efforts can remain within the SBTi framework if they report transparently about implementation hurdles and countermeasures. |
Validation & Assurance | Annual reporting of the Scope 1+2 inventory, supplemented at the end of a five-year cycle by a full Scope 1–3 inventory. Requirements for reporting and independent assurance are specified. |
Governance | Net-zero targets and transition plans must be anchored at the board or executive management level. |
The three OER levels differ in scope and ambition. At the Engaged level, a company addresses at least 1 percent of its current Scope 1–3 emissions, either ton-for-ton via verified mitigation outcomes or through a contribution budget (recommended minimum price 20 USD/t CO₂e). Advanced level requires coverage of 100 percent of Scope 1 and Scope 2 emissions plus additional Scope 3 shares until a total of at least 10 percent is reached, at 20 USD/t CO₂e or ton-for-ton. Leadership stands for full internalization: a contribution budget of 80 USD/t CO₂e on 100 percent of ongoing emissions, which finances verified mitigation outcomes. Compensation consistently remains a complement to genuine reduction, not a substitute.
Companies with existing SBTi targets retain them until the end of the respective time horizon but should know the trigger date of their mandatory five-year review and start now with a gap analysis to prepare for the transition to V2.0 in a structured manner. Anyone preparing a Scope 3 target will find practical guidance in our article on how to calculate Scope 3 emissions.
Criticism of the SBTi and current developments
The Science-Based Targets initiative has been under pressure for several years. Critics accuse it of enabling greenwashing by temporarily allowing carbon offsets to count toward Scope 3 emissions. In addition, there are methodological weaknesses and a potential conflict of interest due to funding from corporate fees. Studies such as those by the New Climate Institute have pointed out that in practice, validated targets often fall short of announced reductions. With the final Corporate Net-Zero Standard V2.0, the initiative is reacting: shorter target cycles, more transparency obligations, mandatory transition plans for large companies, and an integrated framework for ongoing emissions. Whether these adjustments permanently strengthen credibility will depend heavily on implementation and independent monitoring.
For land- and forestry-intensive sectors like the food industry, the Forest, Land and Agriculture Guidance (FLAG) is also relevant. The SBTi published an updated version (FLAG V1.2) in March 2026. Companies submitting a FLAG target must present a No-Deforestation Commitment within two years. For submissions after 2028, a hard deadline also applies: the No-Deforestation Commitment must be fulfilled by December 31, 2030, at the latest. For food and agribusiness companies, this represents a significant tightening of due diligence obligations along the supply chain.
What must companies report regarding SBTi progress?
Following validation, companies must report publicly every year on their emissions development and progress toward targets. This includes current emissions according to Scope 1, 2, and 3, percentage progress compared to the base year, and key reduction measures. In practice, reporting usually takes place within existing formats such as sustainability reports, CDP questionnaires, or CSRD sustainability reporting according to ESRS. With Version 2.0, additional disclosures on Scope 3 category coverage, anchoring of the target at management level, external assurance, and the Climate Transition Plan are mandatory; the Scope 1+2 inventory is reported annually, and the full Scope 1–3 inventory at the end of the five-year cycle. Structured monitoring directly fed by the carbon accounting process significantly reduces the effort required for this disclosure.
Excel Template: Defining SBTi targets
Companies structuring SBTi-compliant targets for the first time need a resilient foundation for their emissions data and reduction pathway. The free Excel template "SBTi for Companies" by Global Changer provides exactly this entry point. It contains a pre-structured emissions data sheet for Scope 1, Scope 2 (market- and location-based), and all 15 Scope 3 categories. From this, the template automatically calculates three reduction scenarios with target horizons 2030, 2035, and 2040, and extracts the three largest Scope 3 subscopes with their own reduction pathways. An overall overview ("Climate Journey") displays the development of all Scopes over the target period.
After clicking the download button, you will receive the template directly via email. It is ready for immediate use and is as suitable for internal reporting as it is for communication with investors and auditors.
An Excel template and software serve different purposes. The template is free, immediately available, and ideal for understanding structure, methodology, and an initial reduction pathway; it reaches its limits with large data volumes, multiple sites, version control, and auditable tracking. Software automates data collection, keeps emission factors up to date, documents changes in an audit-proof manner, and scales across sites and reporting cycles; in return, it requires an onboarding phase and a budget. For getting started and understanding, the template is sufficient; for ongoing, auditable management in enterprise structures, upgrading to software is worthwhile.
What Global Changer's software offers in addition
The Excel template provides the entry point, but operational implementation of SBTi targets within enterprise structures requires more. The CO₂ Reduction module from Global Changer plans and manages transition plans according to SBTi methodology, creates individual reduction pathways, and documents them in an auditable way. Each measure is financially evaluated according to the VALERI methodology (DIN EN 17463) – including CAPEX, OPEX, ROI, NPV, and payback period – and can be tracked in real time across multiple locations. A database with more than 270 reduction measures and the action list according to ISO 50001 provide the content foundation; a comprehensive audit log ensures transparency for auditors.
In addition, Global Changer covers full greenhouse gas accounting (Scope 1 to 3) with AI-powered matching of emission factors for Scope 3.1, access to over 60,000 emission factors from ecoinvent, AGRIBALYSE, and EcoTransIT, as well as AI-powered Product Carbon Footprints. Hosting and AI run entirely in Germany, and the company is ISO 27001 certified and GDPR compliant. A demo can be booked directly online.
Frequently Asked Questions about the SBTi
What is the difference between Science Based Targets and the Net-Zero Standard?
Science Based Targets is the umbrella term for all science-based climate targets validated by the SBTi. The Corporate Net-Zero Standard is the specific framework within the SBTi that regulates both near-term reduction targets (5 to 10 years) and long-term net-zero targets by 2050 at the latest. Earlier SBTi targets often covered only the near-term horizon. With the Net-Zero Standard, both levels were merged into a mandatory two-tier system.
SBTi or CDP – what is the difference?
SBTi and CDP are distinct initiatives that complement each other. The SBTi is a standard setter and validates emissions reduction targets based on scientific criteria. CDP (Carbon Disclosure Project) is a disclosure platform through which companies report their climate data annually. CDP is also one of the founding organizations of the SBTi. In practice, companies use CDP as a reporting channel to transparently disclose their SBTi progress to investors and customers.
Can you achieve SBTi targets using carbon offsets?
No, carbon offsets do not replace emissions reductions in the sense of the SBTi. Reduction targets must be achieved through genuine mitigation in Scope 1, 2, and 3. Compensation is permitted for neutralizing remaining residual emissions on the path to net-zero, and here too, only using high-quality, permanent removal methods. In the final Corporate Net-Zero Standard V2.0, the OER concept (Ongoing Emissions Responsibility) reinforces this principle: offsets are a complement to reduction, not a substitute.
Which companies must set SBTi targets?
SBTi validation is voluntary; there is no statutory obligation. However, it becomes practically mandatory through market mechanisms: investors, major customers in the supply chain, and ratings like MSCI or ISS ESG increasingly expect validated climate targets. In leading indices such as DAX 40, CAC 40, and FTSE 100, SBTi targets are already largely standard. Companies in the food, chemical, and automotive industries also experience pressure from FLAG and sector-specific requirements.
Does a company have to cover all Scope 3 emissions under SBTi?
Not all, but the material ones. Under Version 1.3.1, if Scope 3 emissions account for more than 40 percent of total emissions, a Scope 3 target is mandatory and must cover at least 67 percent of those emissions. With Corporate Net-Zero Standard V2.0, this flat quota is eliminated: companies must address all Scope 3 categories with a share of at least 5 percent in total Scope 3 emissions. This represents a category-specific approach that increases transparency and comparability.
What happens if a company does not achieve its SBTi targets?
Previously, missing validated targets led to removal from the Target Dashboard and marking as "commitment removed". The final Standard V2.0 introduces a best-efforts principle: companies that miss their targets despite proven efforts can remain in the SBTi framework if they report transparently about implementation barriers and countermeasures. There are no formal sanctions; the consequences remain reputational and market-driven. Five-year validation cycles and random spot checks tighten accountability.
When does the new Corporate Net-Zero Standard V2.0 apply?
The final Corporate Net-Zero Standard V2.0 was published on June 11, 2026, and is mandatory for new targets starting February 1, 2028. Until January 31, 2028, companies can still submit targets under Version 1.3.1 (Near-Term Criteria v5.3.1); voluntary submission under V2.0 is possible starting in the first quarter of 2027. Already validated targets remain valid until the end of their time horizon; a transition guide regulates the conversion. The transition phase is suitable for a gap analysis.
What is the difference between Version 1.3.1 and Version 2.0?
Version 1.3.1 usually bundles Scope 1 and 2 in a combined target and works with flat Scope 3 quotas. Version 2.0 separates targets for Scope 1, 2, and 3, sets category-specific Scope 3 targets (categories above 5 percent), introduces the Ongoing Emissions Responsibility for current emissions, and makes a Climate Transition Plan mandatory for large companies. Additionally, targets apply on a best-efforts basis with a stronger focus on implementation and annual reporting.
