SBTi Updates Net-Zero Rules, Limits Offsets, Adds Flexibility

The Science-Based Targets initiative (SBTi) has issued a consultation document for its refreshed Corporate Net-Zero Standard, reaffirming its tough stance on carbon offsets while presenting further measures intended to speed up the decarbonization of businesses. In spite of continued arguments around the application of carbon credits as part of companies' climate change strategies, SBTi adheres to direct emission reduction while avoiding offset over-reliance. But the new framework attempts to streamline complicated Scope 3 emissions management, providing businesses with more realistic routes towards realizing their net-zero ambitions.

The consultation draft reaffirms carbon credits must be applied mainly to residual emissions—those a business is left with after having taken aggressive decarbonization efforts. The stance has proved controversial, critics contending that tough offset limits hold back funding for essential climate solutions. Supporters, nonetheless, argue that carbon credits must never be used to displace direct emissions cuts. The new proposal tries to close this gap by actually inviting companies to invest in climate projects outside of their immediate supply chains. Through this, corporations can still be part of larger environmental efforts without watering down their first line duty to reduce emissions at the source.

SBTi’s firm stance on offsets has drawn both praise and criticism. Environmental advocates support the approach, emphasizing that unchecked reliance on carbon credits can lead to greenwashing, where companies claim climate progress without making meaningful operational changes. On the other hand, some industry players argue that the policy could slow down much-needed climate financing, particularly for initiatives such as reforestation, soil carbon sequestration, and carbon capture technology. These solutions depend on private sector financial contributions, and restrictive offset policies could inhibit their growth. Critics also highlight persistent issues about the effectiveness and transparency of carbon credits, where measurement difficulties and verification problems still haunt the market.

Beyond its position on offsets, the updated standard introduces greater flexibility in addressing Scope 3 emissions—those that occur throughout a company’s value chain and are often the hardest to track and manage. Many businesses, particularly smaller firms and those operating in emerging economies, have struggled with the complexity of Scope 3 reporting. Under the new rule, firms could establish emission levels on the basis of green buying strategies or apply their efforts in high-emissions activities in supply chains. The change offers another option beyond general reduction targets whereby firms can choose to tailor climate strategies to particular operational realities of their businesses.

The proposed draft standard provides more flexibility by offering options for companies to establish targets for green procurement and generating revenues, rather than establishing an emissions reduction target," says the SBTi. The modification is set to make it simpler for businesses to act on climate through significant measures and tackle long-standing issues with monitoring and measuring emissions from suppliers and other indirect sources.

To address the fact that smaller businesses do not have the resources and expertise to deal with complex emissions reduction structures, the SBTi has also introduced streamlined guidelines that apply to medium-sized companies and developing market players. The updated standard seeks to reduce the entry barrier for such companies so that more firms can make net-zero commitments without having to deal with crushing regulatory weights. Simplified demands for medium-sized enterprises in emerging markets and SMEs offer a springboard to universal voluntary corporate climate action," the draft paper observes. Simplifying requirements is expected to widen access to its climate initiative and accelerate progress on a wider basis across industries and geographies, SBTi hopes.

Accountability is still central to the new framework. Companies will be held accountable for consistently evaluating and making public their track record against goals set. The step is aimed at avoiding that companies set stretching net-zero objectives without actual reduction in emissions. By making strong reporting requirements obligatory, SBTi hopes to enforce corporate responsibility and foster investors' and customers' trust in climate promises.

The publication of the draft standard is at a critical juncture for corporate climate action. SBTi estimates that virtually half of all organizations quoted on G7 stock exchanges will have science-based targets validated by the end of 2024, reflecting building momentum for corporate decarbonization. Progress has not been without its problems, though. Political and legal pressure, especially in the US, has compelled some firms to rethink their climate approach. Recent regulatory uncertainty and evolving policy environments have made business leaders question the long-term viability of corporate climate pledges.

Against this backdrop, SBTi is committed to making its net-zero framework more stringent in a manner that aligns ambition with feasibility. The public consultation on the draft standard is now underway, seeking input from stakeholders to make the final version both robust and implementable by companies of all sizes. By further developing its strategy for carbon offsets, Scope 3 emissions, and accountability metrics, SBTi seeks to catalyze effective climate action while meeting the real-world needs of companies in the process of transitioning to a low-carbon economy.