SBTi launches its corporate ‘Net Zero Standard’

What does it mean for your emissions reduction ambitions?

Date November 2021

The Science Based Target initiative’s (SBTi) recently launched corporate Net Zero Standard provides guidance to companies on setting near-term emissions reduction targets in line with science and longer-term net zero targets[1]. The guidance goes a long way to addressing the challenges associated with having had no broadly accepted standard for net zero targets, such as differences in scope of ambition and coverage.

Near-term Science Based Targets (SBTs) can be thought of as the targets verified by the SBTi to date; short to medium term emissions reduction goals aligned with the ambition of the Paris Agreement. The SBTi has heightened the level of ambition required under near -term SBTs. Targets submitted to the SBTi from July 2022 must align with a 1.5°C pathway and be set for 5 to 10 years from the submission date.

Long-term SBTs are net zero targets set for 2050 at the latest.[2] Under the standard, a net zero target must include scope 1, 2 and 3 emissions in line with the SBTi’s coverage criteria and reduce emissions to zero or the residual level for the sector under a 1.5°C pathway. For most companies, this translates to an approximate 90% reduction in absolute emissions across scopes. Companies are required to neutralise residual emissions from the target date onwards.

Figure 1: How short-term and long-term targets under the SBTi align (SBTi Net Zero Standard)

Messages for business

Key takeaways from the discussion are as relevant as ever; start by understanding your emissions footprint, consider both your short- and longer-term emissions reduction strategy, recognise that reaching net zero is a process and be transparent in your disclosure.

On the topic of offsets, you can read more in Energetics’ article, Carbon offsets: approach with caution.

A new standard for corporate sustainability disclosure

In a separate announcement and based on the Taskforce for Climate-related Financial Disclosure (TCFD) framework, the International Financial Reporting Standards (IFRS) Foundation’s newly established International Sustainability Standards Board (ISSB) will develop a global standard for sustainability reporting. Along with TCFD disclosure, which has seen increasing voluntary uptake and has been mandated by countries such as New Zealand, standardised sustainability disclosure will support transparency, investor decision making and the allocation of capital in financial markets. The IFRS has released two prototype documents which contains industry-level and more general sustainability recommendations[3]. Following appointment of a Chair and Vice-Chair, the Board will kick-off public consultations to inform its work plan. Australia was one of 37 countries whose Finance Ministers or Central Bank Governors joined in welcoming the announcement.



[1] Science Based Target Initiative | Resources for setting net zero targets

[2] Companies in the power sector must set targets to reach net zero no later than 2040

[3] IFRS Foundation |IFRS Foundation announces International Sustainability Standards Board, consolidation with CDSB and VRF, and publication of prototype disclosure requirements