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The SBTi has been refining its framework to incorporate years of stakeholder feedback, resulting in a more streamlined but rigorous draft for Version 2.
This update is critical because nearly 12,000 companies currently rely on the SBTi to align their sustainability strategies with a 1.5°C future.
It guides how they set targets but also what instruments they use and how they can or must integrate high-quality carbon credits and removals.
The new standard moves beyond simple target-setting; it introduces a "cyclical validation" model and clear tiers of climate leadership. Here are the key shifts that will have the biggest impact on corporate strategy and carbon removal.
The draft replaces the term "Beyond Value Chain Mitigation" (BVCM) with the Ongoing Emissions Responsibility (OER) framework. This is more than a name change; it is a shift toward making climate finance a standard expectation.
Mandatory Disclosure: Companies must now publicly disclose whether they are taking responsibility for their ongoing emissions during the transition.
The "Nudge" Effect: Those who choose not to participate must explain their rationale publicly, creating a powerful incentive for companies to act rather than face "wait and see" reputational risks.
To earn the prestigious “Leadership” label under the new draft, companies must demonstrate a high level of financial commitment to climate action.
The $80 Floor: Leadership status requires setting an internal carbon price of at least $80/tCO2e across all Scope 1, 2, and 3 emissions.
Structured Spending: At least 40% of this resulting budget must be used to purchase verified carbon credits (ex-post mitigation outcomes). The remaining funds can be used for R&D, innovation, or early-stage "ex-ante" climate finance.
The other label for “Recognized” companies is for those meeting one of two criteria:
Direct Action: Address at least 1% of their total ongoing emissions (Scopes 1, 2, and 3) by purchasing and retiring verified carbon credits.
Financial Commitment: Apply an internal carbon price (recommended at $20/tCO2e) to at least 1% of their emissions to create a dedicated fund for climate-related investments (such as R&D or early-stage removal projects).
According to estimates, if the ~12,000 SBTi-aligned companies adopt even the baseline 1% OER threshold, we could see annual demand surge by over 100 million carbon credits (the total scope 1, 2 and 3 emissions coverage of SBTi-aligned companies is larger than 10 gigatonnes).
This could represent a significant demand boost, although it remains voluntary until 2035.
The draft introduces a clear timeline for when carbon removals move from "encouraged" to "required" for Category A companies (typically large firms in high-income countries).
Phase-in Period: Starting in 2035, these companies must take responsibility for at least 1% of their ongoing emissions using carbon removals, a figure that scales to 100% by their Net-Zero target year.
Credit Type Shift: Until 2035, companies have the flexibility to use any high-quality credit, including avoidance. After 2035, the framework shifts exclusively toward removals.
At the point of reaching Net-Zero, companies must neutralize 100% of their residual emissions. The V2 draft provides a specific "recipe" for this portfolio to ensure long-term climate stability.
Durable Removals: At least 41% of the portfolio must come from long-lived removals (e.g., Direct Air Capture, BECCS, or Biochar) with storage durability measured in centuries or millennia.
Short-lived Removals: The remaining 59% can be composed of short-lived, nature-based removals like reforestation or soil carbon sequestering.
The SBTi recognizes the immense difficulty of Scope 3 abatement. To address this, V2 introduces "intervention level" frameworks:
Counterparty Alignment: Companies can now set targets based on whether their suppliers have their own validated 1.5°C targets.
Activity Pools & Sector EACs: New mechanisms allow companies to use Environmental Attribute Certificates (EACs) to claim improvements within a shared supply region (supply-sheds) or at a sector level, providing a pathway for "insetting" even when direct traceability is complex.
The current Version 1.3 remains the active standard for target validation until December 31, 2027. The final Version 2.0 is expected to be published in late 2026 and will become the mandatory framework for all new targets starting January 1, 2028.
The updated SBTi framework finally treats climate action as a standard cost of doing business rather than an optional extra. The "comply or explain" model sets a powerful new baseline: companies must now act or publicly justify their passivity.
We welcome the "Scope 3 Realism" within the draft. New instruments like "activity pools" and "counterparty alignment" acknowledge the complexity of global supply chains. As we have previously explained, these flexibility mechanisms are essential for progress, allowing companies to focus on high-impact interventions rather than data bottlenecks.
The proposed 41/59 split between durable and nature-based removals at Net Zero is highly debated because of the uncertainty of the type of residual emissions we will have in 2050.
The blended approach however confirms that nature-based solutions and engineered removals (like DAC or Biochar) are not competitors, but necessary partners. While nature provides immediate scale, durable removals ensure the permanent storage required for a true Net-Zero future.
Despite these improvements, clarity is still needed on Corresponding Adjustments and removal durability to avoid stifling private investment.
Clear guidance is urgent. The greatest threat to climate action is not an imperfect standard, but a delayed one. The V2 draft proves that decarbonization and climate finance must happen simultaneously.
Waiting until 2028 to align is a risk no leader should take. As the saying goes: "The best way to predict your future is to create it."