Unpacking SBTi V2: Your questions answered

As the Science Based Targets initiative (SBTi) continues to evolve its Corporate Net-Zero Standard (CNZS), many organizations are evaluating how the V2 updates will impact their climate strategies.

Following our recent webinar, we received excellent questions from sustainability leaders across various industries, and we have compiled and answered the most pressing one.

Table of content

• Target setting & methodology in SBTi V2
• Scope 2 electricity procurement & deliverability in SBTi V2
• Biomethane & scope 1 decarbonization in SBTi V2
• Scope 3 & market instruments in SBTi V2
• Fossil fuel phase-out requirement in SBTi V2

Target setting & methodology in SBTi V2

Has SBTi’s definition of “residual level” changed from V1 to V2?

The bigger shift is structural: V2 addresses residual emissions within the new Ongoing Emissions Responsibility (OER) framework, which requires companies with net zero targets to reduce emissions to residual levels and then neutralize 100% of the remaining residual emissions with high-integrity removals. Consistent with V1, the level of residual emissions depends on the scope, activity, sector, and reduction pathway.

What are volume alignment pathways and how do they count toward SBTi net-zero targets?

Volume alignment targets are benchmarked against a net zero pathway (e.g., 70% alignment by 2030, 95% by net zero year) and require companies to gradually increase the share of commodities aligned with lower emissions or net zero. As your alignment percentage climbs toward the metric set for your net zero target year, you’re on track. Currently, these pathways exist for some emissions-intensive sectors such as transportation, cement, steel, etc., but SBTi is planning to provide additional guidance on implementation of these targets.

How does SBTi’s new scope 1 intensity target allowance work, and does it still require overall emissions reduction?

Intensity targets can allow short-term fluctuation in absolute emissions, especially for high-growth sectors, but SBTi requires a paired long-term target on the same intensity pathway so that each near-term cycle trends progressively lower, preventing runaway absolute growth.

Do FLAG companies still need a separate FLAG target under SBTi’s Corporate Net-Zero Standard V2?

Yes, companies with significant Forest, Land, and Agriculture emissions must still follow existing FLAG-specific guidance, separate from energy and industry targets. SBTi is developing an updated FLAG methodology, but current rules remain in force.

Do companies need to set a new base year every 5 years under SBTi V2 short-term targets?

Yes, every new near-term target cycle requires refreshing to the most recent complete year as the base year.

What is the definition of an “emissions-intensive activity” (EIA) under SBTi V2 scope 3 guidance?

An EIA is a predefined emissions-intensive activity, product, service, or process that significantly contributes to global GHG emissions or otherwise exacerbates climate change. The list of IEAs can be found in CNZS V2.0 Annex A (for example: cement, steel, ammonia, propylene, etc.).

Companies are recommended to set separate, tailored targets for these, and may aggregate the emissions across scopes if doing so. For each EIA meeting the 5%-or-more-of-total-scope-3 threshold, Category A companies must report both absolute emissions and percent of total scope 3, and are also expected to include an EIA decarbonization plan within their broader transition plan.

Scope 2 electricity procurement & deliverability in SBTi V2

How will SBTi’s geographic matching requirement for scope 2 affect electricity procurement costs?

Moving from national-level (or greater, as in the case of North America and European AIB countries, which are currently each considered a single market) to more granular deliverability-region matching will generally entail higher overall costs and low availability of renewables in certain markets. Naturally, the actual cost impact is highly company-specific depending on load location.

Locking in long-term contracts before February 1, 2027 is recommended to ease this transition. SBTi’s legacy clause allows EACs from existing contracts signed before this date to be allocated to load under the CNZS v1.3 market boundary guidance, which does not require matching by deliverability region.

Are low-emission electricity energy attribute certificates (EACs) recognized for achieving scope 2 targets?

Yes, SBTi confirms the low-carbon electricity definition, and now includes nuclear and gas-with-CCS alongside renewables, suggesting a broader category of qualifying EACs.

Can companies source EACs outside their deliverability region if they face supply constraints?

Yes, but only for genuine structural supply constraints. Procurement preferences or cost considerations do not qualify as exceptions. Locking in long-term contracts before the February 1 legacy clause deadline will delay the need to prove these exceptions altogether.

What officially counts as a “long-term contract” for unbundled EACs under SBTi V2?

SBTi hasn’t published an exact definition, but 3Degrees’ working view is that a PPA or multi-year strip of five-plus years qualifies, while a single forward-year purchase does not.

What is SBTi’s legacy clause for long-term EAC contracts?

Long-term contracts signed before February 1, 2027 are accepted for the full length of the contract under current (V1.3) guidance, which does not require matching by narrowed deliverability region. EACs will be considered deliverable if applied within the same activity pool to which the instruments were applied before the effective date (February 1, 2027) and must be allocated proportionally (load-weighted) to where the load sits.

Will unbundled EAC procurement after February 2027 be subject to the new deliverability rule?

The February 1 legacy clause deadline only pertains to long-term contracts; single-year unbundled EAC purchases are simply subject to whichever standard (V1.3 or V2) you’re operating under at the time of that specific purchase.

Biomethane & scope 1 decarbonization in SBTi V2

Can biomethane EACs or renewable thermal certificates (RTCs) be used to reduce scope 1 emissions under SBTi V2?

Yes, biomethane/RNG certificates are accepted for scope 1 target implementation under the SBTi Corporate Net-Zero Standard (CNZS) V2. When using these instruments for scope 1, there are a few factors to consider:

• Proof of Sustainability (POS): You must provide Proof of Sustainability where applicable
• Reporting: Attributes must be reported separately from the physical inventory
• Constraint: Electricity EACs cannot be used to address associated emissions for behind-the-meter electricity generation

Further guidance on the use of market instruments for scope 1, including more specific details on quality criteria, is expected in late 2026.

Scope 3 & market instruments in SBTi V2

What is the hierarchy regarding supply chain traceability requirements for scope 3 interventions?

V2 introduces a four-level implementation hierarchy that governs where actions can be taken across scopes 1, 2, and 3, prioritizing emission reductions as close to the source as possible. In descending order of priority. SBTi’s implementation hierarchy prioritizes the following:

1. Activity level: directly targets emission sources, fully reflected in the physical GHG inventory
2. Activity pool: shared systems a company sources from or feeds into, defined at the smallest reasonable geographic/operational level
3. Sector level: market or geography-wide actions. Note: This action is unavailable for scope 1
4. Enabling actions: addressing structural constraints, not counted toward target progress

For scope 3 interventions, companies would define activity pool actions at the smallest geographic region possible to enable collective decarbonization of the selected activity. For sector-level (or book and claim) actions, companies would need to demonstrate that structural constraints prevent direct or activity pool-level actions. Additional quality criteria for scope 3 market instruments and actions is anticipated from SBTI.

How should companies apply market-based instruments when using a physical emissions inventory?

Companies should maintain the integrity of the physical inventory in accordance with established definitions and requirements, as all targets will be set against the physical inventory. Market-based actions should be tracked alongside the physical inventory to substantiate progress toward targets.

Are insetting strategies allowed for scope 3 emissions reductions under SBTi V2?

Yes, SBTi V2 allows the use of project- and market-based accounting for scope 3 target implementation. SBTi does not explicitly use the term insetting, but projects that reduce emissions are permitted if they follow SBTi’s Actions and Market Instruments Hierarchy. Detailed guidance on quality criteria for project-based actions (i.e., additionality and causality) is still forthcoming.

Do activity-pool and sector-level actions count toward a company’s absolute reduction target?

Yes, activity-pool and sector-level actions count towards targets when they meet SBTi’s conditions. Resulting claims will depend on the actions taken, and SBTi plans to issue additional guidance on claims in 2027.

Fossil fuel phase-out requirement in SBTi V2

Who is affected by SBTi’s unabated fossil fuel phase-out requirement?

Any company generating revenue from products or services tied to unabated fossil fuels, including transportation and logistics within the fossil fuel supply chain, is subject to this requirement. It’s not limited to oil and gas producers or utilities.