SBTi Corporate Standard v1 vs v2: What's Changing and Why It Matters for Your Carbon Management Strategy

From Ambition to Action: The Evolution of the Carbon Emissions Calculation Standard

The Science Based Targets initiative (SBTi) is overhauling its Corporate Net-Zero Standard for the first time since its 2021 launch. Version 2 (v2) represents a significant evolution in requirements, moving companies "from ambition to progress" with substantial changes that every sustainability manager and ESG specialist needs to understand.

For businesses using carbon footprint tracking software and greenhouse gas reporting solutions, these changes will reshape how emissions are calculated, monitored, and reported. Whether you already have approved targets or are just beginning your carbon accounting journey, this comprehensive guide to regulatory carbon reporting will help you prepare for what's ahead.

Six Major Changes in SBTi v2 (and What They Mean for Your Carbon Accounting Platform)

1. Separate Targets for Scope 1 and 2 Emissions

What's changing: Unlike v1, which allowed a combined scope 1+2 target, v2 will require separate targets for each scope in your carbon management system.

Why it matters: This change recognises that tracking direct emissions (scope 1) and purchased energy (scope 2) requires different strategies and timeframes. Companies will need more comprehensive emissions monitoring software with distinct reduction pathways for each.

Action point: If you currently have a combined target, upgrade your carbon emissions calculation tool to track and plan for these scopes separately to prepare for the eventual transition.

2. More Rigorous Scope 2 Requirements

What's changing: v2 mandates a shift to 100% zero-carbon electricity by 2040 at the latest, replacing the more flexible renewable energy targets in v1.

Why it matters: This raises the bar significantly for purchased electricity, requiring companies to set both location-based emissions targets and either market-based targets or specific zero-carbon electricity goals.

Action point: Revise your renewable energy strategy to ensure it's aligned with a credible pathway to 100% zero-carbon electricity, focusing on high-quality procurement that drives real grid decarbonisation.

3. Transformed Approach to Scope 3 Emissions

What's changing: v2 introduces several significant changes to scope 3 (value chain) requirements for your sustainability tracking platform:

• Broader mandate: All large and medium companies in high-income countries must set scope 3 targets regardless of percentage contribution (removing v1's 40% threshold)
• Focus on relevance: Targets must address the most relevant emissions sources rather than arbitrary percentage coverage
• New methodologies: Companies can use "alignment targets" based on supplier-specific emissions tracking or product-specific emissions factors

Why it matters: This is perhaps the most transformative change, requiring deeper value chain engagement while providing more flexible approaches to simplify Scope 3 emissions tracking, which has been notoriously challenging.

Action point: Begin using your carbon accounting platform to identify emissions hotspots in spending and engage with key suppliers now, implementing supplier emissions factor databases even if not strictly required under current rules.

4. Enhanced Role for Carbon Removals

What's changing: v2 proposes more formal integration of carbon removals, with possible requirements for setting interim removal targets or milestones before reaching net-zero.

Why it matters: While offsetting still cannot substitute for emissions reductions, v2 encourages earlier investment in removal technologies and recognises the role of climate finance in broader decarbonisation efforts.

Action point: Develop a strategy for addressing residual emissions with high-quality removals, looking beyond traditional offsetting to more permanent solutions.

5. Progress Tracking and Communication Requirements

What's changing: Carbon disclosure reporting tools will need new capabilities as companies will be expected to evaluate and report progress at the end of their target period and set new targets based on actual performance.

Why it matters: This creates a continuous improvement cycle, with accountability for results, not just commitments. Companies with effective emissions monitoring software that meet or exceed targets might gain recognition as leaders.

Action point: Enhance your carbon data validation tools now to create auditable carbon footprint data and ensure you can track and report progress reliably against targets.

6. Tiered Requirements Based on Company Size and Geography

What's changing: v2 introduces a differentiated approach:

• Category A companies (large enterprises everywhere and medium companies in high/upper-middle income countries) face full requirements
• Category B companies (small companies everywhere and medium companies in lower-middle/low income countries) get increased flexibility

Why it matters: This more equitable approach recognises capacity constraints while still driving universal climate action, lowering barriers for SMEs and developing-market companies.

Action point: Determine which category your company falls into and review the specific requirements and flexibilities that will apply to you.

Timeline: What Happens When

The transition to v2 will unfold gradually over the next few years:

• 2025: Public consultations and draft revisions
• 2026: Final v2 standard expected to be published
• 2027: v2 becomes the standard for new target validations
• Through 2030: Grace period for targets validated under v1

Companies can continue to use v1.2 for new targets through 2026, and those targets will remain valid until their target year or 2030, whichever comes first. This gives businesses ample time to prepare for the transition while maintaining confidence in existing commitments.

What This Means for Your Business

If You Already Have SBTi-Approved Targets (v1)

Your current targets remain valid through 2030 or the end of your target period, whichever comes first. However, you should:

• Conduct a gap analysis between your current targets and v2 requirements
• Focus on implementation to build a strong performance record
• Consider voluntarily adopting some v2 practices early as a leadership move
• Plan for target renewal under v2 guidelines before 2030

If You're Currently Setting Targets

Don't wait for v2 to be finalised. SBTi explicitly recommends proceeding with v1.2 for targets set in 2025-2026. However, you can:

• "Future-proof" your target by voluntarily incorporating elements of v2 where practical
• Consider your timeline of validation (targets submitted by end of 2026 can still use v1.2)
• Engage with the v2 draft and consultation process
• Educate leadership about the coming changes to maintain momentum

Practical Recommendations Moving Forward

Regardless of where you are in your SBTi journey, we recommend leveraging carbon accounting automation to:

• Stay informed: Monitor official SBTi communications about v2 development with carbon compliance tracking
• Engage and contribute: Participate in consultations using insights from your emissions tracking platform
• Build transition into sustainability roadmaps: Use carbon calculation APIs to mark 2027 as a key milestone in planning
• Strengthen data systems: Implement multi-tenant carbon accounting with improved emissions tracking capabilities
• Enhance supplier engagement: Develop supplier emissions factor databases for more robust scope 3 action
• Review renewable energy strategy: Use AI-powered transaction categorization to ensure alignment with zero-carbon electricity goals
• Communicate proactively: Generate regulatory-ready carbon data to reassure stakeholders about your climate commitment

Conclusion: Evolution, Not Revolution

The evolution from SBTi v1 to v2 represents a maturation of the carbon accounting platform framework, sharpening focus on real emissions reductions while broadening participation through better carbon footprint calculation tools.

By anticipating these updates and strategically planning for them using comprehensive emissions tracking software, businesses can turn what might seem like a compliance exercise into an opportunity to strengthen climate strategies, drive innovation in carbon accounting without environmental expertise, and demonstrate leadership.

Remember: The ultimate goal is accelerating corporate climate action through automated carbon footprint calculation. Embracing that spirit will position companies to identify emissions hotspots in spending and thrive in a future where stakeholders and the planet alike demand genuine progress on the path to net-zero.