The Science Based Targets initiative (SBTi) has released Version 2.0 of its Corporate Net-Zero Standard (CNZS), marking the most significant update to the standard since its launch in 2021. The revision reflects a shift from simply setting climate targets to demonstrating credible progress, implementation and accountability. 

For Australian businesses, this update provides an important indication of where climate expectations are heading. As climate disclosures become more prominent, and with regulators, investors and customers expecting increasingly robust emissions reduction claims, the revised standard reinforces the need for transparent reporting, credible transition plans and evidence that commitments are translating into real-world emissions reductions.

From climate commitments to deliveries 

After more than a decade of working with over 10,000 companies, SBTi has recognised that delivering emissions reductions is usually far more challenging than setting targets. Version 2.0 updates the CNZS to reflect real-world business challenges, advances in climate science and growing stakeholder expectations, shifting the focus from target setting to implementation, accountability and measurable emissions reductions.

What’s changed in Version 2.0 of the standard

Key changes 

What companies need to know 

Companies now need to set separate targets for Scope 1 (direct) emissions  

Whereas previously companies could set combined Scope 1 and 2 targets and often meet these through the procurement of renewable electricity, they now need to set separate targets for Scope 1 and provide credible plans for how these will be met. 

Transition plans are now a core part of SBTi, requiring companies to show how they will actually deliver  their targets 

Companies are now required to develop and maintain a Transition Plan and publish it within 15 months of completing target validation. The plan needs to include the actions to meet near term targets and a high-level roadmap over the long term towards net zero. This direction is consistent with the increasing focus on transition planning from investors and within climate-related disclosures. 

Board-level accountability is required and companies must now track and report on their progress  

The standard requires the company’s board to approve targets and Transition Plans, and that governance structures are established for overseeing and implementing targets. 
Companies are now expected to track and publicly report progress against their targets annually, including emissions data, actions taken, implementation challenges and how those challenges are being addressed.

Renewable electricity claims face stronger requirements, with temporal and geographic matching requirements 

Companies using grid-sourced renewable electricity to reduce emissions will face tightened eligibility criteria to ensure they align with a new implementation hierarchy. Renewable purchases will need to be from generators commissioned or repowered within the last 15 years, generation occurring within last 12 months, and from projects within the same interconnected electricity grid (e.g. the NEM or the SWIS). Additionally, companies can now be optionally recognised for using hourly matched renewable purchases, e.g. via time stamped renewable energy certificates (RECs). 

Scope 3 targets must now cover the most material emissions sources in the supply chain and drive decarbonisation within the value chain

The revised standard no longer allows the exclusion of Scope 3 emissions covering less than 67% of the GHG inventory, instead requiring most companies to set targets for all Scope 3 categories that are greater than 5% (of total Scope 3 emissions). Whilst companies can still set a single overarching Scope 3 absolute emissions target, the intent is to drive supplier, customer and product performance to be compatible with a net zero economy, through either category-specific targets or working with suppliers to reduce their emissions and procuring low carbon commodities.

Market instruments, such as Environmental Attribute Certificates (EACs) and commodity certificates can now contribute towards target implementation 

Other than the treatment of RECs in Scope 2 reporting, the GHG Protocol did not historically provide any guidance on how market instruments, e.g. SAF certificates, can be used for emissions reporting. V2.0 now recognises certain market instruments as part of target implementation, subject to an implementation hierarchy and integrity guardrails; these certificates should be accounted for and reported separately from the physical GHG inventory. 

The new Ongoing Emissions Responsibility (OER) framework encourages investment in emissions reduction beyond a company's own footprint 

While not a substitute for directly reducing emissions, the OER framework encourages and recognises companies that take responsibility for emissions that remain during the transition to net zero, by supporting climate solutions beyond their own operations and supply chain. Companies have flexibility in how they contribute, including carbon removals and climate actions, with recognition levels based on the portion of ongoing emissions covered.  

Is SBTi still relevant?

With more stringent requirements to obtain validation for SBTi targets and the need to report ongoing progress against your targets, the question is being posed whether it is still worth seeking to align with the SBTi. 

Many companies have climate related targets, including net zero targets, and are disclosing these in their climate related financial disclosures. Guidance from the ASIC and ACCC around greenwashing states that any claims about something that will happen in the future (e.g. achieving net zero) require the business to have reasonable grounds for making the claim. This means that businesses disclosing near-term and long-term emissions targets need to clearly understand what the targets represent, the basis on which they are made, what assumptions underpin them, and what they plan to do to meet them.  

In our view, SBTi remains the gold standard for net zero target setting and along with the recently released draft ISO net zero standard provides a benchmark that regulators, investors, and customers can point to when assessing the validity of net zero claims. Companies need to understand what’s changed in the newly released CNZS and what the expectations are on corporates when making net zero claims. Even if you don’t intend to align with the new standard, it’s important to at least understand where your net zero claims differ from these standards and have justification for taking a different approach. 

Furthermore, SBTi is closely aligned with the GHG Protocol, which underpins most corporate emissions reporting and is referenced by Australian Sustainability Standards Board (AASB) S2 standard. The GHG Protocol has been consulting on the revision of its own Corporate Accounting and Reporting Standards since 2025, including allowance for the use of EACs in market-based inventories for Scope 1 and 3 and changes to their use in Scope 2 reporting. With the draft revised GHG Protocol standards due to be published in 2027, SBTi has leapt ahead in presenting a model for treatment of these EACs for inventory reporting and target implementation. Corporates will need to be mindful of SBTi’s approaches as they will likely be considered by the GHG Protocol as it revises its own standards.  

What actions do you need to take in response to the new CNZS? 

  1. Consult the transition guidance from v1.3.1 to v2.0 of the new standard and identify when you need to comply with the new standard1 and if you need to submit new Scope 1, 2, and 3 targets. 
  2. Decouple your Scope 1 and 2 targets and conduct analysis on measures to abate Scope 1 emissions through physical actions like energy efficiency, electrification, and fuel switching.
  3. Conduct a review of your energy procurement strategy to ensure your renewable purchases comply with the new geographic and temporal changes and consider if you want to include some hourly matched renewables in your purchases. 
  4. Conduct a Scope 3 boundary review to assess your most material sources of Scope 3 emissions, and develop a Scope 3 decarbonisation plan to utilize EACs to abate emissions in your supply chain. 
  5. Prepare a detailed Transition Plan which is aligned with your business strategy and describes the actions and implementation timeline for achieving revised Scope 1, 2, and 3 targets.

How can ERM help? 

ERM is working with Australian corporates in all the aspects of climate strategy, decarbonisation and managing the energy transition. This includes working to support companies in their AASB S2 mandatory climate-related financial disclosures, preparing Scope 1, 2, and 3 emissions inventories, conducting modelling and analysis to support climate target setting, and preparing Climate Transition Plans to meet these targets. ERM is also actively helping companies with their renewable energy procurement, including providing transaction support for Power Purchase Agreements. We work on EACs across fuels and commodities, including steel, cement and chemicals supporting companies to establish new approaches and purchase certificates. Through this expertise ERM can support your business to interpret the new changes to the SBTi corporate net zero standard at what it means for your climate disclosures, net zero claims, and strategy for procurement and retirement of EACs.

1. A transition period operates between 2026 and 2028 depending on which year your near term targets are reached or when your mandatory five year review is triggered.