4 min. read
Last updated Mar 18, 2025
Key takeaways
Near-term role for carbon removals: The revised Science-Based Targets Initiative (SBTi) Corporate Net Zero Standard (CNZS) v2.0 proposes requiring or recognizing interim carbon dioxide removal (CDR) targets before companies reach net zero. This shift aims to scale up the CDR industry in line with climate science and ensure companies address residual emissions earlier rather than deferring action until their net-zero target year.
Revised target frameworks and increased accountability: The draft standard introduces key changes, including separate targets for scope 1 and 2 emissions, enhanced scope 3 target-setting guidelines, and the recognition of market-based mechanisms for indirect mitigation of scope 3 emissions. It also requires companies to publicly disclose transition plans and assess implementation progress against targets.
Potential for stronger action on removals: While the proposed updates are a step forward, the final standard should make near-term CDR targets mandatory rather than optional and should expand to include those for projected scope 3 residual emissions, not just scope 1. Without these stronger mandates, demand for early-stage CDR investments may remain limited, potentially slowing progress toward net-zero goals.
Companies should prepare now: Businesses should start integrating CDR into their climate strategies now so they are equipped to navigate procurement of high-quality removal credits in the voluntary carbon market. Preparing ahead of the final CNZS v2.0 release will help companies align with science-based decarbonization pathways and demonstrate climate leadership.
What the latest SBTi update means for corporate climate action
On 18 March, 2025, the Science Based Targets Initiative (SBTi) released its draft Corporate Net Zero Standard (CNZS) v2.0, significantly updating its framework for corporate net-zero target setting for the first time since 2021. The draft proposes new approaches for companies to support carbon dioxide removal (CDR) in the transition to net-zero emissions, a move that could help scale the nascent CDR industry.
This release is part of a broader revision, with key proposed updates including:
Requiring public disclosure of transition plans after companies set targets.
Separating targets for scope 1 and 2 emissions.
Enhancing the scope 3 target-setting framework using an impact-based prioritization process.
Recognizing indirect mitigation (e.g., book-and-claim commodity certificates) for hard-to-trace scope 3 emissions.
Defining a role for emissions removals in the transition to net zero.
Providing options to recognize company leadership in beyond value chain mitigation (BVCM).
Assessing corporate progress against targets to bolster accountability.
While formal recognition of removals in the transition to net zero is a positive step, stronger incentives will be needed in the final CNZS to ensure companies take meaningful early action on CDR. The draft standard is open for the first of two public consultations until 1 June, 2025, with a finalized version expected to launch in 2026.
What remains the same from the current standard?
SBTi’s framework remains focused on three core requirements for companies:
Reducing emissions year-on-year to reach an approved science-based target (SBT) by 2050 or earlier.
Investing in beyond value chain mitigation (BVCM) in the transition to net zero to support near-term global decarbonization efforts.
Neutralizing remaining emissions from the net-zero year (achieved after at least 90% emissions reductions) and onwards with high-quality, permanent carbon removal.
Carbon credits representing emissions reductions and removals remain ineligible for meeting reduction targets within a company’s value chain (SBTs).
What’s new in CNZS v2.0 for carbon removals?
Until now, the SBTi encouraged companies to invest in CDR through mechanisms such as BVCM, but has not proposed requiring removal before their target net-zero year. As a result, organizations had little clarity or incentive to invest in CDR ahead of their net-zero target date, dampening near-term demand for carbon removal and delaying the industry's growth.
The new draft changes this by proposing three options for the V2.0 Standard that address the impact of residual emissions during the transition to net zero:
Option 1 (requirement): Companies are required to set near- and long-term removal targets, including interim CDR milestones,¹ to address projected residual emissions.
Option 2 (optional with recognition): Companies can set and receive recognition for removal targets to address projected residual emissions.
Option 3 (flexibility of mechanism): Companies have the flexibility to address expected residual emissions either entirely through additional emissions reductions within their value chain, entirely through removals, or via a combination of both.
Notably, all three approaches apply only to residual scope 1 emissions.
On top of these approaches, SBTi has suggested two options for the minimum durability threshold of CDR purchases in their draft standard. Removals will either need to follow a ‘like for like’ approach,² where CDR storage must match the atmospheric lifetime of residual emissions, or a gradual transition approach, where carbon storage durability increases over time.
Why mandating CDR matters
Mandating near-term CDR reinforces the need for immediate climate action, ensuring that carbon removals complement emissions reductions rather than being deferred until the net-zero target year. The urgency of early CDR investment is clear:
Limiting global warming to well below 2°C above pre-industrial levels requires removing billions of tonnes (gigatonnes) of carbon dioxide annually by mid-century.
The CDR industry is in its early stages and requires sustained investment today to scale in time.
If companies wait until their net-zero year to purchase CDR, the supply of high-quality removal credits is unlikely to be sufficient.
As part of the proposed removal targets in Option 1 (above), the CNZS v2.0 would require companies to gradually increase CDR purchases over time, ramping up to 100% of a company’s projected residual scope 1 emissions in the net-zero target year (<10% of baseline year emissions).³
What more can be done?
The potential introduction of required removal targets would be a significant and welcomed step, reinforcing the importance of near-term CDR investment to support industry maturation and climate goals. However, mandatory near-term CDR targets represent only one of three potential pathways for the V2.0 standard. Moreover, neutralization of residual emissions on the path to net zero is only proposed for scope 1 emissions. While the SBTi provides clear rationale for this,⁴ SBTi should not let the complexity of projecting scope 3 emissions be a barrier to climate change mitigation. Scope 3 emissions represent the majority of emissions from SBTi-aligned companies. Furthermore, companies with high scope 3 emissions typically have a higher ability to pay compared to their industrial counterparts with high scope 1 emissions.
If interim removal targets are made optional, and scope 3 emissions remain excluded, the demand signal for near-term CDR will be limited. The public consultation (and advice of Expert Working Groups that SBTi is convening) will be essential in determining which proposed guidance matures into the final standard; consultation feedback can be provided here.
How businesses can prepare for CNZS v2.0
Companies aligning with SBTi’s evolving guidance should begin to integrate CDR into their climate strategy now. This means:
Understanding their residual emissions forecast and planning early investments.
Developing a company-specific climate strategy to incorporate CDR into their sustainability roadmaps in tandem with plans to reduce value-chain emissions.
Engaging early in the voluntary carbon market to implement these strategies and develop procurement processes to support high-quality removal projects.
Ensuring credibility by selecting removal projects aligned with scientific best practices.
Conclusion: A step in the right direction, but more certainty is needed
The CNZS v2.0 draft represents a critical turning point for corporate climate action with options to formalize the role of early CDR investment through interim removal targets for signatories. However, SBTi must take a stronger stance in the final version of the revised standard by choosing to adopt requirements for near-term neutralization (rather than leaving this optional), including projected residual scope 3 emissions in near-term CDR targets, aligning durability requirements with climate science, and defining removal quality standards to ensure these efforts drive meaningful climate impact. Organizations seeking to align with this guidance should prepare by developing a comprehensive climate strategy that accounts for science-based decarbonization pathways and recognizes the role of early-stage investment in CDR solutions.
Dr. Meera Atreya is a member of the SBTi Technical Advisory Group and has been engaging with the organization in an external advisory capacity for the past two years.
1) Interim removal targets would be set by companies on a five-year time horizon or based on milestone years.
2) The like-for-like principle is ‘when a source of emissions and an emissions sink correspond in terms of their warming impact, and in terms of the timescale and durability of carbon storage’, as defined by the UNFCCC. Thus residual emissions from burning fossil fuels would need to be addressed through engineered removals with permanent CO2 storage.
3) By the net-zero target year, residual emissions should be <10% of baseline year emissions.
4) By the net-zero year, scope 2 emissions from energy generation should be zero. Scope 3 residual emissions from supply chains are challenging to estimate.
