SBTi release of Corporate Net-Zero Standard Version 2.0

In June 2026, the Science Based Targets initiative (SBTi) released version 2.0 of its Corporate Net-Zero Standard — its most significant update in five years.

The update comes as businesses are already grappling with mandatory climate reporting aligned to IFRS S2, making it increasingly important to understand how voluntary net-zero standards fit within the broader reporting and transition planning landscape.

At its core, v2.0 signals a shift from ambition to action: from defining credible net-zero targets to governing credible net-zero delivery. It responds to growing SBTi adoption and practical concerns about target delivery, particularly across Scope 3, by placing greater emphasis on implementation, governance, capital allocation, supplier engagement, transition planning and best-efforts progress over time.  

So, what do these updates actually mean for businesses navigating an increasingly complex climate reporting landscape? 

From commitment to action – what’s new in v2.0? 

SBTi v2.0 introduces a number of technical changes, but for businesses, the practical implications can be understood through six work-streams: 

1. Company categorisation and target architecture 
V2.0 introduces a two-tier structure based on company size and country income classification. Category A captures large companies globally with revenue ≥ $736 million AUD* and ≥ 1,000 full time employees (FTE), and medium-sized companies in high-income countries with at least two of the following: balance sheets ≥ $40 million AUD*, net turnover ≥ $80 million AUD* and/or FTE ≥ 250. Category B captures any companies globally that do not meet the previously outlined thresholds. For most Australian businesses of meaningful scale, Category A requirements are likely to be most relevant, including Scope 3 target-setting, transition plan disclosure and limited assurance over base-year data. 

 * Converted from European euro using RBA exchange rate as at 22nd June 2026: https://www.rba.gov.au/statistics/frequency/exchange-rates.html  

2. Governance and transition planning 
Transition plans are now central to validation and delivery. All companies must explain how targets will be implemented, including actions, timeframes, assumptions and dependencies. Category A companies must disclose their transition plan, with flexibility to publish within 15 months of validation. 

3. Base-year data and assurance 
Targets must use the latest available target base-year data rather than older historical baselines. Category A companies must obtain limited assurance over base-year emissions data, strengthening the link between SBTi target-setting, climate reporting and assurance readiness. 

4. Scope 1, 2 and 3 target pathways 

• Scope 1: A new asset transition pathway has been added alongside absolute reduction and sector-based intensity approaches. This is particularly relevant for capital-intensive businesses with long-lived assets. 
• Scope 2: Targets can be based on emissions reduction and/or low-carbon electricity share, with delivery through instruments such as power purchase agreements (PPAs), contracts for difference and renewable energy certificates (RECs). V2.0 adds rules on deliverability regions, contract vintage, grandfathering of existing contracts and hourly matching disclosure. 
• Scope 3: Near-term targets are mandatory for Category A and optional for Category B, with justified exclusions permitted. Three pathways are available:  
• overarching emissions reduction, including reduction to residual emissions of approximately 10% or less by 2050 or sooner; 
• supplier/customer alignment; and  
• category- or activity-specific targets. 

5. Implementation hierarchy and market instruments 
V2.0 prioritises direct action within operations and value chains, then shared-system actions such as grids, logistics networks or supply sheds, and finally sector-level actions where direct levers are constrained. Market instruments, including energy attributes, RECs, largescale generation certificates (LGCs) and commodity certificates may support delivery where they meet integrity criteria and guardrails. 

6. Best efforts and ongoing emissions responsibility 

V2.0 introduces a clearer “best efforts” model. Companies must use available levers, disclose barriers and dependencies, and show how these are being addressed over time. The Standard also introduces Ongoing Emissions Responsibility (OER), a voluntary recognition program covering 1% to 100% of ongoing emissions, with SBTi signalling an intention to mandate OER from 2035. Carbon credits and other climate contributions do not satisfy near-term targets, and residual emissions must still be neutralised at the net-zero target year. 

What does this mean for IFRS S2 and ASRS reporters? 

With the rollout of IFRS S2 and AASB S2, many businesses are asking how SBTi v2.0 fits into their mandatory climate reporting obligations. The key point is that target-setting is not a direct requirement of IFRS S2 or AASB S2, and businesses are not required to have their targets validated by SBTi. However, where climate-related targets have been set, reporters must disclose information about those targets, including the methodology, metrics used to assess progress, and performance over time. 

This is important because target-setting expectations are likely to evolve as climate reporting matures. Best-practice reporters are already setting emissions reduction targets irrespective of S2 requirements, and where targets exist, the credibility of the underlying methodology will face increasing scrutiny as reporting and assurance expectations tighten. SBTi remains one of the most recognised third-party mechanisms for science-based target validation, supported by growing market uptake, including SBTi’s reported 40% increase in companies with validated targets in 2025. 

For businesses, the practical implication is that SBTi validation is not mandatory, but it may become increasingly relevant for credibility, comparability and stakeholder confidence. As more companies disclose quantitative support for public emissions-reduction commitments, SBTi-aligned targets are likely to become a more important reference point for demonstrating that climate ambition is credible, measurable and aligned with the science. 

Signal shift towards action emphasises the need for a transition plan 

One of the most significant updates under SBTi Corporate Net-Zero Standard v2.0 is that companies submitting targets are now required to develop and maintain a transition plan. This reinforces a broader shift in the Standard: credible climate action is no longer just about setting a target; it is about demonstrating how that target will be delivered. 

Under v2.0, transition plans must explain how science-based targets will be implemented, including actions, timeframes, assumptions and dependencies. For Category A companies, public disclosure is also required, with flexibility to publish within 15 months of target validation. The Standard also links credible implementation to highest-level governance oversight, review mechanisms, and integration with corporate strategy and decision-making. 

For businesses, transition planning should not be treated as a sustainability document prepared after targets are set. It is becoming part of the operating architecture for credible climate strategy, linking emissions pathways to governance, strategy, capital allocation, procurement, value-chain engagement, progress monitoring and climate disclosure. In Australia, this is reinforced by ASRS: AASB S2 does not require every company to have a transition plan, but where one exists, companies must disclose information about it, including assumptions, dependencies, resourcing and progress. 

Why v2.0 matters for heavy industry and hard-to-abate sectors 

SBTi v2.0 has relatively positive implications for heavy industry and hard-to-abate sectors because it is more implementation-aware, asset-aware and system-aware, while still requiring credible decarbonisation action. This is particularly relevant in Australia, where industrial decarbonisation is often shaped by long-lived assets, major capital investment, renewable electricity availability, low-carbon fuels, enabling infrastructure and technology maturity. 

A key change is the new Scope 1 asset transition pathway, which allows companies with long-lived or capital-intensive assets to set targets linked to transition plans, asset replacement cycles, phase-out milestones and carbon budgets. Sector-specific emissions-intensity pathways also remain important where available, including for sectors such as steel, cement and chemicals. 

For heavy industry, v2.0 also means targets need to be linked to capital allocation, maintenance cycles, electrification, fuel switching, process changes, supplier engagement and infrastructure dependencies. Where significant emissions-intensive activities are present in the value chain, companies must also develop a plan to decarbonise those emissions. 

The Standard still requires science-aligned ambition: direct decarbonisation remains the priority, while shared-system and sector-level actions may be used where direct levers are constrained. Market instruments may support delivery where they meet integrity criteria, but claims need care. Carbon credits and other climate contributions do not satisfy near-term targets; residual emissions must still be neutralised at the net-zero target year. 

Already set targets, or setting them now? What to prioritise next 

The release of SBTi v2.0 and the rollout of mandatory climate reporting under AASB S2 are not isolated developments. Together, they form part of a broader shift in how climate ambition is defined, disclosed and held to account.  

The good news is that the v2.0 transition is not immediate. Existing v1.3.1 targets are not automatically invalidated, and version 1 remains open for setting targets until the end of 2027.  

But that runway should be treated as planning time, not waiting time. If you are currently developing targets, designing them with v2.0 in mind can help avoid costly restructuring later.  

If you already hold SBTi-validated targets, the priority is a structured gap assessment. And if you do not currently have targets, now is the time to consider whether, and how, science-based targets fit into your longer-term climate disclosure and transition strategy. 

For Category A companies under the new Standard, three priorities stand out: 

1. Review or develop your transition plan. Under v2.0, this becomes central to target delivery and should set out the actions, timeframes, assumptions and dependencies that support your targets. For Australian businesses, this also links to ASRS reporting, particularly where transition plans, capital allocation and progress may need to be disclosed. 
2. Review your latest target base-year emissions dataset. Assess whether it is complete, traceable and limited-assurance ready. This can align with the broader data quality and assurance uplift many businesses are already undertaking for climate reporting. 
3. Test your existing targets against the new Scope 1, 2 and 3 pathways. This is especially important where the new asset transition pathway may be relevant for Scope 1, where electricity procurement approaches may affect Scope 2, or where supplier/customer alignment and category-specific pathways may provide a more practical approach to Scope 3. 

The message is not panic, it is prepare: use the runway to strengthen transition planning, data quality and target architecture before disclosure, assurance and target-setting expectations converge.

The bottom line 

SBTi v2.0 is best understood as an action framework. Compared with v1.3.1, it shifts the focus from defining credible net-zero targets to governing credible net-zero delivery. 

The previous Standard asked: “What does a credible corporate net-zero target look like?” v2.0 asks a broader question: “How does a company credibly govern, implement, evidence and strengthen its transition toward net-zero?” 

SBTi validation is becoming less about the target in isolation, and more about the delivery system behind it. Those that use v2.0 to strengthen governance, transition planning, data quality, capital allocation and value-chain engagement will be better positioned as target-setting, disclosure and assurance expectations continue to converge. 

For organisations ready to move beyond reporting and deliver lasting change, Edge Impact combines science, strategy and storytelling to support boards and executives to navigate with confidence. 

Find out more at www.edgeimpact.global.