State of Sustainability Podcast

Solo Episode: SBTi Version 2: What's Changed and What It Means

SAIF: Welcome back to another episode of the State of Sustainability. I'm your host Saif Hamid, founder and CEO of Altruistiq.

Today I'm diving into the new corporate net zero standard from the Science Based Targets initiative — version two of the SBTi standard. Longtime listeners will know I have a love-hate relationship with regulation, which makes it odd that I keep doing episodes on regulatory topics. But here we are.

I'm not going to walk through all 130 pages. Instead, I want to cover three things: the backdrop — where I think this is coming from and what's been going on at SBTi; what I see as the major shifts in the new standard; and what I think those shifts mean in terms of what's been resolved and what hasn't.

Backdrop: Where This Is Coming From

Rapid and unexpected growth. Fun fact: back in 2018 or 2019, I was probably one of the only people at McKinsey — among roughly 20,000 consultants — who knew what an SBTi target looked like. That's how niche this was. Since then, SBTi has grown at high double-digit percentages year on year and has just crossed 10,000 verified companies. What's particularly interesting is where that growth has come from: Japan, China, and Southeast Asia have been among the largest contributors.

The driver is fairly clear. A lot of the traditional manufacturing hubs that supply companies like Unilever, Nestlé, and other large FMCGs are now getting onto the SBTi train — partly because their customers expect it, partly because they're exporting into Europe and starting to think about CBAM, and partly because sustainability requirements from buyers are tightening. We saw this early at Altruistiq — one of our first clients was the largest packaging company in Pakistan, a business with around half a billion dollars in revenue, whose customers included Unilever and similar FMCGs. Similarly, textile players across South Asia, India, Bangladesh, Vietnam, and Southeast Asia more broadly were moving fast on Scope 1 and 2 reductions and beginning to engage with Scope 3. That wave has continued and is now showing up in SBTi's own numbers.

A crisis of confidence and identity. SBTi has had a difficult couple of years internally and externally. The announcement-and-retraction episode around offsets — and the reports of pressure from organisations like the Bezos Earth Fund influencing the board's position — damaged credibility and created internal tension between the leadership and management levels. Within the sustainability community, there was a period of genuine inside scepticism about whether SBTi had its act together and whether it would still be relevant in a few years. That kind of uncertainty tends to affect the organisation from the inside too, and I think SBTi has been doing genuine soul-searching about what it wants to be in the world. It started as a fairly niche, cult-like initiative. It has become mainstream. What does it mean to be a mainstream standard-setting body on a long journey, rather than a once-and-done target verification service?

Open questions that have been lingering. SBTi has had an awkward codependency with the GHG Protocol — one defines the accounting framework, the other sets the targets, and the two need to move in lockstep but often don't. This has created persistent gaps and lags around how to handle offsets, insets, energy attribute certificates, forestry, land and agriculture, and other contested areas. Those gaps are part of what V2 is trying to address.

What's Changed in V2

Category A and Category B. The most structurally significant change, in my view, is the introduction of a two-tier categorisation system. Category A is essentially large companies and companies in high-income countries: defined as businesses with over 1,000 full-time employees or revenue over €450 million, or companies based in countries that meet SBTi's high-income threshold. Category B is the converse — smaller companies and those based in lower-income countries.

The principle is roughly: those with the broadest shoulders bear the greatest burden. Category A companies face more stringent requirements, including a mandatory commitment to offset at least 1% of Scope 1, 2, and 3 emissions from 2035, scaling to 100% by their net zero target year. Category B companies have significantly more flexibility.

This is important not just as a policy choice but as a market expansion move. SBTi is explicitly trying to bring in emerging market companies, global south businesses, and smaller mid-market firms alongside the large multinationals that have historically been the primary adopters. I think this is a genuinely significant expansion of SBTi's addressable market.

Much more optionality. The new standard gives companies a far wider menu of ways to engage. You no longer need to commit to an absolute net zero target. Options now include: an overarching absolute Scope 3 emissions reduction target; a supplier or customer alignment target anchored on someone else's commitments; or a category- or activity-specific target focused on a particular part of your value chain. The standard also introduces optionality around how companies engage with offsets and value chain interventions, including a prioritisation framework for insets that encourages targeting actual activities first, then progressively wider supply-shed or commodity-category initiatives.

This shift reflects a deliberate pragmatism. SBTi is acknowledging that one-size-fits-all was limiting adoption without necessarily improving outcomes, and that giving companies meaningful but varied entry points is better than having fewer companies in the system on narrower terms.

A clearer and more explicit position on climate finance. This is the third major shift. SBTi is now taking a clear ideological position on who owns responsibility for residual emissions: for Category A companies, the answer is: you do, and increasingly so over time. The framework explicitly favours technical, permanent removal offsets over nature-based solutions, which are characterised as a stepping stone rather than an endgame. Nature-based credits are not disqualified but are viewed as more time-limited in their validity.

SBTi also introduces an Ongoing Emissions Responsibility programme — a voluntary club with multiple levels of commitment (Engaged, Advanced, Leadership), each carrying different contribution expectations and earning corresponding public recognition. This is the most explicit SBTi has ever been about incentivising companies to take financial ownership of their residual emissions, and it points clearly toward the voluntary carbon and removal markets as an expected part of any serious corporate climate strategy.

What This Means Going Forward

More companies will join SBTi. Signing up is meaningfully easier now. The categorisation accommodates a wider range of company sizes and geographies. The target options accommodate a wider range of starting points and ambition levels. The standard has gone about as far as I think it can in broadening access without fundamentally diluting what SBTi membership means. I expect adoption to continue growing, particularly in Asia and emerging markets.

More money will flow into climate finance. SBTi's explicit endorsement of the climate finance and removal offset space — and the mandatory 1% commitment for Category A companies from 2035, scaling upward — is a meaningful signal. The voluntary carbon market has had a rough few years. South Pole and others working in offset development and trading have faced significant headwinds. This standard won't fix everything overnight, but it could be a meaningful demand signal. Combined with stock exchanges across Asia now beginning to require climate strategies as a listing condition, there may be conditions forming for a more credible recovery of climate finance flows.

More companies will have more to say publicly. More ways to participate means more targets being set and more milestones being hit. The Ongoing Emissions Responsibility programme gives companies a public recognition framework around something they were previously either quiet about or uncertain how to communicate. Expect a wave of sustainability credentialling activity as companies work through what V2 means for them and begin communicating their pathways.

What Isn't Yet Resolved

Insets remain poorly defined. The standard acknowledges insets and provides a prioritisation framework, but it still doesn't clearly define where the boundaries of a "system" lie — which is fundamental to knowing what counts as an inset and what doesn't. SBTi appears to be assuming this will be resolved by the GHG Protocol. It probably should be. But the two institutions don't move in lockstep, which means the lag will continue to create confusion and frustration for companies trying to do the right thing.

Comparability across companies is going to get harder, not easier. With more optionality comes more variation. Two companies in the same sector — a textile manufacturer in Germany and one in Bangladesh, or even two similarly-sized manufacturers in the same market — could both carry valid SBTi commitments that look completely different in practice. That's not necessarily wrong, but it creates a practical challenge for anyone trying to use SBTi alignment as a meaningful signal in their supply chain. Knowing that a supplier has an SBTi target is no longer sufficient. You're going to need to understand what exactly they've committed to, what their pathway looks like, and what they're actually doing. The tick in the box is increasingly insufficient on its own.

Summary: SBTi V2 is the standard's attempt to codify a broader church, accommodate growth from emerging markets, clarify its position on climate finance, and give companies more ways to credibly participate. The backdrop was a period of turbulence, reputational damage, and genuine identity questions. The result is a more pragmatic, more inclusive framework that should drive higher adoption and more money into climate action — while leaving some definitional gaps still to be closed.

As always, I'd love to hear from you — thoughts on this episode or ideas for future ones. Email is in the show notes. Hit follow if you don't want to miss what's coming next.

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