SBTi Criteria for ESG Reporting Standards

The Science-based Target Initiative (SBTi) aims to enable businesses to contribute to measures that limit global warming within the recommended levels. In this regard, net-zero emissions are to be attained by the 2050 deadline.

» Science Based Targets Initiative (SBTi) General Criteria

General Criteria

Target Boundary

Organizational Boundary

• C1 – Organizational boundary: 

The companies are expected strictly to forward their targets using a very strategic level, such as parent or group only, including all the subsidiaries consolidating with preferred consolidation criteria. This assures conformity with the GHG Protocol Corporate Standard.

• R1 – Setting organizational boundaries:

The SBTi firmly supports the alignment of the organizational boundary and the financial accounting boundaries of the company for reasons of continuity.

GHG Coverage

• C2 – Greenhouse gases:Targets must include all seven GHGs addressed by the GHG Protocol Corporate Standard (CO2, CH4, N2O, HFCs, PFCs, SF6, NF3).

Scope Coverage

• C3 – Scope 1 and 2: Targets shall cover company-wide scope 1 and scope 2 emissions.
• C4 – Scope 3: If scope 3 constitutes ≥40% of total emissions (across scopes 1, 2, and 3). The organization need to make a target within a reasonable time frame. If fossil fuel is sold or distributed by a company, a separate scope 3 target should be set against the exposure of the products or sales prorated into sold products, no matter what the percentage. All companies have got to include in their long-term science-based targets all relevant Scope 3 emissions.

Emissions Coverage

• C5 – Scope 1, 2, and 3 allowable exclusions: A company can exclude up to 5% of total combined scope 1 and 2 emissions and up to 5% of total scope 3 emissions from its GHG inventory or target boundary.
• C6 – Scope 3 emissions coverage for near-term targets: Companies must cover at least 67% of total scope 3 emissions in one or more near-term scope 3 targets (this can include engagement targets).
• C7 – Scope 3 emissions coverage for long-term targets: The boundary of long-term SBTs must cover at least 90% of total scope 3 emissions.

• R2 – Targets covering optional scope 3 emissions: Companies may introduce them. They are additional goals but they’re not significant for achieving thresholds for minimum protection.

Method Validity (Near- and Long-Term Targets)

• C8 – Method validity: Targets must be modeled using the latest SBTi-approved methods/tools. Any older methods version becomes invalid 6 months after an updated method is released.

Emissions Accounting Requirements

C9 – Scope 2 Accounting

The companies must declare if a location- or market-based approach is used in the quantification of base-year emissions and in the assessment of the progress of the company. Under the GHG Protocol Scope 2 Guidance, both approaches need to be reported by entities; however, only one is of use in the setting and monitoring of the SBT.

C10 – Scope 3 Inventory

• Companies must create a complete scope 3 inventory using the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

C11 – Bioenergy Accounting

• CO2 emissions linked with the cycle of combustion, processing, and distribution of bioenergy as well as land-based emissions or absorptions of CO2 witnessed as due to bioenergy materials should also be provided alongside the GHG ladder of the company and the target boundary reached for the purpose.
• Land-based GHG accounting includes CO2 from direct land use change (LUC), plus CH4/N2O from land management. Indirect LUC is optional.
• Negative emissions from biogenic removals are not to be counted toward target progress.
• R3 – Biofuel Certification: Companies using biofuels for transport should back up their data with recognized biofuel certifications.
• R4 – Bioenergy Data Reporting: Encourages reporting gross emissions and gross removals for transparency, though the minimum is reporting them net.

C12 – Carbon Credits

Emission reduction by way of Carbon credits cannot pertain to any immediate or intermediate targets. They can only serve to offset remaining emissions and act as carbon emissions neutralization post net zero or additional to the respective mitigation.

C13 – Avoided Emissions

Science-based targets do not take avoided emissions into account as these emissions are not part of the corporate inventories as a baseline.

» Science Based Targets Initiative (SBTi) Net-Zero Target Formulation

Net-Zero Definition

• C14 – State of net-zero emissions:It is the main objective of all companies to try to reduce their scope 1, 2, and 3 to zero or to any residual levels that are their “net-zero emissions” goal according to the “1.5°C scenarios” and then eliminate, more appropriately, neutralize any residual emissions existing in their system as of the target date.

Structure

• C15 – Net-zero target structure: A company must set both near-term and long-term targets. If the near-term target is already in line with long-term requirements, a separate long-term target must still be set at or above that level.

Timeframe

• C16 – Base year: Must be no earlier than 2015; the same base year must be used for scope 1 and 2.
• C17 – Target years:
• Near-term targets must span 5–10 years from the submission date.
• Long-term targets shall have a year no later than 2050. In certain sectors that reach net-zero earlier (e.g., power
• C18 – Progress to date: The minimum forward-looking ambition of a near-term target covering scope 1 and/or 2 is consistent with a linear reduction path to net-zero by 2050. Companies need to supply a most recent inventory (e.g., no earlier than 2022 for 2024 submissions).

Ambition

• Scope 1 and 2 (near- and long-term targets)
• C19 – Level of ambition: These targets must meet 1.5°C alignment.
• C20 – Absolute targets: Must be at least as ambitious as the range of 1.5°C scenarios.
• C21 – Intensity targets: Only valid if modeled using an approved 1.5°C sector pathway (i.e., SDA).
• Scope 3 (near- and long-term targets)
• C22 – Level of ambition for scope 3:
• Near-term scope 3 targets must align with well-below 2°C.
• Long-term scope 3 targets must align with 1.5°C.
• C23 – Supplier or customer engagement targets:

Companies may set an engagement target for suppliers or customers to adopt their own SBTs.

The target must be fulfilled within 5 years.

• C24 – Absolute targets (scope 3): Must be at least as ambitious as the well-below 2°C scenario (near-term) or 1.5°C scenario (long-term).

C25 – Intensity targets (scope 3): Must use an approved sector-specific pathway or an eligible intensity approach.

R6 – Supplier engagement: Companies are recommended to encourage suppliers to validate their SBTs with the SBTi, although not mandatory.

1. Combined Targets (Scopes 1, 2, and/or 3)
• C26 – Combined scope targets: Companies can merge scopes into a single target (e.g., 1+2+3) as long as each portion meets the relevant ambition level.
2. Renewable Electricity Targets (Scope 2 Only)
• C27 – Renewable electricity: A company can set a target to actively source renewable electricity at a rate that meets 1.5°C scenarios. The standard thresholds are:
• 80% by 2025
• 100% by 2030

• R7 – Purchased heat and steam: If using the Sectoral Decarbonization Approach (SDA), companies should treat purchased heat/steam as if scope 

• R8 – Efficiency considerations: Efficiency gains and power sector decarbonization should be embedded in modeling.

Beyond Value Chain Mitigation

• R9 – Beyond value chain climate mitigation:

Organizations should in addition to their compliance and commitments to near-term and long-term targets support or undertake GHG reductions in areas or activities which do not belong in the scope of their value chain. And, it is recommended that the organizations make an annual disclosure reporting the magnitude and types of these movements.

Neutralization

• C28 – Neutralization of unabated emissions: 

After a company has achieved its long-term SBT, any residual emissions left must be effectively tackled through the process of carbon removal and the safe storage of carbon dioxide. This concerns emissions within boundaries, as well as those excluded from boundaries.

• R10 – Neutralization milestones: Companies should publicly share their plans and milestones for neutralizing residual emissions at the net-zero date.

» Science Based Targets Initiative (SBTi) Reporting, Recalculation, and Target Validity

Reporting

• C30 – Frequency: Companies must publicly report their GHG inventories annually.
• C31 – Reporting completeness: They must separately report emissions and removals each year.
• R11 – Where to disclose: No specific platform is mandated, but recommended options include CDP and annual reports.

Recalculation and Target Validity

• C32 – Mandatory target review: Every 5 years, companies must review their targets against the latest SBTi criteria. If targets no longer align with the new criteria, they must be updated and revalidated.
• C33 – Triggered target recalculation: Significant structural or data changes (≥5% shift in base-year emissions or boundary) also necessitate recalculation.
• C34 – Target validity: Once approved, targets must be publicly announced on the SBTi website within 6 months, or they expire.

R12 – Validity of target projections: Recommends annual checks for changes in assumptions or data.

» Science Based Targets Initiative (SBTi) Sector-Specific Requirements

Sector-Specific Guidance

• C35 – Requirements from sector-specific guidance: If sector-specific guidance exists, companies must follow it within 6 months of its publication.
• C36 – Companies in the fossil fuel business: The SBTi will not validate targets of companies with direct involvement in exploration, extraction, or production of oil, gas, coal, or those deriving ≥50% revenue from fossil fuel sales or services.
• C37 – Sale, transmission, distribution of fossil fuels: Companies that sell or distribute fossil fuels must set scope 3 targets for the use of sold products (1.5°C aligned), regardless of the scope 3 share.

Sector-Specific Requirements

Below is the summarized content of each sector’s requirements, as laid out in the table:

Companies Not Covered by Any SBTi Sector Guidance

• These companies may use the cross-sector pathway with the absolute reduction method for both near- and long-term targets (using the Corporate Near-term Tool and Corporate Net-Zero Tool).

Aluminum

• May also use the cross-sector pathway (absolute reduction).

Apparel

• Optional guidance exists for apparel and footwear.
• These companies primarily rely on the cross-sector approach with absolute reduction methods.

Air Transport

• Air transport pathway (intensity convergence method / SDA) available for near- and long-term targets, using the Aviation Tool. Must cover well-to-wake (WTW) emissions.
• Alternatively, can use the cross-sector absolute reduction method.
• Must exclude non-CO₂ factors (like contrails) in the target itself, but should publicly disclose them separately.

Buildings

• The Buildings guidance is under development, but current approaches include:
• Residential or service buildings pathways (intensity convergence).
• Sector-specific absolute reduction for long-term.
• Cross-sector absolute reduction.
• Companies will soon be required to use SBTi-CRREM-based guidance for operational and embodied emissions once it’s finalized.

Cement

• Sector-specific intensity convergence (SDA) or cross-sector absolute reduction.
• Must include a scope 3 target that covers purchased cement and clinker.

Chemicals

• No official method is yet finalized, so companies use cross-sector absolute reduction.

Financial Institutions

• Financial institutions derive ≥5% of revenue from investment, lending, or insurance.
• Near-term targets must apply either:
• Absolute reduction for scope 1 and 2.
• Sectoral intensity approach for scope 3 Category 15 (“investments”).
• Portfolio coverage or temperature rating methods.
• SBTi will soon release a Net-Zero Standard for financial institutions; no net-zero validations are accepted yet.

Forest, Land, and Agriculture (FLAG)

• Companies with FLAG emissions ≥20% of total emissions must set FLAG targets.
• Sector-specific absolute reduction (FLAG tool) or commodity pathways (e.g., beef, dairy, palm oil, etc.).
• Must cover at least 95% of scope 1 and 2 FLAG emissions in near-term targets, 67% of scope 3 if relevant.

Fossil Fuel Sale/Transmission/Distribution

• Companies deriving <50% revenue from fossil fuels must still set scope 3 category 11 (use of sold products) coverage.
• Those deriving ≥50% revenue from fossil fuels are not currently validated by the SBTi (see C36).

Information and Communication Technology (ICT) Providers

• Can use cross-sector absolute reduction method.
• Optional guidance exists for mobile/fixed network operators and data centers.

Iron and Steel

• Sector-specific intensity convergence (SDA) or absolute reduction.
• Must include a near-term scope 3 target covering category 3 “Fuel- and energy-related emissions”.

Maritime Transport

• May use the maritime pathway (intensity convergence) or cross-sector absolute reduction.
• If using the maritime pathway for a company’s own maritime operations, near-term target year can be no earlier than 2030, and the long-term target must be no later than 2040.
• Companies that only subcontract maritime transport for shipping are not obliged to set a long-term target.

Oil & Gas

• Currently, the SBTi cannot validate oil & gas targets. All such submissions are paused until a dedicated oil & gas standard is developed.
• Involvement in fossil fuel extraction (such as coal mines, lignite mines) makes companies ineligible for validation.

Electric Utilities & Power Generation

• Must use the power sector pathway (intensity convergence method / SDA).
• The long-term target year is no later than 2040 (earlier than some other sectors).
• Companies must set two targets if scope 3 is ≥40%:
1. Intensity target covering all sold electricity.
2. Intensity target covering all electricity generation.
• If also selling or distributing fossil fuels, an additional absolute target covering those products is required.

Land Transport (Road and Rail)

• Cross-sector absolute reduction method for near- and long-term.
• Must account for well-to-wheel (WTW) in GHG inventories.

Land Transport: Transport OEMs/Automakers

• Currently, the SBTi is developing new guidance.
• Near- and long-term target validations for automakers are paused until the interim 1.5°C method is officially published.

Adaptation Notice under the Science Based Targets initiative (SBTi)

This text has been adapted in accordance with the guidelines set forth by the Science Based Targets initiative (SBTi). In our efforts to ensure transparency, accountability, and alignment with sustainable practices, we have carefully reviewed and incorporated SBTi principles into the content. This adaptation process reflects our commitment to high-quality, accurate, and comprehensive sustainability reporting, ensuring that the information presented adheres to internationally recognized standards.

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