Last month, the Science Based Targets initiative (SBTi) released a draft update to its Corporate Net-Zero Standard—the framework many companies use to guide and validate their climate targets. The revisions mark a step forward in how companies are expected to think about climate action: not as a distant goal for 2050, but as something that requires serious planning and investment today.

“There’s quite a lot to welcome here,” says Tom Gegg, Development Lead for UK nature projects at Palladium. “The updates show a more pragmatic approach, less about ticking boxes, and more about encouraging real-world change.”

While the new guidance doesn’t overhaul the SBTi framework, it refines it in ways that could significantly influence how businesses approach everything from electricity use to supply chains to carbon removal.

Getting Stricter on "100% Renewable Energy" Claims

One of the most interesting changes is how SBTi expects companies to report their Scope 2 emissions (those related to energy use). In the past, many firms claimed they were powered entirely by renewable electricity simply by buying certificates from clean power generators. However, in some cases the certificates were linked to electricity generation happening at a completely different time of day or location where the claim was being made.

“That’s no longer going to cut it,” says Gegg. “Buying a certificate from a wind farm on the other side of the country that generates power at night, when your factory runs during the day, isn’t really the same thing as being powered by renewable energy. It’s accounting gymnastics.”

The new SBTi draft starts to close this loophole. It asks companies to match their renewable energy purchases more closely to when and where they’re actually using electricity.

“This is about bringing integrity back into the system,” says Naomi Conway, Palladium’s UK Director of Nature. “If we want companies to play a meaningful role in the energy transition, their claims have to reflect real-world changes, not just financial transactions.”

Getting Pragmatic About Scope 3

Scope 3 emissions (those generated by suppliers, logistics, and downstream product use) are often the largest and most complex part of a company’s footprint. They’re also notoriously hard to measure.

“The old approach tried to measure everything down to the last decimal point,” says Gegg. “But it turned into a bit of a data trap. You spend so much time calculating emissions, you don’t have the headspace to actually reduce them.”

The new guidance encourages companies to focus on making changes in their supply chains like switching to low-carbon suppliers or redesigning products.
“It’s a more pragmatic approach,” Conway adds. “The goal isn’t perfection, it’s progress. Encouraging procurement changes gives companies something concrete to act on.”

Carbon Removals Get a Bigger Role, But Timing Is Key

Perhaps the most forward-thinking part of the draft is its new emphasis on carbon removals, methods like planting forests, restoring ecosystems, or using technology to capture and store carbon from the air.

“In the past, removals were treated like a ‘later’ problem – something to deal with in the 2040s,” Gegg explains. “This draft encourages companies to start thinking about them now, by setting interim targets.”

That’s a critical shift. Many removal solutions take decades to deliver results and require long-term investment. But without near-term demand signals from companies, project developers working on carbon removal projects struggle to secure the upfront investment they need from pension funds and other providers of “patient” capital, those investments that look for returns over decades rather than months or years.

“If companies are going to be rewarded for setting a clear removals target, they should also show some kind of evidence that they’ve made a commitment to purchase removals,” argues Gegg. “Otherwise, it's still all a bit vague and won’t help unlock the investment we need to get a decent supply of removals up and running”.

“SBTi could really make an impact if it encouraged companies to make the kind of robust, long term demand side commitments to supporting carbon removal. Once we see that happen, it will give investors the confidence they need to back projects now.”

This kind of thinking is driving the advance market commitment recently launched by the Symbiosis Coalition. A partnership between Google, Meta, Microsoft, Salesforce, and McKinsey, the Coalition aims to contract for 20 million tons of nature-based carbon removal over the coming decades. This kind of powerful market signal gives investors confidence that there will be a market to generate the revenues they need in order to recoup their investment in high-quality carbon removal projects.

Rethinking What Counts as “Permanent”

One area of debate is how the guidance talks about durability, or how long carbon stays out of the atmosphere once it’s been removed.

“There’s a risk here,” Gegg notes. “The new criteria might put all nature-based removals into a ‘low permanence’ category and just prioritise engineered removals. But that’s not always fair.”

He points to woodland creation in the UK as an example. “If you’ve got a forest backed by a long-term management plan, and it’s protected by law from being cut down, that’s a pretty permanent removal in practice. I think that deserves recognition.”

For many in the nature-based solutions space, how SBTi defines permanence could shape where investment flows – or doesn’t.

A Framework That Encourages Action

Taken as a whole, the revised draft shows signs of a more grounded, action-oriented approach to corporate climate leadership.

“There’s still room for improvement,” says Conway. “But this is a solid step forward. It gives companies clearer signals and more practical tools for turning targets into action.”

And for Gegg, that’s what matters most. “This guidance can help shift the conversation from distant targets and confusing acronyms to present-tense planning. And that’s exactly what we need if we want to deliver net zero in the real world.”

Contact info@thepalladiumgroup.com to learn more.