Understanding SBTi: A Comprehensive Guide to Scope 3 Emissions, Carbon Credits, and Getting Started

This guide provides sustainability managers with an in-depth roadmap for setting near- and long-term science-based targets (SBTs) through the Science-Based Targets initiative (SBTi). It covers key steps such as understanding your company’s GHG emissions inventory, setting targets for Scope 1, 2, and 3 emissions, leveraging sector-specific guidance, and ensuring alignment with net-zero standards. The guide also highlights the importance of reducing reliance on carbon credits and the need for transparency and ongoing validation of targets.

What is SBTi?

The Science Based Targets initiative (SBTi) is a collaboration between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). SBTi provides companies with a clear framework to set science-based targets for reducing greenhouse gas (GHG) emissions, aligned with the goals of the Paris Agreement. With growing participation from businesses, SBTi has become the largest validator of corporate climate targets, having approved the 2030 goals of around 6,000 companies. However, many of the largest corporations are still falling short, as Corporate Climate Responsibility Monitor reports.

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However, SBTi has faced criticism regarding the stringency and effectiveness of its standards, especially with regard to Scope 3 emissions and carbon credits. It’s important for businesses to understand both the potential and limitations of the initiative before embarking on this path. For more insights on sustainability standards, check out A Complete Overview of ESRS Standards.

Why SBTi is Important for Businesses

SBTi offers businesses a structured, science-aligned pathway to contribute to global climate action by setting targets to reduce emissions. But beyond environmental benefits, SBTi can future-proof businesses by improving competitiveness, resilience, and accountability to stakeholders. The initiative's framework is designed to push companies beyond incremental improvements, though critics argue that current standards may not be stringent enough, particularly when it comes to addressing Scope 3 emissions.

Understanding Scope 3 Emissions

Definition of Scope 3 Emissions

Practitioner reality from 1,401 public 2024 and 2025 reports of European listed companies: 69 percent contain complete Scope 1, 2 and 3 data. 13 percent publish no extractable Scope data at all. And 8 percent of the reports that do carry a Scope 3 figure show Scope 3 smaller than Scope 1 or 2, a methodological red flag, because Scope 3 is typically five to ten times larger.

Scope 3 emissions are the indirect emissions generated throughout a company’s value chain, both upstream (e.g., production, transportation) and downstream (e.g., use of sold products). These emissions are typically the largest component of a company’s overall carbon footprint but are often the hardest to measure and manage. You can learn more about managing emissions in your business through the Mastering Life Cycle Assessment guide.

Challenges in Addressing Scope 3 Emissions

SBTi requires companies to set targets for Scope 3 emissions only when they account for more than 40% of a company's footprint - which applies to most companies. However, these targets do not have to be fully aligned with a 1.5°C pathway. As such, many companies fall short of the reductions required to address the critical emissions within their value chains. This limitation has led to calls for more stringent standards, as companies can sometimes overstate their progress by focusing on easier-to-achieve Scope 1 and 2 reductions, leaving their most impactful emissions largely unchecked.

Carbon Credits and SBTi: A Controversial Tool

What Are Carbon Credits?

Carbon credits allow companies to "offset" their emissions by investing in projects that reduce or remove emissions elsewhere, such as reforestation or renewable energy projects. While this mechanism offers a way to balance emissions that are difficult to eliminate, the effectiveness of carbon credits in genuinely reducing a company’s overall impact remains contentious.

SBTi’s Position on Carbon Credits

SBTi has historically maintained that carbon credits should not count towards a company’s core emission reduction targets. However, recent developments have triggered controversy. In 2024, SBTi's Board of Trustees made a unilateral decision to consider allowing carbon offsets for Scope 3 emissions, prompting internal disputes and criticism from climate scientists and corporate leaders alike. It is assumed that SBTi has been pressured by business groups with interests in carbon markets to allow for carbon credits to count against scope 3 emissions. While carbon credits can play a role in offsetting unavoidable emissions, prioritising direct emissions reduction is essential, as I emphasise in this piece: CO2 Reduction vs. Compensation for Companies.

More on this point: Voluntary vs Regulated Carbon Markets: Risks, Verification & Price Differences Explained.

External Voice: H&M Group raised concerns over SBTi allowing companies to offset Scope 3 emissions, arguing that real reductions within the value chain should take priority.

My position: carbon offsetting is, in most cases, self-deception. The SBTi Mitigation Hierarchy puts reduction and insetting in the value chain ahead of offsets for good reason: in more than 90 percent of corporate use cases, offsets are cheaper than action but do not address the underlying business risk. A net-zero strategy that depends on offsets has not solved the carbon problem, it has merely postponed it. Insetting, spending the same money inside your own value chain, is the cleaner route economically and ecologically, because it reaches the suppliers your Scope 3 target actually depends on.

Frequently asked questions

Corporate Net-Zero Standard: What Version 2.0 Changes for Scope 3

Net-zero targets are governed by the Corporate Net-Zero Standard, and in 2026 the version question is the practical one to answer. Version 2.0 was published on 11 June 2026 and is final, not a consultation draft. Version 1.3.1 is the version behind the targets validated so far.

The transition runs on dates. The SBTi Services validation portal opens for Version 2.0 submissions in the first quarter of 2027. From that point until 31 January 2028, companies may submit against either Version 1.3.1 or Version 2.0. After 31 January 2028, Version 2.0 applies to all submissions.

For a company that already holds a validated target, that timetable means the calendar alone changes nothing in 2026. The version question becomes real at the next submission, whether that is a target update, a base-year recalculation or a first long-term net-zero target. For a first submission being prepared now, the version is a scheduling decision: submit before the portal opens and the target sits under Version 1.3.1, wait and there is a choice between the two.

What should not wait is the Scope 3 data work. The centre of gravity of the revision is Scope 3 target setting, and every version of the standard reads the inventory before it reads the target. The failure mode I see in mid-market implementations sits upstream of any standard: Category 1, purchased goods and services, gets modelled spend-based across the entire supplier base. That is methodologically defensible and useless for steering, because a cut in spend looks exactly like a cut in emissions. Moving the largest suppliers by spend onto supplier-specific factors is the piece of work that survives every version change.

Getting Started with SBTi

How to Align with SBTi

To align with SBTi, businesses must first familiarize themselves with SBTi criteria, assess their emissions profiles, and set near- and long-term science-based targets. It’s also important to focus on the most critical sources of emissions in their value chains. Companies should engage suppliers and partners to tackle Scope 3 emissions, which requires robust data collection, collaboration, and innovation across their entire supply chain.

Best Practices for Success

To ensure success, businesses must integrate emissions reduction into their core strategies, rather than treating it as an external obligation. Transparency, regular reporting, and stakeholder engagement are key to maintaining accountability. Companies must also avoid relying on false solutions, such as standalone renewable energy certificates or unproven carbon removal technologies, which can provide short-term benefits but fail to address systemic emissions challenges. You can also explore further insights on implementing these strategies with Implementing ESG Criteria: A Beginner's Guide.

A Sustainability Manager’s Guide to Getting Started with Science-Based Targets (SBTi)

As a sustainability manager, navigating the complexities of Science-Based Targets (SBTi) can seem daunting. However, with a clear understanding of the steps and requirements, you can align your company’s climate goals with the latest science and international best practices.

Step 1: Understand Your Company’s Position

• Determine your organization type:
  • Parent company or subsidiary: If you are a subsidiary, ensure that your parent company submits the targets for the entire group to avoid redundancy.
  • Oil and gas, financial, or SME sector: Each of these sectors has tailored guidance for setting targets. For example, oil and gas companies must wait for sector-specific SBTi guidance, while financial institutions follow the Financial Institutions Near-Term Criteria.
  • FLAG emissions: If your company has significant Forest, Land, and Agriculture (FLAG) emissions, ensure separate FLAG targets are set following the FLAG guidance.

Step 2: Complete a Full Greenhouse Gas (GHG) Inventory

• Scope 1, 2, and 3 inventory: Ensure that your inventory covers all relevant categories, using the GHG Protocol Standards and CDP resources to guide you.
  • Scope 1: Direct emissions from your operations.
  • Scope 2: Indirect emissions from purchased electricity.
  • Scope 3: All other indirect emissions in your value chain, both upstream and downstream.
• FLAG emissions: Disaggregate FLAG emissions within your GHG inventory if applicable. You can further explore emissions calculations through the Mastering Measuring and Reporting Guide.

Step 3: Set Near-Term Science-Based Targets

• Scope 1 & 2 (Mandatory for All Companies):
  • Targets must be 1.5°C aligned, covering at least 95% of your Scope 1 and 2 emissions.
  • Achieve these targets within a 5-10 year timeframe from submission.
  • Focus on reducing emissions by at least 4.2% annually, with special sector-specific pathways for FLAG and power sectors.
  • Transition to renewable energy: 80% by 2025 and 100% by 2030 for Scope 2 emissions. For a deeper exploration, see IFRS Impact on Power Purchase Agreements.
• Scope 3 (For Companies With Significant Emissions):
  • If Scope 3 emissions represent more than 40% of your total, you are required to set reduction or engagement targets covering at least 67% of Scope 3 emissions.
  • Align Scope 3 targets with a well-below 2°C pathway over a 5-10 year timeframe.
  • For best practice, aim to include as many Scope 3 categories as possible, even if they account for less than 40% of your total emissions.

Step 4: Leverage Sector-Specific Guidance

• Depending on your industry, specific guidance exists for sectors such as FLAG, power, and transportation.
  • Power sector: Follow the sector-specific intensity convergence pathway.
  • FLAG sector: Separate FLAG targets must be set.
  • Transportation emissions: Report all transport-related emissions on a well-to-wheel (WTW) basis.

Step 5: Align With Net-Zero Standards

• Corporate Net-Zero Standard: If your company is planning to set long-term net-zero targets, align with the corporate standard. Ensure that your near-term targets are updated and validated first, as net-zero ambitions build upon these early reductions.
• Companies must focus on deep decarbonization and not rely heavily on carbon credits to meet net-zero targets, especially for Scope 3 emissions. Ensure that carbon credits are used as a last resort for residual emissions and reported separately from the GHG inventory. Learn more about forward-looking emission reduction strategies in LCAs to Forward-Looking Impact.

Step 6: Regular Updates and Validation

• If you already have near-term targets, review them regularly to ensure alignment with the latest SBTi criteria. If adjustments are needed, submit an updated target through the Corporate Target Submission Form.
• Continuous improvement is key. Use insights from your progress to set more ambitious targets in the future.

Conclusion

SBTi remains the most widely respected framework for corporate climate targets, and its weakest points are exactly the two this article covers: Scope 3 and carbon credits. The working rule is simple. Reduce first, validate second, and let credits touch only what is genuinely left over.

How I Can Help Your Business

If your company is looking to reduce emissions, navigate SBTi standards, or understand carbon accounting, I can help. As a sustainability consultant with experience working with startups and established companies, I offer tailored advice and hands-on guidance. From conducting Life Cycle Assessments (LCA) to aligning your strategy with science-based targets, my services ensure your business stays on the cutting edge of sustainability. Get in touch to find out how we can collaborate to meet your sustainability goals.

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Scope 3 Quick-Check: a structured assessment of your Scope 3 situation.