What the SBTi's new net zero standard actually says about carbon offsetting
- Henry Bishop
- Jun 29
- 6 min read
Updated: Jun 30
The Science Based Targets initiative published its Corporate Net Zero Standard Version 2.0 this month, and some of the conversation has centred on carbon offsetting.
In this blog, I cut through that commentary and cover the four themes that matter most with carbon offsetting under SBTi v2.0, with a practical timeline for companies funding carbon offsets as part of their sustainability strategy.
V2.0 gives climate funding a formal reporting structure
V2.0 introduces the Ongoing Emissions Responsibility (OER) recognition framework. For the first time, companies can formally report how they take responsibility for their annual emissions through carbon offsetting and other climate contributions within their SBTi submission.
Carbon offsets qualify toward OER recognition, but the framework also accepts adaptation funding, climate R&D, and loss and damage funding.
Previously, under V1.3.1, the SBTi recommended that companies fund mitigation action beyond their value chains, a concept it called Beyond Value Chain Mitigation (BVCM). In practice, however, BVCM provided no formal reporting mechanism within an SBTi submission, meaning companies had no recognised way to account for that funding under the standard.
OER changes that, giving those contributions a recognised structure, a public reporting home, and a way to grade the level of ambition. Companies are recognised across three levels - Engaged, Advanced, and Leadership - primarily based on the volume of emissions covered, from a minimum of 1% at Engaged level up to 100% at Leadership.
The structure and thresholds are confirmed, but the SBTi has not yet named the projects, registries or third-party frameworks it will recognise under its second version.
Based on how the standard is written, the ICVCM's Core Carbon Principles and the VCMI Claims Code of Practice are the most likely reference points for offset quality and corporate offsetting claims.
From 2035, Category A companies must back carbon removal
This is the most significant new requirement in V2.0.
Category A companies will be required to support eligible carbon removal equivalent to 1% of their total annual emissions from 2035. That percentage rises linearly each year, reaching 100% by the company's net zero target year.
As the commitment scales, two additional requirements apply.
An increasing share of that removal must be durable, specifically direct air capture and BECCS rather than nature-based removal.
By the time a company reaches its net zero year, only durable carbon removal is permitted and nature-based removal no longer qualifies.
How to prepare for the carbon removal requirement:
Connect with organisations that facilitate procurement of carbon removal to understand different project options and prices across short-term removal via nature-based solutions and long-term removal.
Understand the cost reality: nature-based removal typically costs around £30-60 per tonne while durable removal such as direct air capture can cost up to £1,000 per tonne, with extremely limited supply.
If you are planning to begin procuring carbon removal, consider starting with nature-based solutions to take responsibility for your ongoing emissions now. Whilst carbon is not stored permanently from these solutions, they bring a wealth of benefits for nature and biodiversity - alongside removing emissions - when delivered well.
Start conversations with durable removal developers now and even potentially explore offtake agreements for durable carbon removal projects. Many carbon removal solutions are still being built, so offtakes are a common way to secure future volume.
For those exploring offtake agreements, forward purchasing can reduce projected cost and secure access to supply upon availability. It is worth noting, however, that projects do not always deliver carbon removal on time, making thorough due diligence on both the developer and the project itself an important consideration.
Learn about offset quality criteria and the general market landscape, or else make contact with those that understand these pieces. The EU is steadily expanding its list of approved carbon removal approaches under the CRCF and registries like Isometric are at the forefront of developing high-quality durable removal methodologies.
Read up on the Oxford Principles for Net Zero-aligned carbon offsetting to get a full understanding of the taxonomy of different types of carbon offsets, and the trajectory of ongoing funding for different offset solutions under corporate Net Zero targets.
Carbon offsets do not count toward your decarbonisation target
V2.0 has not changed the rule on carbon credits, but it is worth repeating clearly because it remains a widely misunderstood point in corporate climate strategy. Ongoing offsetting is not a substitute for reducing emissions and your offset funding cannot be reported as progress toward your decarbonisation target.
The purpose of OER, as mentioned above, is to give climate contributions like ongoing offsetting a parallel disclosure and recognition track, reported separately from your emissions inventory as a contribution to system-level climate action.
If in doubt, always ensure to report your offset funding separately from your emissions inventory.
Neutralisation of residual emissions at net zero is unchanged
The requirement to neutralise residual emissions at the point of reaching your net zero date has not changed.
Once a company reaches its net zero year, the annual ‘residual’ emissions that cannot be reduced must be met with the equivalent CO2 permanently removed. V2.0 reinforces this requirement and aligns it directly with the durable removal trajectory described above, meaning that by the time neutralisation is required, only durable removal qualifies.
Who this is relevant for and when
V2.0 is immediately relevant for three groups:
Companies whose existing targets come up for renewal in 2027
Companies intending to make a first submission from Q1 2027 onward
Companies mapping out what will be required before their next target cycle
For companies planning to set or renew targets in 2026, the SBTi strongly recommends using the current Corporate Net-Zero Standard V1.3.1. Companies submitting under V1.3.1 will still be able to benefit from a number of the innovations introduced in V2.0, including combined scope 1 and 2 targets.
The SBTi Services Validation Portal is expected to open for V2.0 submissions in Q1 2027. Both V1.3.1 and V2.0 will be accepted from that point until 31 January 2028, after which V2.0 becomes mandatory for all new submissions.
If you already have science-based targets
More than 11,000 companies have already set science-based targets under previous versions of the Standard. Those companies can begin benefiting from certain V2.0 innovations now, without waiting for a full target renewal.
The SBTi has published three resources to support the transition:
Guide for Companies in the Transition to Corporate Net-Zero Standard Version 2.0 that covers the transition timeline and the substantive changes from earlier versions of the standard.
Continuing use of the Corporate Net-Zero Standard V1.3.1 and Transition to Version 2.0 that sets out which V2.0 features companies on the current standard can access without waiting for a full renewal.
Preliminary Minimum Evidence Required for Corporate Net-Zero Standard Version 2.0 that details the evidence and data companies will need when applying for validation under V2.0.
The case for setting targets remains strong
V2.0 does not soften the expectations around decarbonisation. The core rules on what counts toward a target are unchanged.
For companies weighing whether to set or renew science-based targets, the SBTi's own research across surveyed companies is instructive:
91% reported an overall positive impact on their organisation
95% saw a positive impact on reputation
80% reported stronger investor relations and perception
80% said it sharpened their long-term strategic direction
72% reported improved resilience to future regulatory changes
86% reported a positive impact on the pace of decarbonisation
Climate change is a material driver of physical and economic risk. Setting credible, science-aligned targets is one of the most structured ways to build resilience into operations and supply chains.
What this means in practice
While the validation portal opens in Q1 2027, the decisions that will shape your position by then need to be made considerably earlier, from how you structure your carbon removal portfolio and whether your OER contribution disclosures are in order, to which standard is appropriate for your next submission.
We are working through the implications of V2.0 with clients now. If you want to understand what this means for your programme specifically, get in touch.
FAQ: Contributions, offsets, removals
What’s the difference between climate contributions and compensations?
Compensation implies a direct trade where you emit a tonne and cancel it with a credit elsewhere, but climate contributions work differently. They are additional actions taken on top of a company's own reduction targets, supporting broader climate action globally. Crucially, they are reported separately from the emissions inventory and make no claim to reduce a company's own reported footprint.
What’s the difference between carbon removal and carbon offsetting?
Carbon offsetting uses credits generated by emissions reduction projects elsewhere to balance a company's own footprint. Those credits can be generated simply by preventing a new emission from occurring, without pulling any CO2 out of the atmosphere. Carbon removal goes further by physically extracting CO2 that is already in the atmosphere and storing it, whether through natural processes like forests or engineered solutions like direct air capture.
What is durable carbon removal?
Carbon removal can store CO2 for very different lengths of time depending on how it works. Nature-based approaches like forests hold carbon for decades, but that storage is reversible if trees are disturbed or die. Durable carbon removal, referred to in the standard as durable removal, stores carbon for centuries to millennia. Direct air capture with geological storage is the clearest example. The distinction matters because only durable removal counts toward a company's net zero obligations at the point they reach their target year.
The key criteria to look for when evaluating whether a carbon offset project delivers on its promises.
An explainer on the CCP label and how it helps buyers identify high-quality carbon offsets.