June 2026 Newsletter

Just before publishing Version 2, SBTi set out a strategic change of direction, shifting from setting targets to supporting companies in acting on them. Version 2 is framed as an “action framework designed to help decision-making”. This is a response to an awkward reality. The number of companies with validated targets keeps rising, now more than 10,000, representing over 40% of global market capitalisation and around a quarter of global revenue, yet many are making little or no progress against the targets they have set.

To close that gap, the new standard is built on a best-efforts framework. Companies are expected to deploy every lever within their control, to be transparent about the barriers that limit what is possible, and to demonstrate how they are working to remove those barriers over time. This is a sensible piece of honesty. It reduces the incentive to set a headline target a company then quietly misses, and it keeps companies inside the framework while they work at the hard problems. The risk sits on the other side. Best efforts is only as demanding as the way it is assured, and a softer test of progress could as easily license slower action as reward honest restraint.

The SBTi Chair, Francesco Starace, frames the ambition well, wanting to recognise companies “not just those managing their own transition but actively working to change the systems that make decarbonisation hard for everyone”. This is the heart of it. The market is recognising that a company’s emissions are embedded in the systems it operates within, bound by the technology available and the cost of decarbonisation in its economy. I have been reading a lot of Lisa Sachs on this and find her thinking incredibly valuable: that entity-level target-setting is inherently limited, because most of a company’s emissions are shaped by systems beyond its direct control. It pushes us to think about decarbonisation at the level of systems rather than individual company ledgers, and to start structuring targets around what sits within and outside a company’s control, an idea Robert Höglund has explored through the notion of operational net-zero.

This is also why the standard had to change. SBTi had to find a way to keep companies on track against their targets, or at least to be seen to be, when the systems and the economy around them are not decarbonising fast enough. Where the levers inside a company’s own operations and value chain have genuinely been exhausted, the standard now allows broader sector-level action, supported where appropriate by market instruments such as energy and commodity certificates and, increasingly, carbon credits. It is a more pragmatic picture of how emissions actually fall, and a more complex one, bringing new categories, hierarchies and rules that the market will take time to absorb.

Recognition for carbon credit use now takes form in the Ongoing Emissions Responsibility (OER) framework, which rewards companies for taking responsibility for the emissions they have not yet cut. Reducing your own emissions remains the core of the framework, and OER is a complement to that, not a substitute.

The programme is voluntary, but when a company submits its targets it is required to explain if it chooses not to take part, which could create an implicit expectation of participation. Both participation and non-participation will be visible on the SBTi dashboard.

Companies can be recognised at one of three levels, set out below, distinguished by how much of their footprint they cover and how they pay for it.

From 2035, this stops being voluntary for Category A companies (large companies everywhere and medium-sized companies in higher-income countries). They will then be required to purchase removals for at least 1% of ongoing emissions, rising in a straight line to 100% by their net-zero year and no later than 2050. A durability requirement phases in alongside it: long-lived removals must cover at least 10% of emissions from long-lived gases in 2035, rising to 100% by the net-zero year.

A mandate that only starts in 2035 is later than many would like, but it is still better than nothing. The rule builds up from 1% of ongoing emissions to covering everything that is left, and that gives the supply side something it has been missing: a clear, longer-term source of demand. Removal projects need long contracts to get funded, often around ten years, so a 2035 deadline already matters for any deal being signed today. The problem is the near term. Before 2035, the standard does very little to get companies buying.

The carbon price a company sets can also shape the types of projects that get funded. At the $20 a tonne suggested for the Advanced tier, the money is likely to go towards cheaper avoidance projects rather than removals. Only the $80 Leadership price and the mandatory removals from 2035 push real money towards high-integrity, higher-cost removal. So in the near term, the prices in this standard will mostly not reach the removals we will eventually depend on.

If you are building durable supply, the durability rule is the part to watch. Long-lived removals must cover at least 10% of long-lived emissions from 2035, rising to 100% by a company’s net-zero year. That creates a steady and growing source of guaranteed demand for durable removal, which should give investors more confidence to fund higher-cost, longer-term projects. One thing to keep an eye on is SBTi’s plan to look at whether shorter-lived removals can count as equivalent, which could change that demand.

There is also a clear missed opportunity in how the standard treats companies that fall short of a target. Credits cannot be used to make up the gap. A company that misses simply has to make steeper cuts next time, with no immediate cost for falling behind, which takes away one of the simplest ways to make missing a target actually hurt.

One aspect that is welcome is shared responsibility for Scope 3. Companies can now split the coverage of shared Scope 3 emissions with their suppliers and partners under a written agreement, and deal with whatever is left jointly at net-zero. This is a good step, pushing companies and their suppliers to share responsibility for the supply chain instead of each ignoring, or paying twice for, the same emissions, and it fits naturally with the kind of pooled, joined-up buying that a portfolio approach is built for.

The real question I wanted to pose is whether Version 2 does enough to encourage corporate removal demand to the level we need to scale the removal market and address our residual emissions. I do not think it does.

When you look at why companies are not engaging with the removal market, or with carbon credits more broadly, a large part of it is that there is still no credible, usable case for the credits once they are bought, among many other barriers. A recent WBCSD survey found companies are delaying meaningful engagement with carbon removal because of policy uncertainty, reputational risk, high costs and a lack of practical procurement guidance. Most treat removals as a 2030s to 2050 problem rather than a near-term planning issue, partly because the eligibility of credits under future reporting and green-claims rules is still unclear.

Version 2 does not resolve this. It stops short of letting offsetting account for in-value-chain emissions, which must still be reported separately and do not count towards a target, and it continues to treat beyond-value-chain action, removals included, as second-tier to internal reductions. To really stimulate action, removals should be recognised as a legitimate and equal route to decarbonisation, letting the market and the wider economy price which is the more efficient tonne to abate. The rules on claims and target fulfilment, the very thing the WBCSD survey identifies as the binding constraint, have been deferred to early 2027, and ought to be brought forward to this year to give companies more clarity.

In economics terms, carbon markets have always been about integrating the externality of emissions through a price, because a price is what makes a company weigh carbon in its long-term planning and capital allocation. By keeping ongoing emissions responsibility voluntary until at least 2035, the standard defers that price signal, and with it the near-term incentive to act. It creates the recognition that companies are, and should be, responsible for their emissions, and it accepts that wider system change is needed, but it does not do enough, fast enough, to spur that change or to make the case for acting now. The effect is to let companies do relatively little until 2035, and then scramble for removals.

Since this is likely to be the state of play going forward, a word on what it means in practice, particularly for companies already signed up to SBTi or considering it. Everyone essentially has freedom over their approach between now and 2035, but from then all Category A companies meet the same requirement to procure removals, rising to full neutralisation at their net-zero year. The companies best positioned when that mandatory purchasing arrives will be those that begin dipping their toes in the removal market now, in small increments, so that they are ready to procure at scale from 2035. Durable supply in particular is constrained and built years ahead of delivery, so those who wait will compete for the same tonnes at higher prices.

Treated as a portfolio of long-term carbon assets rather than a last-minute purchase, ongoing emissions responsibility becomes a way to manage cost, delivery risk and claims risk together, and that case does not change because the obligation is a decade away. If anything, the decade is the opportunity.