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Podcast
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Decoding SBTi’s Updated Net-Zero Standards: Key Changes and Business Implications

Latest from SBTi - removals vs reductions with Alexander Schmidt │ What goes up must come down, Episode 6

May 1, 2025
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3 min

Introduction

In the face of escalating climate risks, businesses worldwide are under increasing pressure to align their operations with global climate goals. As the urgency for meaningful climate action grows, the Science Based Targets initiative (SBTi) has emerged as a critical authority, providing companies with a structured pathway to set credible, science-aligned emissions reduction targets. Recently, the SBTi released a draft of its updated Corporate Net-Zero Standard, outlining significant revisions intended to strengthen corporate commitments and drive more transparent, effective climate action. Together with Alexander Schmidt, an expert in the field of policy and net-zero standards, our latest podcast episode explores the key proposed changes, their implications for businesses, and the challenges that lie ahead as companies strive to deliver on their net-zero ambitions.

TL;DR

  • SBTi is raising the bar for corporate climate targets with a newly revised standard.
  • Version 2.0 emphasizes separating Scope 1 and 2 emissions for clearer accountability.
  • Companies must now publicly disclose transition plans—not just targets.
  • Scope 3 emissions require better data and supplier collaboration.
  • Beyond Value Chain Mitigation (BVCM) gains traction as a key climate lever.
  • Early investment in carbon removals is no longer optional—it's essential.

The Role of SBTi in Climate Action

The SBTi serves as the de facto framework guiding businesses in setting science-based targets for emission reductions. Its primary goal is to keep global temperature rises below 1.5 degrees Celsius, with a commitment to achieving net-zero emissions by 2050. In March, the SBTi published a comprehensive 130-page document detailing proposed revisions to the corporate net-zero standard, which has sparked significant interest among thousands of companies committed to sustainability.

Key Changes in the Revised Standard

The proposed version 2.0 introduces several critical changes aimed at enhancing the effectiveness of corporate climate commitments:

1. Separation of Scope 1 and Scope 2 Targets

One of the notable changes is the separation of Scope 1 and Scope 2 targets. This allows companies to have a more granular view of their emissions and provides greater control over their reduction strategies. By distinguishing between these scopes, businesses can better manage their emissions and hold themselves accountable for their progress.

2. Public Commitment Requirements

Another significant update is the requirement for companies to publicly disclose their emissions targets and transition plans. This shift aims to create greater transparency and accountability in the corporate sector.

"It is easy (for companies) to set targets, and then it is hard to follow through if there is no transition plan behind them."
– Alexander Schmidt, expert advisor on climate policy of Normative

By mandating public commitments, the SBTi seeks to ensure that companies are not only setting ambitious goals but are also actively working towards achieving them.

3. New Metrics for Scope 3 Targets

The revised standard introduces new metrics for Scope 3 targets, including revenue alignment targets and incentives for improving data quality. This is vital for companies that often struggle with the complexity of their supply chain emissions. Enhanced data quality will enable businesses to make informed decisions and develop effective strategies for reducing their overall carbon footprint.

4. Beyond Value Chain Mitigation (BVCM)

BVCM refers to actions that take place outside a company's immediate value chain but can still contribute to climate change mitigation. The SBTi has recognised the importance of these activities and is encouraging companies to invest in climate finance. This could include funding projects that promote sustainable practices or support carbon removal technologies.

"We will need removals by 2050, and it's crucial that companies start investing in these technologies now."
– Simon Bager, co-founder and CIO of Klimate

Challenges Ahead

While the proposed revisions are a step in the right direction, challenges remain. Companies must navigate the complexities of Scope 3 emissions, which often account for a significant portion of their overall carbon footprint. The SBTi has acknowledged that many companies struggle to obtain primary data across their value chains, making it difficult to set accurate targets.

Furthermore, the requirement for companies to exert direct influence over their tier-one suppliers highlights the need for collaboration across the supply chain. Larger corporations, particularly those in sectors like technology and pharmaceuticals, have the potential to drive significant change by encouraging their suppliers to adopt net-zero targets.

Conclusion

The revisions to the SBTi standards represent a critical evolution in corporate climate action. By enhancing accountability through public commitments, separating emissions targets, and recognising the importance of BVCM, the SBTi is setting the stage for more effective climate strategies. However, as companies move forward, they must also address the challenges associated with Scope 3 emissions and ensure that their commitments translate into tangible actions. The journey towards net-zero is complex, but with the right frameworks and collaboration, it is achievable.

Company strategy
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BVCM strategy and SBTi's guidance for companies

BVCM & SBTi: an essential strategy to address ongoing emissions

April 11, 2025
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5 min

What is a BVCM strategy & how does it contribute to climate mitigation?

In a BVCM strategy, companies provide finance for scalable solutions, including activities that avoid, reduce, or remove GHGs but do not count as reductions in a company’s emissions inventory. These activities can range from high-integrity natural or technical removal credits, financing of permanent reductions, or conservation on natural carbon sinks. Beyond broader climate goals, these strategies enable companies to take responsibility in the near term, as advised by corporate target setting standards such as SBTi’s recent Corporate Net Zero Standard.

Integrated into the world of CO2 credits, a BVCM pledge may look closer to a contribution strategy, compared below:

  • Compensation: a strategy in which carbon credits offset specific emissions in a company’s value chain (e.g., addressing residual emissions in Net Zero goals).
  • Contribution: a strategy where corporations purchase units to support the development of essential solutions. This allows them to take meaningful action on their ongoing emissions, even though these activities do not directly reduce or offset their own Scope 1, 2, or 3 emissions. 

Overall, BVCM helps close the gap between ambitions and actual implementation, catalyses immediate mitigation, and accelerates global climate efforts by securing finance for emerging solutions. Without additional financing of mitigation measures today, climate action lags–risking even a 2°C target. In the long-term, solutions including technologies or natural ecosystems that enable permanent reductions and removals may lack the necessary gigatonne scale for a 2050 net zero deadline.

For further reading on creating and implementing a BVCM pledge: https://www.klimate.co/insight/science-based-targets-releases-guidance-on-beyond-value-chain-mitigation


Who engages with BVCM and why?

Organisations with net-zero targets and those seeking to take immediate responsibility for emissions beyond their value chains are the primary groups engaging with BVCM. Companies engage with BVCM for several reasons:

  • Urgency of climate action: BVCM allows companies to act on ongoing emissions even when direct reductions are not yet possible.

  • Demonstrating climate leadership: For net-zero target setters and early adopters of climate strategies, BVCM provides a strategic way to show commitment to long-term emissions reductions.

  • Credibility and responsibility: Organisations want to take responsibility for their ongoing emissions, building credibility in their climate actions.

  • Mitigating greenwashing risks: Separating contribution strategies from core emissions inventories enables clearer reporting and more credible climate commitments.

  • Scalability of solutions: BVCM offers a flexible approach, making it suitable for both organisations just starting their climate journey and those with ambitious, long-term sustainability goals.

For many, the tangible benefits of contribution strategies are already becoming clear, reinforcing BVCM as a critical element of a comprehensive corporate climate strategy. 

”Our customers are striving to reduce emissions within the value chain. In addition to that, they also make an effort to remove emissions outside their value chain as a supplement to the reduction journey. Because we work with afforestation, which is both a measurable AND noticeable climate action, the investment is not only tied to the sustainability or finance department, but also often in HR, Marketing and Sales.” says Poul Erik Lauridsen, CEO Klimaskovfonden

Still, clear incentives and mechanisms for a wide-spread BVCM adoption are needed now. To this end, SBTi’s latest guidance may address adoption delays by providing clear instructions and recognition for organisations going above and beyond with BVCM. 

Case Study: national climate commitments and local benefits in Denmark

BVCM strategies align with broader climate goals by supporting local afforestation projects in Denmark. With the Danish government aiming to plant 250k hectares of forest by 2045, companies can contribute to national climate commitments while enhancing local ecosystems. Klimaskovfonden’s tree planting projects offer tangible benefits, from carbon storage to improved biodiversity and water quality, making them a prime example of a high-quality BVCM project.

Supported by science-based frameworks like SBTi and Gold Standard, these initiatives show how BVCM can drive both global and local impact.

How will SBTi incentivise widespread adoption of BVCM?

Negative emissions pathways are increasingly central to corporate climate strategies, and SBTi’s latest guidance reinforces this by highlighting the need for removals, alongside other near-term mitigation actions, to ensure the 'net' in net zero. The guidance urges companies to act now to integrate removals into their near- and long-term strategies, in particular through use of Scope 1 neutralisation and beyond value chain mitigation.

This draft standard clarifies multiple aspects regarding corporate near-term action:

  1. This draft acknowledges the urgency of addressing emissions released into the atmosphere today and the critical role that companies can play in mobilising finance for mitigation activities beyond their value chain.
  2. Since ongoing emissions are a primary driver of negative climate impact, it is crucial for companies’ credibility to take responsibility for them.
  3. The SBTi aims to incentivise companies to take responsibility for the impact of ongoing emissions by providing optional recognition for these actions.

This degree of recognition has the potential to create wide-spread BVCM adoption from both SBTi target-setters and beyond by standardising science-backed best practices for investment. With this increased visibility of contribution actions and products, we anticipate that contribution products will increasingly gain a footing and recognition in the voluntary CO2 market in the coming years.

Still, without broader requirements for BVCM or removals across all industries, demand generation could stall. This could work against the noted ambition gap recognised by the scientific community. The question remains if companies are both knowledgeable of the need and ready to act, otherwise the demand levers of a ‘gold star system’ to recognise leadership may not be strong enough. To combat this, a stronger clarification of the link between BVCM strategies and corporate responsibility is essential from frameworks such as SBTi.

Driving value through climate action.

As further climate regulations change, BVCM will become increasingly relevant in demonstrating commitment to real, impactful climate mitigation while mitigating greenwashing risk. Already today, contribution approaches that follow leading frameworks remain popular to boost company reputation and climate leadership.

The characteristics of a strategic contribution strategy include:

  • Support scaling of both nature-based and engineered carbon removal solutions with synergies across biodiversity and local communities.
  • Provide flexible investment opportunities outside the direct scope of emissions, broadening the scope of corporate engagement.
  • Separate reporting inventories of overall decarbonisation and other financial contributions allow clear communication of progress with key stakeholders and audiences.

The growing importance of BVCM in bridging the climate action gap is made clear by it’s rise in climate reporting frameworks such as SBTi. This strategy unlocks massive potential for companies to drive both immediate and long-term mitigation outcomes through strategic BVCM investments–and speed up action even while other levers may slow down. One thing is certain–deploying climate finance to help reach our broader goals is possible today and an essential element of corporate climate action.

Podcast
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Exploring carbon removal strategies in South Asia

Exploring Carbon Removal: Opportunities and Challenges in South Asia │ What goes up must come down, Episode 5

April 10, 2025
·
3 min

Introduction

In a world increasingly aware of climate change, carbon dioxide removal (CDR) strategies has emerged as a crucial tool in the global decarbonisation strategy. While much of the spotlight has been on regions such as South America and Africa, South Asia remains a largely untapped frontier—despite its enormous potential. With its rich biodiversity, a large population, and infrastructure advantages, the region offers potentials for scalable and high-quality climate solutions.

TL;DR

  • South Asia offers a unique opportunity for carbon dioxide removal due to biomass availability and favorable climate conditions.
  • Key pathways include regenerative agriculture, afforestation, biochar, and enhanced rock weathering.
  • Challenges include landholder fragmentation and varying market approaches across regions.
  • Engaging smallholder farmers is crucial for successful implementation and scalability.
  • Soil carbon sequestration presents a viable, faster alternative to traditional afforestation methods.

The Promise of CDR in South Asia

As our guest, Ikarus Janzen from Varaha, pointed out, there is a big opportunity generally in the tropical belt. With abundant biomass and dual agricultural seasons, regions like India not only provide the resources needed for carbon sequestration but also the potential for clean energy production.

South Asia is still largely untapped in the carbon removal space, especially when compared to South America and Africa. This is primarily due to fragmented land ownership and differing market dynamics. However, qualified workforce and strong infrastructure make it a promising area for future CDR initiatives.

“While Africa also has a lot of labor, it is sometimes very difficult to get the same cost efficiencies at scale because the infrastructure is lacking to support that.” — Ikarus Janzan, Chief Commercial Officer at Varaha

Afforestation, Reforestation, and Restoration (ARR)

Afforestation, reforestation, and restoration (ARR) projects have garnered attention, but implementing successful ARR requires integration with broader aims and priorities. For instance, Varaha’s tree-planting initiative provides comprehensive training and support to help smallholder farmers cultivate income-generating tree species. This approach not only boosts carbon sequestration but also improves local livelihoods.

By aligning carbon credit programs with farmers’ economic priorities, such initiatives become more viable and long-lasting. The goal of ARR should not solely be maximising carbon capture, but delivering environmental and socio-economic benefits—creating solutions that are as sustainable for communities as they are for the planet.

Soil Carbon Sequestration

Soil carbon sequestration provides a quicker path to generating carbon credits than traditional afforestation efforts. While ARR projects typically take at least four years before yielding credits, soil carbon initiatives begin showing results within a year. This faster timeline makes them more attractive and investable for stakeholders, as Jansen highlighted.

“Time to market I think really matters, and then the scalability really matters, and then there are also certain cost advantages, especially if we do it at scale.” — Ikarus Janzan

Challenges to Soil Carbon Sequestration

Despite a promising outlook, challenges remain. In 2023, only 7 million credits were issued across major registries, which is a tight supply. Moreover, developing a robust monitoring, reporting, and verification (MRV) system is critical for ensuring the integrity of carbon credits, which is likely solvable with technology.

Another challenge is educating the market and buyers, as hesitation and limited understanding of carbon initiatives persist. Drawing from his experience at Varaha, Ikarus noted that small-scale farmers are primarily driven by the goal of boosting crop yields and reducing fertiliser costs, rather than by potential carbon revenue. As a result, the project prioritises practical farming techniques that align with farmers’ immediate interests while also contributing to soil carbon improvements.

Conclusion

South Asia’s potential for carbon removal is immense, but it requires a concerted effort to harness it effectively. By focusing on smallholder farmers and integrating sustainable practices, we can create a more resilient agricultural landscape that benefits both the environment and local communities. As we move forward, the integration of technology and education will be vital to overcoming challenges and unlocking the full potential of carbon removal in South Asia and worldwide.