SBTi rewrites net-zero standard to let firms offset residual emissions

SBTi rewrites net-zero standard to let firms offset residual emissions The new Corporate Net-Zero Standard recognises carbon credits and removals against ongoing emissions, creating fresh corporate demand for a voluntary market that just gained validation. The Science Based Targets initiative released its updated Corporate Net-Zero Standard on Friday (2026-05-29), reshaping how energy companies and heavy industry can report climate progress. For the first time the standard formally recognises firms that address ongoing emissions through carbon credits and removal purchases, not only those chasing absolute elimination.¹ The change shifts the goalposts for the 69% of firms in MSCI's world index that have committed to reach net zero by 2050 or sooner. Until now, SBTi validation was largely a binary pass-fail on emissions reduction pathways. MSCI's research arm says fewer than 40% of those almost 10,000 firms even report their scope one and two emissions.² The framework introduces what SBTi calls ongoing mitigation, where companies that have already cut emissions by 90% can use verified removals and credits to neutralise the remaining 10%. SBTi said this reflects the reality that some sectors, including steel, cement and aviation, cannot fully abate with current technology.³ Scope three is where the standard is most exposed. CDP data show only 55% of European oil and gas companies disclose their supply-chain emissions, even though that accounts for the vast bulk of a fossil-fuel firm's carbon footprint. The new standard requires scope three coverage but gives companies until 2030 to report fully.² Analysts at Montel questioned whether the underlying measurement can bear the weight. The Greenhouse Gas Protocol, which governs corporate carbon accounting, faces growing criticism as not fit for purpose ahead of planned reforms. Without reliable scope three data, any offset-based claim rests on shaky ground.¹ Sceptics point to the gap between corporate ambition and action. While 69% of firms hold net-zero commitments, only 17% have set medium-term targets or produced quantified decarbonisation strategies, according to CDP data. The new standard does not close that gap; it offers a second path that may prove more popular than the first.² The timing aligns with a broader push to bring carbon credits into mainstream corporate finance. Amazon, Meta, Netflix, Mastercard and PepsiCo recently joined the Kinetic Coalition, which backs early retirement of coal-fired power plants through carbon credits. The alliance of more than 20 companies aims to unlock clean-energy investment in developing economies where coal retirement is politically sensitive and capital-intensive.⁵ Oil and gas companies have the most to gain or lose. DeSmog analysis published on Tuesday (2026-05-26) found nearly two-thirds of social media posts from six major European energy companies since the end of 2019 present a green image, despite the majority of their business remaining in fossil fuels. The new standard hands those firms a mechanism to back that messaging with certified claims.⁴ For carbon-credit markets the implications are direct. Studies cited by the Intergovernmental Panel on Climate Change suggest the world may need to remove an additional 5 billion tonnes of carbon dioxide a year to keep a decent chance of staying below 2°C warming. The standard effectively creates corporate demand for those removals at a scale that dwarfs current voluntary market volumes.³ The pathway carries a timeline risk. Companies choosing the removal-based route still need to hit 90% absolute cuts first, and even then enough gas keeps entering the atmosphere that the balancing level of removals would be a huge undertaking. The distance between stated intent and physical reality remains wide.³ Whether regulators treat SBTi's new category as a floor or a ceiling is unresolved. The ICAP status report, published in May (2026-05-17), counts 101 carbon-pricing mechanisms now operating, covering just over 80% of global greenhouse-gas emissions. If carbon taxes and ETS caps tighten, the offset route may become economically rational rather than merely reputational.⁶ For now the market's verdict will surface in a mundane place: the price and liquidity of removal credits eligible under the new standard. Traders watching the rollout will look for which registries and project types win early validation, knowing the first wave of corporate buyers will set the tone for a market that just gained its seal of approval.⁵