Science-Based Targets (SBTi)

Commitments to reduce Scope 1, 2, and 3 emissions within a 5–10 year timeframe. These targets must cover at least 95% of Scope 1 & 2 emissions and, if Scope 3 is material (over 40% of total emissions), 67% of Scope 3 emissions. The reduction pathway must be consistent with limiting warming to 1.5°C, typically requiring a 4.2% linear annual reduction for Scopes 1 and 2.

A commitment to reduce emissions to a residual level consistent with a 1.5°C scenario by no later than 2050. This requires a total value chain emission reduction of at least 90% before neutralizing the final, unavoidable residual emissions (≤10% of base year) through permanent carbon removal and storage.

For financial institutions, the framework requires specific asset class coverage. The Temperature Rating methodology translates portfolio holdings into an implied temperature rise. Companies with significant indirect emissions must set supplier or customer engagement targets, ensuring that a defined percentage of their value chain partners set their own science-based targets within a fixed period.

A five-step process ensuring rigor:

• Commit: Submit a commitment letter to the SBTi.
• Develop: Model targets using SBTi-approved tools like the Sectoral Decarbonization Approach (SDA).
• Submit: Present targets for official validation against SBTi Criteria.
• Communicate: Publicly announce approved targets.
• Disclose: Report emissions annually and recalculate targets every 5 years.

A specific methodology used for homogeneous, energy-intensive sectors (e.g., power generation, cement, aluminum). The SDA allocates the global carbon budget to individual companies based on their physical intensity convergence relative to a sector-specific pathway. It ensures that a company's intensity target converges to the sector average in 2050, preventing free-riding.

While not a substitute for direct reduction, SBTi encourages companies to finance external climate action outside their own value chains. This includes investments in permanent carbon dioxide removal (CDR) and avoided emissions projects. The BVCM recommendation is critical for neutralizing the final ≤10% of residual emissions required for the Net-Zero Standard.

Indirect greenhouse gas emissions from purchased electricity, steam, heating, or cooling. For AI enterprises, this is the dominant category tied to cloud compute and data center operations. SBTi requires companies to use market-based accounting—reflecting contractual instruments like Power Purchase Agreements—rather than solely location-based grid averages. This makes renewable energy procurement a central lever for meeting near-term science-based targets.

All indirect emissions across the value chain, both upstream and downstream. For technology firms, this includes:

The practice of compensating for unabated emissions by purchasing verified credits from external reduction or removal projects. SBTi's Net-Zero Standard explicitly distinguishes between: