Proposed Guidance for Corporates Explores the Role of Carbon Removal in Reaching Net Zero

The draft Corporate Net Zero Standard v2 from SBTi presents options for addressing residual emissions. Here’s how it is advancing the conversation on carbon dioxide removal.

Last week, the Science Based Targets initiative (SBTi) released the first draft of its new Corporate Net-Zero Standard, kicking off a public consultation process as part of SBTi’s broader revision process for the standard. Importantly, the draft standard advances the conversation on the role of carbon dioxide removal (CDR) in reaching corporate net-zero targets. SBTi highlights the need for CDR to address residual emissions and offers three options for integrating CDR for that purpose. The draft standard also considers the appropriate role for low- versus high-durability forms of CDR and how to ensure that CDR is high quality and delivers promised climate benefits.

CDR needs to develop faster and be adopted more widely. Companies that want to achieve net zero or otherwise lead on climate have been asking for a “North Star” on the role they should play in supporting CDR’s development and adoption. SBTi has a key role to play and an opportunity to provide that guidance and spur adoption.

In this article, we summarize key elements of SBTi’s new draft guidance on CDR, and the key decisions SBTi seeks feedback on during the consultation.

What is SBTi and the Corporate Net-Zero (CNZ) Standard?

SBTi is a non-profit organization that provides frameworks for companies and financial institutions to set science-based emissions reduction and net-zero targets. Its Corporate Net-Zero Standard was first published in 2021 and includes guidance for companies on setting near-term emissions reduction targets (by 2030), long-term emissions reduction targets (by 2050), and net-zero targets (by 2050). In addition to the Net-Zero Standard, SBTi has published sector-specific standards for heavy-emitting industries, including cement, steel, and air transport. Once a company sets one or multiple of these targets, it can submit the target to SBTi’s subsidiary, SBTi Services, for validation.

SBTi is one of the most influential sources of guidance for voluntary corporate action on climate and clean energy. At the time of publication, 7,425 companies have SBTi-approved targets. In 2023, companies with SBTi-approved targets and commitments represented 39 percent of global market capitalization.

However, companies have faced challenges in meeting their targets. In March 2024, 239 companies had their net-zero commitments removed by SBTi for failure to submit science-based targets within 24 months of their commitment. Companies cited challenges in accounting for emissions, especially Scope 3 emissions, in line with SBTi’s standard as a major obstacle to submitting their targets.

As a result, more companies have SBTi-approved near-term targets than long-term targets and net-zero targets (Exhibit 1). Near- term targets cover reducing emissions by half by 2030; long-term targets cover reducing scope by roughly 90 percent by 2050; net-zero targets cover reducing emissions by roughly 90 percent and balancing the final 10 percent through carbon removal by 2050. While near- and long-term targets can optionally apply to Scope 1, 2, or 3 emissions, net zero targets must address all three scopes of emissions.

Exhibit 1.

Note: As of March 12, 2025, SBTi has approved more near-term targets than net-zero targets. This figure quantifies the number of targets rather than companies. A company can have multiple near-term targets based on Scope 1, 2, and 3 emissions as well as long-term or net-zero targets. Source: SBTi Target Dashboard.

Reducing emissions where possible remains the first and best solution to address climate pollution. However, many industries and companies will have emissions that are very difficult or impossible to reduce. The only tool available for addressing these residual emissions is CDR. The scale of CDR needed globally is massive and a portfolio of approaches will be needed.

CDR is under-invested in today, versus the role it will need to play in reaching and sustaining net-zero. Additionally, very few companies with SBTi-approved targets have purchased CDR. Total voluntary carbon market (VCM) retirements in 2024 were 179 million tons, of which CDR was 7.16 million tons and durable CDR (CDR durable for more than 1000 years) was just 0.16 million tons.

CDR is, however, growing fast. Overall retirements in the VCM increased by 9 percent from 2023 to 2024. Temporary CDR (CDR durable for more than 100 years) retirements grew by 50 percent and durable CDR retirements doubled.

Because CDR will be needed in the long term and is growing from a small base currently, there’s a need and an opportunity for additional corporate spending over the next five to ten years to sustain CDR’s development and adoption. This will enable the CDR industry to validate the performance of different approaches, to drive down costs, and to scale at an accelerating rate.

Key highlights for CDR in SBTi’s draft Corporate Net-Zero (CNZ) Standard

The existing 2021 CNZ Standard recognizes that CDR  will be needed to neutralize residual emissions to reach net zero. However, it only requires CDR once a company reaches its net-zero target. This demand signal has proven insufficient to motivate the levels of investment needed today for durable CDR.

In the new draft, SBTi presents for consultation:

• Three options for interim removal targets to address residuals.
• New criteria on relevant emission scopes.
• Two options for a company’s CDR purchases to meet a minimum durability threshold.
• CDR quality guidance.

Here are the key features of the new guidance.

Three options for interim removal targets to address residuals: Options 1 and 2 both entail setting removal-specific targets, defined as a percentage of projected residual emissions at the year of net zero. Under these options, residual emissions are based on a company’s Scope 1 emissions. Target percentages are defined at “milestone years” every five years, with a method to calculate the target percentages in between milestones. The exact percentage depends on the approach to meeting the durability threshold (more on this below). By 2050, 100 percent of residual emissions would be covered by CDR. The main difference between options 1 and 2 is that removal targets are mandatory for companies in option 1. In option 2, companies are recognized for setting removal targets, such as through the SBTi Target Dashboard, but it is not required for companies to do so.

Option 3 varies by allowing both additional emissions reductions and CDR to address residual emissions. Companies can choose to reduce emissions beyond the requirements for their science-based targets, use removals, or combine both to address projected residual emissions. The percentage of residual emissions eligible to be covered by CDR increases annually, like in options 1 and 2, to cover 100 percent of residual emissions by 2050.

A summary of each of the three options proposed to address residual emissions is detailed in Table 1 below.

Source: SBTi Corporate Net-Zero Standard v2.0 draft, pages 66-67

New criteria on relevant emission Scopes: When outlining the options under consideration for addressing projected residual emissions between now and net-zero, SBTi limits residual emissions to Scope 1 emissions. The rationale is that residual emissions associated with Scope 2 will be zero as the power sector decarbonizes and that residual emissions associated with Scope 3 are too uncertain to project.

However, SBTi does include a criterion addressing Scope 3 residual emissions for large and medium-sized companies operating in higher-income geographies (known as Category A companies in the draft standard). It asserts that at the net-zero year, companies must address Scope 3 residual emissions by either ensuring, or providing support to ensure, that their value chain partners neutralize emissions. The draft standard does not provide additional details at this time to guide companies on planning for this step.

Two options for a company’s CDR purchases to meet a minimum durability threshold: The first option is a “like-for-like” framework, in which the durability of the storage matches the atmospheric lifetime of the greenhouse gas emitted.  For example, carbon dioxide lives in the atmosphere for thousands of years and so would be addressed using durable CDR (>1000 years of storage, called novel CDR in the standard). Temporary CDR (>100 years of storage, called conventional CDR in the standard) can be used to address residual emissions of other greenhouse gases that are short-lived, like methane. In this case, companies would need to report emissions by type of greenhouse gas. Table 2 below details the percentage of residual emissions that must be addressed for each gas by target year.

Source: Table 2.2, SBTi Target-Setting Methods Documentation

The second option is to gradually increase the share of residual emissions addressed by durable CDR versus temporary CDR. In this case, companies would not have to report emissions by type of greenhouse gas. Instead, they would address their overall residual emissions each year through a distribution of temporary and durable CDR that, in total, would address 100 percent of residual emissions by 2050. Table 3 below details how the distribution of durable vs. temporary CDR would shift over time. The distribution is based on modeling from the Intergovernmental Panel on Climate Change.

Source: Table 2.4, SBTi Target-Setting Methods Documentation,

CDR quality guidance: SBTi also acknowledges that all CDR should adhere to quality and sustainability standards, providing the GHG Protocol Draft Land Sector and Removals Guidance as an example that will be explored through the consultation process.

How might this draft standard impact the CDR field?

A stronger demand signal is needed to draw in continued investment in the development and deployment of existing and new CDR pathways. Without clear line of sight on demand, early-stage investors are less likely to back new startups and financial institutions are wary of financing construction of new technologies without a clear market. SBTi’s CNZ Standard v2 has the potential to provide that stronger demand signal.

In addition to signaling demand, this draft guidance rightly emphasizes the importance of accounting for the durability of the removals. It has the potential to guide corporates towards sourcing CDR in a way that acknowledges and accounts for the role that CDR with different durability thresholds has to play. Finally, it rightly emphasizes quality, and guides corporates toward setting a high bar on that.

Ultimately, the impact of SBTi’s CNZ Standard on the CDR field will vary significantly depending on the final version of the standard. Each of the options presented in the draft standard have implications for the total amount of emissions that would need to be addressed by CDR. Each option may also impact the number of companies that adopt SBTi-approved net-zero targets.

An illustrative estimate of the varying impacts this draft standard might have is below in Exhibit 2. As outlined in Table 1 and Table 2 in this article, a different percentage of residual emissions would need to be addressed through durable CDR in the “like-for-like” and the gradual transition approach to durability. SBTi’s Target-Setting Methods Documentation outlines how each of these approaches to durability would affect CDR requirements for what they call “an archetype aviation company” that has 34 tons of carbon dioxide as residual emissions in its net-zero year.

Comparing this example company’s CDR requirements for each of the two durability approaches shows that each year, the “like-for-like” approach creates a larger requirement for durable CDR. In the near-term, there would be approximately 2.5 times more demand for durable CDR from 2030 to 2035 under the “like-for-like” approach, though overall CDR demand may be greater under the gradual transition approach.

Exhibit 2.

Carbon removal targets in SBTi’s standard can create a near term demand signal for CDR. Regardless of the exact number of tons of residual emissions, the “like-for-like” approach may generate 2.5 times as much demand for durable CDR between 2030 and 2035 for a single company, though the gradual transition may create more overall CDR demand. Adoption rates by companies may vary based on the approach chosen for the final standard, so the total increase in demand for durable CDR in the next five years may be lower than 2.5 times. The residual emissions in this figure are based on the archetype aviation company in Tables 2.3 and 2.5 in SBTi Target-Setting Methods Documentation.

What is next for the revision process?

The public consultation process on the draft of the Corporate Net-Zero Standard is now open and will run until June 1, 2025. SBTi is also convening Expert Working Groups to provide feedback on the draft standard. A second draft and consultation process are expected later this year, as well as pilot testing by companies.

RMI will be analyzing and sharing more insights on the different options presented by SBTi throughout the process.