Net Zero for Companies: A Practical Guide to Setting and Achieving Science-Based Climate Targets
Net zero has moved from aspiration to obligation. As of January 2026, over 10,000 companies hold validated science-based targets through the Science Based Targets initiative (SBTi) — committing to emissions reductions aligned with keeping global warming below 1.5°C. Thousands more are under CSRD mandate to disclose climate strategies. The language of net zero is now embedded in finance, regulation, and supply chains.
But "net zero" is also one of the most misused terms in corporate sustainability. Many companies claim it without the underlying substance. This guide cuts through the noise: what does a credible corporate net zero strategy actually require, what does the SBTi framework demand, and how do you move from commitment to verified achievement?
What Does "Net Zero" Mean for a Company?
Net zero means that a company's activities result in no net addition of greenhouse gases to the atmosphere. It is achieved through a combination of:
- Maximum feasible emission reductions across all scopes (at least 90% absolute reduction from base year to 2050)
- Neutralization of unavoidable residual emissions through high-quality, permanent carbon removal
Important distinction: Net zero is NOT the same as "carbon neutral." Carbon neutrality typically allows offsetting without deep reductions — buying credits to balance current emissions. Net zero requires the underlying business to transform. The difference matters enormously for credibility with investors, regulators, and customers.
The SBTi's Corporate Net-Zero Standard — the global benchmark for corporate net-zero targets — makes this explicit: credits can only be used for neutralizing residual emissions after 90% absolute reduction, never as a substitute for reduction.
The Foundation: Understanding Scope 1, 2, and 3 Emissions
Every corporate net zero journey begins with a complete emissions inventory. The GHG Protocol defines three scopes:
Scope 1: Direct Emissions
GHG emissions from operations owned or directly controlled by the company:
- Combustion in owned boilers, furnaces, vehicles
- Chemical reactions in manufacturing processes
- Company-owned or leased transportation
- Fugitive emissions (refrigerants, methane leaks)
Typical share: 10–40% of total corporate footprint, depending on sector.
Scope 2: Purchased Energy
Indirect emissions from the generation of purchased energy (electricity, steam, heating, cooling) consumed by the company.
Two accounting methods:
- Location-based: Uses average grid emission factors for the country/region
- Market-based: Reflects actual energy purchases, including renewable energy certificates (RECs) and PPAs
Typical share: 10–30% of total footprint.
Scope 3: Value Chain Emissions
All indirect emissions in the company's value chain — both upstream and downstream. The GHG Protocol identifies 15 categories:
Upstream (categories 1–8):
- Purchased goods and services (often the largest single category)
- Capital goods
- Fuel and energy-related activities
- Upstream transportation and distribution
- Waste generated in operations
- Business travel
- Employee commuting
- Upstream leased assets
Downstream (categories 9–15):
- Downstream transportation and distribution
- Processing of sold products
- Use of sold products
- End-of-life treatment of sold products
- Downstream leased assets
- Franchises
- Investments
Why Scope 3 matters: For most companies, Scope 3 represents 60–90% of the total carbon footprint. A company that only addresses Scope 1 and 2 has touched a fraction of its actual climate impact. The CSRD requires full Scope 3 disclosure; SBTi requires Scope 3 near-term targets where Scope 3 exceeds 40% of total emissions.
The SBTi Framework: Near-Term + Net-Zero Targets
The Science Based Targets initiative (SBTi) provides the globally recognized framework for corporate climate targets. It distinguishes between:
Near-Term Targets (by 2025–2035)
These targets focus on ambitious reductions in the next 5–10 years — the critical decade for limiting warming to 1.5°C.
Requirements for 1.5°C alignment:
- Scope 1+2: Absolute reduction of at least 4.2% per year on average (or use a sectoral pathway)
- Scope 3: Companies where Scope 3 exceeds 40% of total must set near-term Scope 3 targets. The specific target depends on the sector pathway.
Near-term targets must be achieved by a date no more than 10 years from when the target is submitted.
Long-Term / Net-Zero Targets (by 2050 at latest)
Net-zero targets require:
- Minimum 90% absolute reduction in Scope 1, 2, and 3 emissions from the base year to 2050
- Neutralization of remaining residual emissions (maximum 10%) through permanent carbon removal — not offsets
The 90/10 principle is non-negotiable: Companies cannot claim SBTi-validated net zero by offsetting current emissions. The reductions must happen in the real economy.
SBTi Corporate Net-Zero Standard V2 (2026)
SBTi is finalizing Version 2.0 of its Corporate Net-Zero Standard, expected for publication in 2026. Key updates:
- Companies may continue setting targets under Version 1.3 until December 31, 2027
- V2.0 will become mandatory for new targets from January 1, 2028
- V2.0 introduces stronger requirements for transition planning and Scope 3 integration
- New alignment with ISSB/IFRS S2, CSRD/ESRS, and TNFD frameworks
As of January 22, 2026: SBTi has validated targets for 10,000 companies — a significant milestone. The pipeline for new commitments continues to grow driven by CSRD and investor pressure.
The Four-Step Net Zero Journey
Step 1: Commit
Submit a public commitment to SBTi. This is free and signals market intent. The commitment must be followed by target submission within 24 months.
What to do: Submit commitment at sciencebasedtargets.org. Announce it publicly — to investors, customers, employees. This starts the accountability clock.
Step 2: Measure
Build a complete, verified GHG inventory:
- Use the GHG Protocol as the methodological foundation
- Set a base year (recommendation: last full pre-2020 year, or the most recent year with reliable data)
- Quantify all Scope 1, 2, and 3 categories
- Use approved Scope 3 calculation tools (GHGP's Scope 3 Evaluator, sector-specific tools)
- Seek third-party verification (increasingly expected for CSRD credibility)
Common Scope 3 challenge: Supply chain data. Many companies struggle to get primary data from suppliers. Acceptable starting points include spend-based calculation using emission intensity databases (Ecoinvent, GHG Protocol EEIO), graduating to activity-based data as supplier engagement improves.
Step 3: Set Targets
Develop near-term and net-zero targets using SBTi's methodology:
Near-term target setting options:
- Absolute Contraction Approach (ACA): Reduce absolute emissions by minimum 42% by 2030 from base year (1.5°C pathway)
- Sectoral Decarbonization Approach (SDA): For sectors with specific SBTi pathways (power, steel, cement, etc.)
- Economic Intensity Approach: Revenue-based intensity reduction (only applicable where absolute targets are not feasible)
Net-zero target setting:
- Define the 90% reduction trajectory from base year to 2050
- Identify residual emissions category (which Scope 3 categories are truly irreducible)
- Plan the removal strategy for the remaining maximum 10%
Submit targets to SBTi for validation. The validation process typically takes 3–6 months. Fees range from approximately $9,500 (SME) to $22,500 (large enterprises).
Step 4: Achieve and Report
Validated targets create a permanent accountability structure:
- Annual progress reporting: SBTi-committed companies must publicly disclose progress each year
- CSRD reporting: EU mandatory disclosure of climate targets, Scope 1/2/3 emissions, and transition plans under ESRS E1
- Investor reporting: TCFD-aligned disclosures expected by major institutional investors
Reduction vs. Removal vs. Offset: Critical Distinctions
One of the most important and frequently confused elements of net-zero strategy is the distinction between three types of climate action:
Reduction
What it is: Permanently lowering emissions from business operations and value chain.
Examples: Switching to renewable electricity (Scope 2), electrifying vehicle fleet (Scope 1), redesigning products to use less material (Scope 3 upstream), switching to low-carbon packaging (Scope 3 downstream)
SBTi role: This is the primary mechanism — must account for at least 90% of total net-zero achievement.
Removal
What it is: Actively removing CO₂ from the atmosphere through biological or technological means, and storing it permanently.
Examples:
- Biological: Agroforestry, reforestation, soil carbon enhancement, peatland restoration, biochar
- Technological: Direct Air Capture + Storage (DAC+S), Enhanced Weathering, Bioenergy with Carbon Capture and Storage (BECCS) SBTi role: Removals are the only valid mechanism for neutralizing the remaining maximum 10% of residual emissions in a net-zero claim. Quality requirements: the removal must be permanent (or have robust reversal mechanisms), additional, and independently verified.
Agroforestry and Paulownia as removal vehicles: Paulownia-based agroforestry produces high-quality biological carbon removals, certified under Verra VCS methodologies. The sequestration is measurable, monitored annually, and buffers against reversal risk through pooled reserves. VERDANTIS Impact Capital structures these as investable removal instruments for companies with SBTi net-zero targets.
Offset (Avoidance/Reduction Credits)
What it is: Paying for emission reductions or avoidances elsewhere — typically REDD+ (avoided deforestation), clean cookstoves, or renewable energy in developing countries.
SBTi role: Offsets of this type cannot count toward SBTi near-term or net-zero targets. They can be used as "beyond value chain mitigation" — voluntary beyond-target contributions — but do not reduce a company's reported footprint.
This distinction is critical: many legacy "carbon neutral" claims relied on avoidance offsets that SBTi does not recognize. Companies transitioning to SBTi-aligned net zero must replace avoidance offsets with genuine reductions and high-quality removals.
Transition Planning: From Commitment to Action
A net-zero target without a credible transition plan is just a press release. CSRD's ESRS E1 standard requires companies to publish transition plans that show how they will achieve their climate targets.
Key elements of a credible transition plan:
1. Decarbonization roadmap by scope and sector
- Which business units drive the most emissions?
- What are the specific interventions planned, and on what timeline?
- What capital expenditure is required?
2. Supply chain engagement
- Which Scope 3 categories are most material?
- What supplier programs are in place?
- What procurement standards are being applied?
3. Financial alignment
- Are capital allocation decisions aligned with the net-zero trajectory?
- Have stranded asset risks in fossil-intensive assets been disclosed?
- What green finance instruments are being used?
4. Governance
- Who in the C-suite owns climate strategy?
- Are executive compensation targets linked to climate performance?
- What is the board's oversight role?
5. Residual emission and removal strategy
- What will the irreducible residual emissions be in 2050?
- What removal mechanism will neutralize them?
- What is the procurement strategy for carbon removals today (locking in early supply at lower prices)?
Case Studies: What Good Looks Like
Microsoft
- SBTi-validated targets; committed to being carbon negative by 2030
- Near-term Scope 1+2+3 absolute reduction targets across all business units
- Investing heavily in Direct Air Capture (DAC) — multi-million-tonne purchase agreements
- Procuring biological removals (forestry, soil carbon) at scale for 2030 transition
Unilever
- SBTi-validated net-zero target by 2039
- Ambitious Scope 3 reduction target including agricultural supply chain
- Working with suppliers on sustainable sourcing (palm oil, soy, dairy)
- Biodiversity and deforestation targets integrated into climate strategy
IKEA
- SBTi near-term targets validated
- 100% renewable electricity target achieved
- Circular economy strategy reduces Scope 3 use-phase emissions
- Forestry investments for responsible timber sourcing and carbon benefit
Common thread: All credible net-zero leaders combine operational decarbonization with supply chain engagement and early investment in removal capacity — not waiting until 2050 to figure out the residual.
CSRD Alignment: Reporting What You Commit
The Corporate Sustainability Reporting Directive (CSRD) creates mandatory disclosure obligations that overlap significantly with SBTi:
ESRS E1 (Climate Change) requirements:
- Disclosure of Scope 1, 2, and 3 emissions (full GHG inventory)
- Climate transition plan aligned with 1.5°C
- Physical climate risk assessment
- Financial effects of climate risks and opportunities
- TCFD-aligned forward-looking metrics
How SBTi and CSRD align:
- SBTi validation provides the climate ambition standard that CSRD reporters disclose against
- CSRD creates the audit trail and public disclosure that makes SBTi commitments verifiable
- Inconsistencies between SBTi filings and CSRD reports create legal and reputational risks — companies must ensure data consistency
For SMEs: CSRD's SME standard (ESRS LSME, from 2027 for listed SMEs) is simpler but still requires climate target disclosure if material. The SBTi SME route (simplified validation process, lower fees) is the recommended pathway.
Common Mistakes Companies Make
1. Treating net zero as a communications exercise: Without a genuine transition plan and capital allocation, targets are a liability, not an asset. Greenwashing enforcement is increasing in Germany (UWG), the EU (Green Claims Directive), and the UK (FCA ESG rules).
2. Ignoring Scope 3: Companies that validate only Scope 1+2 without material Scope 3 targets are not credibly addressing their actual climate impact — and increasingly investors and customers know this.
3. Confusing offsets with removals: Buying avoidance credits and calling it net zero will not pass SBTi validation or CSRD audit scrutiny.
4. Setting targets without a pathway: A 2050 net-zero commitment without near-term interim milestones provides no accountability. SBTi requires near-term targets precisely to prevent this.
5. Underestimating the Scope 3 data challenge: Building robust Scope 3 inventory takes 12–24 months of supplier engagement and data platform investment. Start early.
The Net Zero Action Plan: A 12-Month Roadmap
| Month | Action |
|---|---|
| 1–2 | GHG inventory scoping and base year selection |
| 2–4 | Scope 1+2 data collection and calculation |
| 3–6 | Scope 3 materiality screening; supplier data collection begins |
| 4–6 | SBTi Commitment submitted publicly |
| 6–9 | Near-term and net-zero targets developed with SBTi tools |
| 8–10 | SBTi Validation Request submitted |
| 10–12 | Transition plan drafted; CSRD gap analysis vs. ESRS E1 |
| 12+ | Annual reporting cycle begins; supplier engagement deepens |
Conclusion
Net zero for companies is achievable — but only through genuine transformation, not accounting tricks. The SBTi framework provides a credible, science-based roadmap: reduce 90% by 2050, neutralize the rest with high-quality removals, and report transparently under CSRD every year. The 10,000 companies that have already validated targets demonstrate that this is not theoretical.
For companies planning their residual emission removal strategy, high-quality nature-based removals — including Paulownia agroforestry certified under Verra VCS — provide a credible, cost-effective, and investment-grade removal mechanism. VERDANTIS Impact Capital structures these as long-term supply agreements for corporate buyers, ensuring supply security for the carbon removals that will be needed at scale from 2030 to 2050.
About the Author
Dirk Röthig is CEO of VERDANTIS Impact Capital, a specialized investment manager for Paulownia-based agroforestry in Europe. VERDANTIS provides corporate buyers with high-quality carbon removal credits, verified under Verra VCS, as part of SBTi-aligned net-zero strategies. Learn more at verdantis.capital
Über den Autor: Dirk Röthig ist CEO von VERDANTIS Impact Capital, einem Unternehmen das in nachhaltige Agrar- und Technologieinnovationen investiert. Mehr Artikel auf dirkroethig.com.
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