On June 11th, the Science Based Targets initiative (SBTi) released its new Corporate Net-Zero Standard. The standard introduces changes that impact how companies set and reach their SBTi targets across Scope 1, Scope 2 and Scope 3.
This blog post focuses on the new standard’s implications for Scope 2. If you’re a company with existing SBTi targets, or planning to set one, here’s what you need to know:
1. Category A or Category B
The new standard divides companies into two categories, Category A and Category B, with slightly higher requirements placed on Category A companies.
Category A companies are those with a net turnover of over €450 million, or over 1,000 FTEs. Companies with Scope 1 and Scope 2 emissions over 10,000 tCO2e, or with two of the following, also fall under Category A:
Balance sheet: ≥ €25 million
Net turnover: ≥ €50 million
FTE: ≥ 250
Category B companies are those that do not meet any of the Category A criteria.
2. Physical emissions take centre stage
Companies must maintain a physical GHG inventory as the primary basis for target accounting.
Market instruments that are not reflected in a company’s physical inventory, such as Guarantees of Origin, must be reported separately and meet the integrity criteria set out in the standard.
3. Companies can choose between two different Scope 2 target types
Think of these target types as the KPIs of your electricity procurement.
Option 1: Low carbon electricity (LCE) alignment
Companies increase the share of low-carbon electricity they use, contract, or match including working towards an optional long-term target of 100% by 2050.
This can be achieved through a range of implementation actions - including on-site generation and PPAs - with the SBTi expecting companies to prioritise actions according to its implementation hierarchy (see Section 4 below).
If a Category A company increases its annual electricity consumption by over 20% over the target cycle, the company is must set an absolute emissions target.
Option 2: Absolute Scope 2 emissions reduction
Companies reduce absolute Scope 2 emissions, including working towards an optional long-term target of reaching lowest possible absolute emissions by 2050.
The same implementation hierarchy applies as in option 1, with priority given to reducing electricity demand, followed by increasing the physical consumption of low-carbon electricity.
4. Electricity procurement should follow an implementation hierarchy
Companies are expected to prioritize:
Reducing electricity demand through efficiency.
Increasing physical consumption of low-carbon electricity.
Supporting decarbonization of the electricity system (i.e., electricity grid) supplying the company.
Using broader sector-level interventions when necessary
5. New integrity criteria for market instruments
The standard continues to recognises the same market instruments for the documentation of low-carbon electricity, provided they meet the integrity criteria set out by SBTi. These include Power Purchase Agreements (PPAs), contracts for difference (CfDs) and unbundled Guarantees of Origin (GOs).
There are two new introductions to the integrity criteria for these instruments: an age requirement and deliverability requirement.
Under the age requirement, companies should use market instruments from a renewable energy park that is less than 15 years old.
Under the deliverability requirement, companies should procure low-carbon electricity from the same deliverability region (i.e., connected grid infrastructure) in which they consume electricity.
For example, it will not be possible to use a Guarantee of Origin from Spain to match consumption in Denmark.
That said, there are a few exceptions to the deliverability requirement if:
Electricity can physically flow through interconnection rights, or
Companies combine their consumption across interconnected regions under PPAs
Important: Existing contracts are grandfathered for the duration of the contract, meaning they will not need to meet new requirements.
6. Hourly matching is required for Category A companies
Companies in Category A that consume more than 10 GWh of electricity annually will be required to disclose the proportion of their electricity consumption that is matched by low-carbon electricity on an hourly basis.
The standard also introduces optional recognition for higher levels of hourly matching. To be recognized, a company must reach the following thresholds:
By 2030: at least 50% hourly matching
By 2035: at least 75% hourly matching
From 2035 onwards: at least 90% hourly matching
In Denmark, there is no system for hourly-matching yet.
Timeline
In 2028, the new standard will become mandatory for all new submissions.
If you already have a validated SBTi goal, you don't need to do anything right now. The changes will take effect when you reach your goal year or at the mandatory five-year review, whichever comes first.
What the new standard means for companies
The new standard reflects a growing focus on more impactful electricity procurement, and some of the expected changes to the GHG Protocol.
The most important takeaway for companies is that unbundled Guarantees of Origin (GOs) from assets older than 15 years, or assets that are not in the same deliverability region as your electricity consumption are no longer sufficient.
Instead, the standard encourages companies to adopt a more holistic electricity procurement strategy that combines:
Energy efficiency.
On site renewable generation.
Long-term Power Purchase Agreements (PPAs).
High-quality Guarantees of Origin (GOs) from renewable energy assets that are less than 15 years old and located within the same deliverability region.
Reporting tools that demonstrate hourly matching between electricity consumption and renewable energy generation.
As companies adapt to these evolving requirements, Reel simplifies electricity procurement by offering the full range of procurement solutions in one place.
Together, we’ll help you build an SBTi V2-aligned procurement strategy that delivers measurable impact.
