In a development that could reshape corporate climate strategies, the Science Based Targets initiative (SBTi) has proposed guidelines that would fundamentally alter how companies tackle their Scope 3 emissions – often the most challenging aspect of corporate decarbonization efforts.
The initial draft of the SBTi’s revised Corporate Net-Zero Standard for public consultation published in March 2025 responds to years of industry feedback by introducing a more nuanced approach to value chain emissions. Rather than treating Scope 3 as a monolithic challenge with a one-size-fits-all mandate to generally reduce emissions, the new framework would allow companies to set discrete targets for specific high-impact activities within their value chains, such as procurement of carbon-intensive materials or business travel. The proposed changes would offer companies a much more flexible pathway to addressing their value chain emissions.
SBTi and indirect mitigation: a pathway to faster action
Perhaps most significantly, the SBTi has tentatively endorsed “indirect mitigation” – also called value-chain intervention or insetting. This mechanism allows companies to earn credits against their Scope 3 totals by funding decarbonization projects with their suppliers.
The proposal also introduces the concept of “supply sheds” – groups of similar suppliers, typically in the same region, where companies can make interventions even when they cannot identify specific facilities in complex supply chains. This approach acknowledges the reality that many organizations have limited visibility deep into their networks.
The SBTi is currently soliciting feedback through an online survey until June 1, with accounting rules for indirect mitigation expected to be a key focus of future drafts.
Strategic advantages of clustering Scope 3 emissions reduction
By breaking down Scope 3 emissions into specific clusters of high-emission activities, reduction efforts become more focused, practical, and realistic.
- Priority Setting: Companies could focus their efforts on the most emission-intensive areas instead of spreading their limited resources across less significant activities. This approach would dramatically increase the effectiveness of decarbonization efforts by targeting areas with the greatest potential impact.
- Greater Flexibility: Instead of trying to reduce emissions uniformly across their entire supply chain, transport and logistics companies can now target specific clusters like particular suppliers or material groups and reduce the pressure to show unrealistic equal progress everywhere.
- Improved Transparency: Clustering allows companies to analyze their Scope 3 emissions more granularly, focus on areas where data is available and make communication with stakeholders more transparent and easier to understand.
- Actionable Reduction Strategies: Companies that were previously paralyzed by complex supply chains can now work directly with specific supplier groups, implement indirect measures like “insetting” in supply areas and take meaningful reduction steps even without complete control over the entire supply chain.
- Increased Acceptance: Rather than demanding blanket CO2e reductions from all suppliers, companies can focus on strategic partnerships with key actors, make emission reduction measures more economically attractive and reduce potential resistance from suppliers.
SBTi: a journey of corporate climate accountability
When the SBTi emerged in 2015, it set out to transform corporate climate action from a voluntary exercise to a rigorous, scientifically-grounded standard. Founded with an ambitious vision, the organization aimed to establish a systematic approach to emissions reduction that would align corporate strategies with the latest climate science.
The SBTi’s core mission has been multifaceted: defining best practices for emissions reductions, providing technical guidance to companies, and offering independent validation of corporate climate targets. Their impact has been substantial, with over 10,000 businesses now either having set science-based emissions reduction targets or committed to doing so.
A pivotal moment came in 2021 with the launch of their first Corporate Net-Zero Standard, a landmark publication that provided a clear framework for corporate climate commitments. However, the path to refining this standard has not been without complexity and internal debate.
Comment: Balance caution with practicality
Commenting on the latest developments, our Co-CEO Tobias Bohnhoff shared frank insights about the broader landscape of climate standard-setting: “The Science Based Targets initiative and Greenhouse Gas Protocol (GHGP) are foundational standard-setters that shape expectations and create a level playing field. Yet their influence has reached a problematic level”.
He expressed concern that science-based targets commitments have become “a form of carbon window dressing” for many organizations: “Being at the party is well received, but it does not mean that they know how to party. Companies commit without clarity on execution. Baselines are often flawed, and dropout rates – though public – receive little scrutiny.” Our Co-CEO highlights a particularly troubling consequence:
“Uncertainty about the future direction of SBTi and GHGP has frozen commercially impactful decision-making in some organizations. Companies hesitate to invest in decarbonization pathways that could be invalidated later.”
While acknowledging that SBTi and GHGP rightly emphasize that carbon credits alone are insufficient, our Co-CEO noted that “their delay in offering practical guidance on what to avoid and what to explore is steering the market toward exactly these risky schemes and relabeling of questionable inputs – because they work fast and under higher pressure to act.”
He concludes with a call for sharper distinctions: “Interventions outside one’s own supply chain (e.g., via market-based certificates) could for example be clearly limited as compared to those implemented internally. Doing so would encourage direct action and reduce uncertainty, particularly if frameworks like the Smart Freight Centre’s Market-Based Measures Framework update their multimodal guidance accordingly.”
