Setting and reporting net zero targets

What are net zero targets?

A net zero target is a commitment to reduce a company's greenhouse gas emissions across its operations and value chain to a residual level consistent with reaching global net zero by 2050, and to balance the residual with permanent removals of carbon dioxide from the atmosphere. Near-term targets, typically five to ten years ahead, drive action now; the long-term target sets the destination. Targets can be absolute, in tonnes, or intensity-based, per unit of output, and are measured against a base year. See climate transition plans.

How does the SBTi validate net zero targets?

The SBTi assesses whether targets are consistent with climate science. Under its first net zero standard and near-term criteria, a 1.5°C-aligned absolute scope 1 and 2 target needed a minimum linear reduction of 4.2% a year, and most companies had to cut emissions by at least 90% by their net zero year. Version 2 of the Corporate Net-Zero Standard, published in June 2026, divides companies into categories A and B by size and location, offers more ways to set scope 1, 2 and 3 targets, sets near-term targets five years from submission, and adds recognition for companies that take responsibility for their ongoing emissions, for example through removals. Companies can use version 1 until 31 January 2028, and existing targets remain valid until they end or a mandatory five-year review.

Net zero targets in practice: a company's first two years

A consumer goods company sets targets from a 2024 base year of 50,000 tonnes of scope 1 and 2 emissions and 250,000 tonnes of scope 3: cut scope 1 and 2 by 42% and scope 3 by 25% by 2030, and all scopes by 90% by 2050, neutralising the rest. Its scope 1 and 2 target is steeper than the 25.2% that the version 1 minimum rate implies over six years.

After two years, scope 1 and 2 emissions are down 12%, close to the 14% a straight line to 2030 would require, but scope 3 is down only 2% against 8%, because a supplier programme started late. The company reports both, explains the gap and the actions planned to close it, and states that it does not count carbon credits towards its reduction targets. In 2050, its residual 30,000 tonnes would need permanent removals. See scope 3 supplier-specific data.

What role do carbon credits play?

Reductions come first. Carbon credits from avoided emissions do not count towards science-based reduction targets, and only permanent removals can neutralise residual emissions at the net zero date. Credits can still fund climate action beyond a company's value chain, but claims based on them face growing limits: in the EU, claims that a product has a neutral, reduced or positive climate impact because of offsetting have been banned since 27 September 2026. See carbon credits in reporting and greenwashing risk.

How are net zero targets reported?

IFRS S2 requires each climate target's metric, objective, scope, period, base period, milestones and whether it is absolute or intensity-based, how the latest international climate agreement informed it, whether it was validated by a third party, and performance against it. For greenhouse gas targets it adds the gases and scopes covered, whether the target is gross or net, whether a sectoral decarbonisation approach was used, and the planned use of carbon credits. ESRS E1 asks for absolute reduction targets with base year values and target years, and whether they are compatible with limiting warming to 1.5°C. See IFRS S2 and ESRS E1.

When should a target be recalculated?

When acquisitions, disposals, methodology changes or errors significantly change the base year, companies following the GHG Protocol recalculate base year emissions, and the SBTi expects targets to be revalidated at least every five years. The recalculation policy and any changes should be disclosed, because a moved baseline can make progress look better than it is. See base year recalculation and the GHG Protocol.

This guide is general information. It is not tax or legal advice for your situation.