The SBTi Corporate Manual: Why It Matters
The Science Based Targets initiative (SBTi) establishes the global reference framework for companies aligning their climate targets with the temperature limits of the Paris Agreement. The SBTi Corporate Manual is the foundational document that defines target-setting rules, validation processes, and methodological requirements.
Updates to the manual directly affect all companies in the target validation pipeline. Corporate Manual v2.1, which should be read alongside the SBTi Criteria and Recommendations document, contains several significant changes (SBTi, "SBTi Corporate Manual," v2.1, 2024).
Key Changes
Mandatory 1.5 Degree Alignment
SBTi has phased out 2-degree target pathways. Under Corporate Manual v2.1, only 1.5-degree aligned pathways are accepted for new target submissions. This means more aggressive annual reduction rates for Scope 1 and 2.
The SBTi Criteria document requires at least a 4.2 percent annual linear reduction rate for Scope 1 and 2 targets. This rate aligns with the global emissions reduction needs defined in the IPCC's 1.5-degree scenarios (SBTi, "SBTi Criteria and Recommendations," v5.1, 2024).
Cross-Sector Pathway Updates
SBTi has updated the Sectoral Decarbonization Approach (SDA) and Absolute Contraction Approach (ACA) to more precisely reflect sectoral differences. Updated pathways for energy-intensive sectors (steel, cement, aluminium, power) account for technological feasibility.
Particularly for the power sector, updated pathways reflect coal phase-out timelines and renewable energy transition rates.
FLAG Guidance Integration
For companies operating in Forest, Land, and Agriculture (FLAG) sectors, SBTi has published separate FLAG guidance and integrated it into the Corporate Manual. FLAG emissions are mandatorily included in target scope when a company's total land-based emissions exceed a defined threshold.
The FLAG guidance requires deforestation-linked emissions to reach zero by 2025 and overall FLAG emissions to be reduced in line with defined pathways. This is a significant requirement directly affecting companies in the food, beverage, tobacco, paper, and forestry sectors.
Scope 3 Flexibility Provisions
Scope 3 emissions constitute the majority of the total carbon footprint for many companies and represent the most difficult area to measure. SBTi has defined several flexibility provisions for Scope 3:
- 67 percent threshold: The Scope 3 target must cover at least 67 percent of total Scope 3 emissions.
- Supplier engagement targets: Requesting SBTi target commitments from a defined percentage of suppliers is accepted as an alternative pathway.
- Sector-specific pathways: Sector-specific reduction pathways can be used for certain Scope 3 categories.
These flexibilities acknowledge the complexity of Scope 3 calculation while preventing it from being left without targets.
The Beyond Value Chain Mitigation (BVCM) Debate
In 2024, SBTi made a controversial announcement regarding carbon credits and Beyond Value Chain Mitigation (BVCM). In an April 2024 statement, the SBTi Board announced it was evaluating the use of environmental attribute certificates (including carbon credits) within the scope of Scope 3 target compliance.
This announcement drew significant criticism from the scientific community and civil society organisations. Subsequently, in its updated July 2024 statement, SBTi clarified that carbon credits would not be used as a "direct substitute" in Scope 3 targets, but that BVCM would be encouraged as an additional climate finance instrument (SBTi, "Board Statement: Scope 3 and Beyond Value Chain Mitigation," July 2024).
Current Status: Carbon credits do not count as a replacement for Scope 1, 2, or 3 emissions reductions in SBTi target compliance. However, companies are expected to make beyond value chain mitigation investments alongside their target work. SBTi is developing separate guidance for BVCM.
Impact on the Validation Process
Stricter Scrutiny
With the updates, the validation process has become more rigorous. SBTi validation teams are conducting more detailed reviews in the following areas:
- Accuracy and completeness of base year emissions data
- Consistency of Scope 3 calculation methodology
- Whether FLAG emissions have been included (in relevant sectors)
- Alignment of the target pathway with 1.5 degrees
Wait Times
Due to the increase in target submissions to SBTi, validation timelines have lengthened. As of 2024, the time from submission to validation outcome ranges between six and twelve months. Companies need to factor this timeframe into their planning.
Target Renewal Requirements
Existing targets must be renewed at least every five years. Targets previously validated under a 2-degree pathway must be upgraded to 1.5-degree alignment at the renewal period.
Recommendations for 2025 Preparation
For companies entering the validation process or renewing existing targets:
- Review your base year inventory. Ensure Scope 1, 2, and 3 emissions data is complete and verified.
- Conduct a FLAG assessment. Check whether your land-based emissions exceed the SBTi threshold.
- Expand your Scope 3 category coverage. Ensure you meet the 67 percent threshold.
- Define your BVCM strategy. Plan beyond value chain climate investments alongside your target work.
- Keep the timeline realistic. Account for the fact that the validation process can take six to twelve months.
Conclusion
The SBTi Corporate Manual updates are making the science-based target-setting process more rigorous. The combined effect of the 1.5-degree mandate, FLAG integration, and Scope 3 flexibility provisions requires companies to refresh their target strategies. While the debate around BVCM continues, the core principle remains unchanged: carbon credits do not replace emissions reductions; they complement them.
Action Item: If you have an SBTi target submission plan, compare the requirements of Corporate Manual v2.1 against your current inventory and target structure. Identify misalignment points and address them before submission.
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