Background: After setting science-based targets, companies take actions to implement them. This chapter introduces a hierarchy that applies across scope 1, scope 2, and scope 3 targets and guides the prioritization of target implementation actions to achieve meaningful reductions in emissions from company operations and value chains over time. The hierarchy is designed to support the long-term decarbonization of the activities and systems that generate companies’ emissions. The SBTi expects to develop further guidance to ensure robust application of the requirements in this chapter.
In this chapter, actions refer to measures taken by companies to reduce emissions or support the scale-up of net-zero-aligned practices or technologies within their operations, value chains, activity pools, or sectors. This may include operational changes, projects, and the use of market instruments.
Actions that directly reduce emissions in companies’ physical GHG inventories form the primary basis for setting targets. To enable recognition of a broader range of mitigation efforts, companies may also undertake actions and use market instruments that are not reflected in their physical GHG inventories. Such actions shall be accounted for and reported separately to ensure transparency while recognizing their contribution to decarbonization beyond companies’ physical GHG inventories.
At the activity level, companies directly target the emissions sources reflected in their GHG inventories. They may improve efficiency, switch to lower-emission inputs, or change operational practices – including, where relevant, through engagement with suppliers and customers. Because they act on the underlying emissions sources, actions like these provide the most direct route to decarbonizing company activities and reducing long-term exposure to those emissions sources, rather than relying continuously on market instruments.
In many cases, emissions arise within shared systems that companies purchase from or feed into, such as electricity grids, gas grids, supply sheds, or logistics networks – referred to as activity pools. Where emissions are embedded in such a system, a company can take action within the same activity pool to decarbonize the system serving the company. Over time, such actions contribute to physically reducing emissions associated with the company’s underlying activities.
In some situations, structural constraints may limit action at the activity or activity pool level within the target timeframe. These constraints may include technological, infrastructural, regulatory, or market limitations. In such cases, action may occur at the sector level, provided the actions mirror the relevant emissions sources and support the transition of the sector in which those emissions arise.
Actions at the activity pool or sector level, including the use of market instruments, can contribute to broader system-level decarbonization as interim measures until the opportunity to take direct action in operations and value chains is available. These actions may include, for example, the purchase of energy attribute certificates (e.g., for electricity or gas) and commodity certificates that rely on different chain-of-custody models (such as mass balance or book-and-claim). Where such actions are not reflected in a company’s physical GHG inventory, they are reported separately.
The SBTi does not seek to develop or replace certification frameworks. Instead, this chapter establishes minimum integrity criteria for the use of such instruments in target implementation, while the SBTi will develop criteria and processes to recognize relevant third-party frameworks, standards, and programs, where applicable.
Where companies cannot take sufficient action within the target timeframe, they are encouraged to take enabling actions that help address underlying constraints and support future emissions reductions, such as contributing to the development of necessary technologies, infrastructure, or supply systems.
Electricity merits explicit application of the implementation hierarchy because it is a universal input across operations and value chains, and is typically delivered through well-defined activity pools (grids). Actions may be undertaken for scope 2 targets or to contribute to scope 3 targets where electricity consumption is a component.
The Corporate Net-Zero Standard V2.0 requires geographical matching of electricity consumption, either directly or through attributes, based on deliverability regions. Matching can also extend beyond a deliverability region to interconnected regions where a contract is supported by interconnector access rights or a power purchase agreement for a low-carbon project. Where structural barriers exist, companies can take sector-level actions for an interim period while simultaneously taking measures to overcome the barriers.
While annual matching has historically been used in scope 2 accounting, more granular approaches are increasingly being adopted to better reflect the temporal relationship between electricity consumption and generation. Hourly matching can strengthen the credibility of scope 2–related claims and better align electricity demand with low-carbon supply. It can support stronger price signals and investment incentives for flexibility, demand response, energy storage, and new low-carbon generation technologies.
To improve transparency while hourly matching practices further develop, the Corporate Net-Zero Standard V2.0 requires Category A companies with large electricity loads to report the percentage of scope 2 electricity consumption matched with low-carbon electricity attributes on an hourly basis. The Corporate Net-Zero Standard also includes an optional recognition framework for companies that meet specified hourly matching thresholds for target implementation; this highlights leadership in aligning electricity demand with low-carbon generation, while encouraging adoption of more granular accounting approaches as the GHG Protocol evolves its scope 2 requirements.
To inform future revisions of the Corporate Net-Zero Standard, the SBTi intends to launch a Call for Evidence to better understand how hourly matching should be deployed in the context of a target-setting program, and, specifically, how voluntary action can complement market dynamics and policy incentives.
To establish an implementation hierarchy that prioritizes emissions reductions as close as possible to the source, while enabling credible and systemically relevant action at the activity pool or sector level where sufficient decarbonization is not feasible within the required timeframe.
To ensure that actions and market instruments in support of target implementation deliver credible, high-integrity outcomes that reflect real-world emissions reductions and support system-wide decarbonization.
To drive meaningful decarbonization of electricity consumption in both operations and value chains by focusing actions on the sources of electricity use while supporting the transition of the systems on which they depend. The relevant criteria set out earlier in this chapter apply equally to electricity-related actions. Companies shall therefore ensure that implementation actions for electricity meet all applicable requirements, including the temporal (12-month) alignment requirement (CNZS-C25.5).
To improve transparency on the temporal alignment between electricity consumption and low-carbon electricity (LCE) generation, and to recognize companies that demonstrate leadership in aligning electricity demand with low-carbon supply on an hourly basis. To inform future revisions of the Corporate Net-Zero Standard, the SBTi intends to launch a Call for Evidence to better understand how hourly matching should be deployed in the context of a target-setting program.
To ensure that bio-based feedstocks used by companies are sourced and managed in a way that supports sustainable production, avoids environmental harm, and enables accurate accounting of land-related emissions and removals.
