For the past decade, the business world has been caught in a climate commitment race. Thousands of companies have set net-zero targets in good faith. But the reality on the ground teaches a harsh lesson: commitment is not the hard part; execution is. And while it is not a panacea, the SBTi (Science Based Targets initiative) has updated its climate action framework for businesses and published the Corporate Net-Zero Standard V2.0. 

The New Business Challenge

Complex supply chains, immature technologies, and asynchronous investment cycles often thwart even the best-laid plans. This is where a new urgency for business leaders lies. Managing climate impacts, risks, and opportunities is no longer simply a compliance or public relations exercise. It is now a strategic imperative for survival and success in an economy constrained by carbon emissions. We have entered an era where business resilience is measured by how quickly a company decarbonizes its operations and value chain. 

Global geopolitical and regulatory shifts have fundamentally changed the business landscape. Beside saving the planet, the energy transition is also about energy security, protection against fossil fuel price volatility, and access to capital. I’m witnessing financial institutions and consumers now demanding radical transparency. And companies that fail to integrate climate strategies into the core of their operations—from capital allocation to procurement—will face existential transition risks.

Physical risks from extreme weather are also beginning to routinely disrupt global supply chains. They start to erode profit margins and threaten operational continuity. Floods, heat waves, and droughts are no longer statistical anomalies, but financial variables that businesses must factor into every annual budget projection. 

Conversely, those who view decarbonization as a catalyst for innovation will unlock cost efficiencies, supply chain resilience, and competitive advantage. The climate crisis is a dangerous risk multiplier, but the transition to net-zero represents the greatest growth opportunity of the 21st century. And seizing this opportunity requires a framework that not only demands adherence to science but also recognizes practical, real-world constraints.

Corporate Net-Zero Standard V2.0: A New Standard with a New Paradigm

Responding to this reality, the Science Based Targets initiative (SBTi) launched the Corporate Net-Zero Standard Version 2.0 on June 12, 2026. Overall, I believe the update goes beyond the technical. Rather, it presents a paradigm shift from a standard that merely validates ambitions to a more pragmatic framework for climate action.

First, SBTi’s Standard V.20 introduces a best-efforts framework. SBTi now recognizes that companies do not control everything. Rather than punishing companies for systemic barriers, the standard demands transparency. It asks them to set science-based targets, use all levers within the company’s control, and then honestly disclose where structural barriers are limiting progress.

Second, the V2.0 links climate ambition to concrete business decisions. Transition plans are now mandatory. Beyond that, they must be approved by the board of commissioners and directors as well as integrated into the company’s strategy, including its investment cycle. On that note, SBTi’s Standard V2.0 also tightens governance requirements. Climate targets can no longer simply be signed off by sustainability managers. They now require direct accountability from the board of commissioners and directors, ensuring that capital allocation aligns with the physical realities of the energy transition.

Third, the V2.0 establishes a clear implementation hierarchy. The top priority remains direct action at the activity level. However, when structural barriers arise, the framework permits companies to take action at the activity pool or sector level. The Standard V2.0 also specifically highlights Emissions-Intensive Activities (EIAs) such as steel, cement, and Forestry, Land, and Agriculture (FLAG) commodities, which forces companies to explicitly address the most difficult-to-reduce emissions in their value chains.

Finally, the SBTi introduces a voluntary Ongoing Emissions Responsibility (OER) claim. This program allows companies to finance climate action outside their value chains as a complement to internal efforts. It recognizes that the global transition requires capital flows to developing countries. In doing so, it introduces company categorizations (Categories A and B) to accommodate the realities of developing countries and SMEs.

Opportunities and Limitations

As a framework, SBTi’s Standard V2.0 offers significant benefits to executives. Its primary advantage is operational realism. By allowing targets based on emissions intensity or asset transition, the Standard V2.0 accommodates the realities of heavy industry and companies with slow capital turnover. Recognition of market instruments and hourly matching for electricity also provides better price signals to encourage investment in renewable energy. Thus, this transforms the sustainability department from a cost center into a strategic partner for the CFO and Chief Operating Officer.

However, I urge everyone to assess its limitations with a clear eye. The complexity of data tracking is a significant challenge. Separating physical GHG inventories from system-wide contribution claims requires highly sophisticated carbon accounting systems, skilled human resources, and costly third-party assurance.

Furthermore, there is a risk of abuse of flexibility. Allowing sector-level action and the use of commodity certificates could potentially open up opportunities for greenwashing. This is an especially slippery slope if the integrity of market instruments is not strictly maintained. Flexibility is a double-edged sword, after all. On one hand, it prevents companies from exiting the SBTi system out of frustration. On the other, it demands an exceptional level of governance maturity from company leaders to avoid being trapped in the illusion of decarbonization.

Meanwhile, there is the OER program. Though it is innovative in bridging the global climate finance gap, it risks being perceived as a “license to pollute” if companies use them as an excuse to delay internal decarbonization. SBTi has attempted to mitigate this by separating physical inventory claims from system contributions, but stakeholder scrutiny will remain the real test. 

SBTi’s Standard V2.0 in the Context of Developing Economies

Climate action and sustainability remains a contested topic in the economic landscapes of developing economies. These countries are at a crossroad. Many of them have vast natural resource wealth, decarbonization ambitions, and a central position in global supply chains. And so, companies there face dual pressures: domestic regulatory and growth demands and stringent expectations from global trading partners, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM) and the Deforestation Regulation (EUDR). 

In this context, SBTi’s Standard V2.0 offers a highly relevant roadmap. Flexibility for Category B companies and recognition of infrastructure constraints—such as limited renewable electricity grids—through sector-level action are crucial. Rather than feeling alienated by rigid global standards, companies in developing economies now have a framework that recognizes the realities of the energy transition in their countries while still maintaining scientific integrity. 

For Chief Sustainability Officers (CSOs) and boards of directors, the Standard V2.0’s message is clear: stop treating climate targets as a side project isolated to the ESG division; start using them as a tool for transition risk management and value creation.

What’s Next?

I urge sustainability professionals in developing economies to immediately unpack and study SBTi’s Standard V2.0. Form a cross-sector alliance to define what activity pools mean in your country’s context. Use Emissions-Intensive Activities (EIA) data to renegotiate with companies’ strategic suppliers, creating unprecedented value chain collaboration in your domestic market. Leverage the transition plan framework to align companies’ decarbonization roadmaps with their capital expenditure (CapEx) plans.

No less importantly, demonstrate to the board of commissioners and directors that complying with SBTi’s Standard V2.0 is not about avoiding sanctions, but about securing access to global supply chains, lowering the cost of capital, and building resilience to climate shocks. Remember that global standards no longer wait for us to be ready. They shape the rules of the future of international trade, and those who adapt first will dictate the market. The first-mover advantage in this regard is clear.

We should have passed the era of commitment characterized by statements. The next decade will be the decade of execution, turning dreams and promises into reality. The SBTi’s Corporate Net-Zero Standard V2.0 is certainly not a silver bullet that will magically solve the climate crisis. Still, it is a navigational tool in a time of fierce business transition. It demands complete honesty about what we can control, boldly invest in what we need to change, and collaborate in addressing systemic barriers we cannot solve alone.

Editor: Abul Muamar & Nazalea Kusuma

Translator: Nazalea Kusuma

The original version of this article is published in Indonesian at Green Network Asia – Indonesia.

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Jalal

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Jalal is a Senior Advisor at Green Network Asia. He is a sustainability consultant, advisor, and provocateur with over 25 years of professional experience. He has worked for several multilateral organizations and national and multinational companies as a subject matter expert, advisor, and board committee member in CSR, sustainability, and ESG. He has founded and become a principal consultant in several sustainability consultancies as well as served as a board committee member and volunteer at various social organizations that promote sustainability.

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