The headlines

• The current SBTi SME route is being replaced. Under v2.0, companies will fall into either Category A or Category B.
• Virtually all SMEs will be Category B.
• Category B is simpler than the Category A route, but more demanding than the current SME route. This is not just a simple replacement for the existing SME pathway.
• The core mandatory targets for Category B only cover Scope 1 and Scope 2. Scope 3 targets remain optional unless a business chooses to set a wider net-zero target.
• The biggest practical change is the requirement for a Climate Transition Plan. Businesses will need to show how they intend to deliver their targets, including actions, timings, assumptions, dependencies and barriers.
• Validation is likely to be more involved. Because Category B includes more requirements than the current SME route, businesses should expect more work to prepare for validation.
• Costs are likely to rise. SBTi pricing is not the only issue. The additional work needed to prepare inventories, transition plans, reporting processes and evidence will significantly increase overall cost.
• The standard recognises that SMEs do not control everything. Businesses can acknowledge dependencies such as landlords, suppliers, infrastructure, customer behaviour and technology availability.
• Net zero has not become easier. A formal SBTi net-zero target still means reducing Scope 1, 2 and 3 emissions to zero or residual levels, then neutralising any remaining residual emissions with eligible carbon removals.
• Offsetting still cannot be used as a substitute for reducing emissions. Wider climate contributions may be recognised separately, and for Category A businesses some wider climate contributions, offsetting, will become mandatory, but they do not replace target delivery.
• Annual reporting becomes more central. Businesses will need to show progress against targets each year, including actions taken, barriers encountered and what they plan to do next.

Why this matters for SMEs

SBTi validation of carbon targets has become increasingly important in supply chains, tenders, investor conversations and sustainability reporting. For some SMEs, it is still optional. For others, it is something clients or customers expect.

The current SME route has been relatively simple. A business could set near-term Scope 1 and 2 targets and commit to measuring and reducing Scope 3 emissions, without having to set detailed Scope 3 targets.

That simplicity has made the SBTi process relatively accessible to smaller businesses even if many of the targets they have been expected to set have made little sense in reality.

Version 2.0 keeps some of that proportionality, but it changes the process. The emphasis is no longer just on setting a target. Businesses will need to show how they will deliver their targets, report progress, explain barriers and keep improving over time.

That is good for credibility. But it means SMEs will need to think more carefully about planning, evidence and reporting.

From SME route to Category B

One of the biggest changes is the move away from the current SME route.

Under v2.0, companies will be assessed as either Category A or Category B. Category A is the more demanding route. Category B is the significantly more straightforward route.

Virtually all SMEs will be in Category B. 10,000 tonnes of carbon (CO2e) is a lot – equivalent to spending multiple millions on gas and/or electricity every year – and any business with lower than 10,000 tonnes of Scope 1 and 2 emissions will be in Category B as long as they also meet at least two of the following criteria:

• Balance sheet below €25 million
• Net turnover below €50 million
• FTE less than 250

This is important. Category B is a wider route than the current SME pathway. But it is not an easier one.

The current SME route is streamlined. Category B sits within the full Corporate Net-Zero Standard. It has more structure, more documentation and more ongoing reporting. So while more businesses may qualify for Category B, those businesses should expect a significantly more involved process.

Scope 1 and Scope 2 remain the core requirement

For Category B companies, the mandatory target-setting requirement is still limited to Scope 1 and Scope 2 emissions.

In plain English:

• Scope 1 is direct emissions from things the company owns or controls, such as company vehicles, gas boilers, generators or other fuel-burning equipment.
• Scope 2 is emissions from purchased energy, mainly electricity, heat, steam or cooling.
• Scope 3 is everything else in the value chain, such as suppliers, travel, waste, employee commuting, transport, products and customer use.

The theory is that by focusing on Scope 1 and 2, SMEs can focus their targets on the parts of their footprint they control most directly. However, in many cases control is still limited, for example landlord-controlled premises, and in almost all cases Scope 1 and 2 barely touches the sides of the footprint, with the vast majority of emissions lying in Scope 3.

The approach keeps SBTi-aligned target-setting more manageable but will significantly limit its impact and its value in delivering emissions reductions.

Under the current SME route, businesses have largely worked with predefined reduction targets, such as the familiar 42% Scope 1 and 2 reduction by 2030. Under v2.0, Category B companies appear to have more choice over the type of targets they set, including absolute reduction, intensity-based approaches, asset transition targets and low-carbon electricity targets. This could be helpful for growing businesses, asset-heavy businesses or companies whose emissions do not reduce in a neat straight line. But the ambition still needs to be demonstrated. At the time of publication, the level of ambition needed is a little unclear, with eligible ‘pathways’ still to be announced.

What about businesses with no premises or vehicles?

This is a common SME scenario.

Under the current SME route, businesses with zero or near-zero Scope 1 and/or Scope 2 emissions could use a maintenance target. That was useful, if slightly odd. In some cases, the “target” was effectively to keep doing what the business already did, i.e. not operate premises or vehicles.

In v2.0, the same idea appears to be absorbed into the wider standard rather than treated as a separate SME maintenance target, but the ‘maintenance’ option appears to remain open in practice.

For example, a fully remote consultancy with no company vehicles might approach this by:

• evidencing that it genuinely has no Scope 1 or Scope 2 emissions – v2.0 interprets this as having achieved net zero for a portion of the business footprint;
• explaining what would trigger a change in future, such as leasing premises or buying vehicles;
• setting controls to avoid these scenarios in future.

Scope 3 becomes more flexible, but also more complex

For Category B companies, Scope 3 targets are optional unless the company chooses to set targets that bring Scope 3 into scope, such as a formal net-zero target.

Many SMEs will continue to focus their validated SBTi targets on Scope 1 and Scope 2, while still measuring and managing relevant Scope 3 emissions for wider credibility, customer reporting, B Corp, EcoVadis, PPN 006 Carbon Reduction Plan or other requirements.

For businesses that do choose to get Scope 3 targets validated, v2.0 offers more flexibility.

Instead of always relying on a single absolute reduction target across all Scope 3 emissions, companies may be able to use different approaches, such as:

• supplier alignment targets;
• customer alignment targets;
• category-specific targets;
• product use targets;
• end-of-life targets;
• activity-specific reduction targets.

In plain English, that might mean:

• asking key suppliers to set credible climate targets;
• targeting an increased proportion of spend with lower-carbon suppliers;
• setting a specific target for business travel;
• focusing on a particular material or product category;
• working with customers to reduce product use-phase emissions.

This is useful because many SMEs cannot directly control their full value chain.

But it also creates more complexity. A supplier alignment target is only credible if the business can explain what “aligned” means. A category-specific target only works if the business understands that category properly.

So Scope 3 becomes more flexible, but not necessarily easier.

Net zero has not become easier

One of the risks with v2.0 is that the extra flexibility around Scope 3 could be misunderstood.

It does not mean that net zero has become a looser concept.

As with the current standard, under v2.0 a company setting an SBTi net-zero target must still reduce Scope 1, Scope 2 and Scope 3 emissions to zero or residual levels, and neutralise any remaining residual emissions using eligible carbon removals.

The flexibility is more about the route, especially in the near term. It recognises that companies may need different target types, and that some delivery depends on suppliers, customers, infrastructure, policy and technology.

For SMEs, the honest message is this: committing to net zero will still feel beyond ambitious. For most, particularly those that are growing, the route to achieving it will be far from clear. Achieving a net-zero target often relies on things the business cannot deliver alone. A company can choose its vehicles, energy supplier, travel policy and purchasing decisions, but it cannot single-handedly decarbonise the electricity grid, make landlords retrofit buildings, force suppliers to provide low-carbon materials, or create affordable technologies that do not yet exist. What v2.0 does is give businesses a more honest way to explain these dependencies. They still need to use the levers they do control, but they can also be transparent about where progress depends on wider market, infrastructure, policy or supply chain change.

This is hugely welcome and should lead to more honest carbon reporting. However, it remains to be seen what will happen in cases where, because of those dependencies, carbon trajectories do not align with a net zero pathway.

The climate transition plan is the big shift for SMEs

The most important practical change for SMEs in v2.0 is the requirement for a climate transition plan. Under the current standard, the numbers in the target are the focus. Under v2.0 the focus broadens to include delivery.

Producing a Climate Transition Plan perhaps sounds more intimidating than it needs to be. At its simplest, a climate transition plan should explain:

• what targets the business has set;
• what actions it will take to meet them;
• when those actions are expected to happen;
• what the business can control directly;
• what it can only influence;
• what it depends on others to deliver;
• how it will monitor progress.

For many SMEs, this is not about producing a glossy strategy document. It is about turning a carbon target into a practical action plan.

This is where many businesses will need more support than they did under the current SME route.

More validation, more evidence, higher costs

This is one of the most important practical implications. Category B is lighter-touch than Category A, but it is more demanding than the current SME route.

Businesses should expect more work around:

• defining organisational boundaries;
• preparing a robust Scope 1 and Scope 2 inventory;
• setting separate Scope 1 and Scope 2 targets;
• preparing a climate transition plan;
• identifying assumptions and dependencies;
• documenting actions and barriers;
• reporting annually;
• preparing for end-of-cycle review.

It means validation will require more information than the current SME route. It also means the overall cost of going through SBTi is likely to rise. Fees may increase significantly from the current $1,250 for the SME route, plus there will be additional costs associated with extra preparation work needed before submission.

Category B will not be as quick, straightforward or low-cost as the current SME pathway.

Offsetting, OER and neutralisation

SBTi v2.0 introduces the concept of Ongoing Emissions Responsibility, or OER.

OER is about supporting additional climate action, offsetting for example, while the business continues to emit on the journey to net zero. For Category B businesses, OER appears to be optional rather than a core requirement.

OER does not replace emissions reductions. It must be accounted for separately and should not be presented as a way to meet SBTi targets through offsets.

Neutralisation is different. Neutralisation applies at the net-zero target year and afterwards. It means using eligible carbon removals to deal with residual emissions that remain after deep reductions.

In practice, neutralisation means mechanisms that remove CO2 from the atmosphere and store it. Examples could include high-integrity engineered removals, such as direct air capture with geological storage, or nature-based removals where carbon is genuinely removed and stored with appropriate durability and safeguards.

For SMEs, the simple message is:

• reduce emissions first;
• use any offset-style or climate contribution claims carefully, if at all;
• do not present climate contributions as a substitute for target delivery;
• only think of neutralisation as the final step for residual emissions if setting a formal net-zero target.

Reporting becomes a bigger part of the system

Annual reporting is not completely new. The current SME route already requires businesses to report emissions and progress against their targets each year.

But v2.0 places annual reporting inside a more formal progress cycle.

For Category B companies, annual reporting is likely to involve:

• reporting the period covered by the emissions data;
• reporting progress against validated targets;
• reporting Scope 1 and Scope 2 emissions;
• describing actions taken;
• identifying material barriers;
• explaining what is being done in response;
• reporting assurance status where relevant.

At the end of each target cycle, companies will also need to complete a more formal progress assessment. This is where the business looks back over the target period and assesses what changed, what actions were taken, what barriers affected delivery and what this means for the next set of targets.

For SMEs, the practical implication is that the climate transition plan should not be written once and forgotten. It should become a live document that supports annual updates and future reviews.

So, is v2.0 good or bad for SMEs?

Both.

The good news is that v2.0 recognises the real world more clearly. SMEs do not control every part of their footprint. They may depend on landlords, suppliers, infrastructure, customer behaviour and technologies that are not yet affordable or available. A standard that acknowledges those dependencies is more honest.

However, for many growing SMEs the disconnect between ‘science-based’ targets and business realities will remain and this is a challenge that the SBTi will need to address.

A further challenge is that the new standard is way more complex. It asks businesses to be clearer about their targets, actions, assumptions, dependencies, evidence and progress. Much of that is sensible, but businesses will need more support.

What SMEs should do now

SMEs do not need to panic. But they should prepare.

A sensible starting point would be:

1. Understand your current footprint. At minimum, be clear on Scope 1 and Scope 2. If Scope 3 is material to your business or customers, start improving that data too.
2. Check whether SBTi validation is actually needed. Some businesses need it because customers, investors or procurement teams expect it. Others may be better served by credible footprinting, action planning and transparent reporting.
3. If you already have validated SBTi targets, check your review date. Businesses with existing targets may want to consider whether it makes sense to complete their mandatory five-year review early, while the current SME route is still available. For some, this may allow them to renew targets under the current criteria before moving to the more demanding v2.0 framework at the next cycle.
4. Build a practical action plan. Focus first on what you can control: energy, vehicles, travel, purchasing, waste, supplier choices and product decisions.
5. Identify dependencies. Be honest about what sits with landlords, suppliers, customers, infrastructure or technology availability.
6. Keep evidence. Records of decisions, data gaps, assumptions, supplier engagement and actions taken will matter more under v2.0.
7. Prepare for more validation. Businesses seeking SBTi approval under v2.0 should expect a more involved process than the current SME route.
8. Think about reporting early. If you will need to report annually, make sure your systems can capture the information without creating unnecessary admin.

In short, SMEs with existing validated targets should not assume they have to wait until their review date. If their review falls close to the transition to v2.0, it may be worth exploring whether an early review under the current route is the more practical option.

Final thoughts

SBTi v2.0 is not a small tweak. For SMEs, it marks a move away from simple target-setting towards a more rounded climate management process.

More businesses may fall into the lighter-touch Category B route, but that does not mean the process will be easier. Category B is likely to be more demanding than the current SME route, with more planning, evidence, reporting and validation required.

That may sound daunting, but it is also a useful reality check. A credible carbon target is not just a number on a website. It needs to be backed by a plan, actions, evidence and honest reporting.

For many SMEs, the best response is not to overcomplicate things. It is to start with a clear footprint, focus on the emissions you can influence, document the barriers you face, and keep improving year by year.

That is where climate action becomes more than a claim. It becomes part of how the business works.

SBTi v2.0 makes one thing clear: counting carbon is only the start. If you need help understanding what the new standard means for your business, or turning your carbon footprint into a credible action plan, Green Business can help. We specialise in the action as well as the counting.