Major update to SBTi target-setting method

What the new Dynamic Linear Annual Reduction Rate means for companies setting or renewing science-based targets this year

By Diana Bach, Co-Founder & Owner
May 2026

The Science Based Targets Initiative (SBTi) recently announced a major update to their target-setting methodology under the current versions of the Corporate Net-Zero Standard (V1.3) and the Corporate Near-Term Criteria (V5.3). This change was instituted as an ‘urgent revision’ and goes into effect immediately, meaning it is required for any companies currently in the process of or planning to set targets this year.

What’s the change?

The SBTi Corporate Net-Zero Standard (V1.3) was revised via a new Appendix outlining the method adjustment. The change affects how companies set near-term targets via the Absolute Contraction Approach (ACA), used by four out of five companies with science-based targets.

The ACA model calculates required linear annual reductions of absolute emissions for the target term. The previous method applied a fixed annual percentage rate for all companies (e.g. 4.2% per year), plus a requirement to increase target ambition to levels consistent with a base year of 2020, regardless of the company’s selected base year. The SBTi replaces this ruleset with an updated method that institutes a ‘dynamic rate adjustment’ for calculating the linear percentage reductions using the ACA.

The new ‘Dynamic Linear Annual Reduction Rate’ (dLARR) takes into account a number of factors including the target base year, SBTi’s planned net zero pathways, and the company’s progress to date. The dLARR also removes two requirements that previously posed difficulties for many companies: the post-2020 base year adjustment, and an additional Forward-Looking Adjustment (FLA) increasing the ambition for companies that had already made progress toward their near-term target.  (Note that FLA is inherently embedded in the new method, though via a different mechanism).

What’s does this mean?

SBTi posits that the change will help instill greater alignment towards the net-zero pathways proposed in the new Corporate Net-Zero Standard (V2) expected to be published later this year. Additionally, the amended method requires less steep emissions reductions in the near term for companies setting targets in 2026-2027, spreading out the required reductions over a longer time period.

For many companies, this may mean a less prohibitive entry point to setting targets with SBTi, and a clearer transition to a long-term net-zero pathway. On the other hand, the change relaxes SBTi’s previous emphasis on earlier and more ambitious climate action this decade, and has led to questions on whether the target-setting method remains aligned with IPCC recommendations.

Existing approved targets are still considered valid and are not affected by the change.

How are targets calculated under the new method?

The new dLARR method is similar to one proposed for the revised Corporate Net-Zero Standard (V2), and is based on establishing an individualized net-zero pathway for each company’s emissions profile. The basis of the method assumes net zero is achieved by 2050 at the latest, and builds in scope-specific assumptions:

• 90% reduction in scope 1 emissions by 2050

• 100% reduction in scope 2 emissions by 2040

• 90% reduction scope 3 emissions by 2050

• 72% reduction in forests, land, and agriculture (FLAG) emissions by 2050

A notable change is the more ambitious pathway for scope 2 reductions, based on the assumption that the global power system will decarbonize by 2040 as a key driver of the net-zero transition.

From these pathways, the dLARR uses a company’s starting point (base year) and most recent year of data to establish the near-term reductions required to align to the net-zero path.

Where companies may have already made progress on their track to net zero, the dLARR includes minimum linear reduction rates, in line with the previous ACA method: a minimum of 4.2% annual reductions for a 1.5°C aligned scope 1, 2, and 3 energy and industry emissions, and 3.03% annual reductions for FLAG emissions.

How does the new method compare?

The dynamic nature of the new dLARR method means calculating targets is more complex and unique to an organization’s own target conditions and emissions profile. The simplest way to identify the target required for your company is through SBTi’s updated target setting tool. You can also find the technical details of the method in the new Appendix.

‍For most companies setting targets now with mid-decade base years, the near-term targets calculated by the dLARR will require less ambitious reductions than the old ACA. However, your organization’s specific emissions contributions and progress to date may mean the final targets are similar or more ambitious with the dLARR. Below are three example scenarios for scope 1 & 2 targets under the old and revised methods.

Example scenarios of how SBTi revision affects combined Scope 1 & 2 targets using the new dLARR method.

Who does this affect?

The updated ACA method is required for all companies who are setting targets for the first time, or who are reviewing and resubmitting their targets per the five-year mandatory re-evaluation. The method applies to both energy and industrial targets and forests, land, and agriculture (FLAG) targets, with specific thresholds in place for each.

Companies with already validated targets may optionally update their targets, but this is not required.

Looking ahead

SBTi has signaled that this update supports better alignment with the revised Corporate Net-Zero Standard expected to be published later this year. Meanwhile, the revisions lower the barrier to entry to the SBTi platform for some companies who may have faced infeasible near-term reductions under the old method. Companies facing their five-year recalculation trigger may see a shift in their required reductions for the next target term, depending on their progress made towards their existing target.

For more information on this update, see:

• The announcement from SBTi

• The technical Appendix explaining the new method

• The updated target setting tool (v2.5)

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Questions on how this might affect you? Contact us to ask our team of SBTi Certified Experts.