Aligning Net-Zero Targets with Science Based Targets (SBTi) and CSRD

By Felix Gruber, Head of Climate Science

More than 7,000 companies globally have committed to Science Based Targets as of mid-2025, and a growing number of them are now working through their first mandatory CSRD disclosure simultaneously. On paper, the two requirements seem like they should reinforce each other — both demand climate targets aligned to a 1.5°C pathway, both require disclosure of progress. In practice, the alignment is substantial but incomplete, and the differences create real work for enterprises managing both commitments at once.

This article is about how to navigate that overlap without running two parallel target-setting processes. Done right, a single methodology can satisfy both. Done carelessly, you end up with SBTi targets and ESRS E1 targets that use different base years, different boundary assumptions, and different reporting timelines — and explaining that inconsistency to an assurance provider is genuinely difficult.

What SBTi Corporate Net-Zero Standard Requires

The SBTi Corporate Net-Zero Standard, published in 2021, requires companies to set two aligned targets:

• A near-term target: achieving at least a 42-50% absolute reduction in Scope 1 and 2 emissions by 2030 (from a 2019 or later base year), plus Scope 3 where material.
• A long-term net-zero target: reducing emissions by at least 90% across Scope 1, 2, and 3 by no later than 2050, with the residual ≤10% addressed through permanent carbon removal, not offset-only approaches.

The SBTi validation process is rigorous: companies submit targets, SBTi reviews them against sector-specific pathways (using IPCC 1.5°C-compatible scenarios), and either validates or returns them for revision. Validated targets are published in SBTi's database with the year of commitment and the target parameters.

Scope 3 coverage in SBTi near-term targets is required when Scope 3 represents more than 40% of total emissions — which is true for most manufacturing, retail, financial services, and technology companies. The threshold is not optional: if Scope 3 crosses 40%, it must be included in the near-term target.

What CSRD and ESRS E1 Require for Targets

ESRS E1-4 requires disclosure of climate-related targets, including:

• The scope and time horizon of each target
• Whether the target is absolute or intensity-based
• Whether the target is aligned to a 1.5°C pathway and under which scenario
• The base year and base year emissions
• Interim milestones
• Progress toward the target in the current reporting period

ESRS E1-5 requires separately disclosing the energy efficiency and renewable energy targets that contribute to GHG reduction — these are typically sub-targets within the broader decarbonization strategy.

Notably, ESRS E1 does not require that targets be externally validated (SBTi validation is one way to demonstrate alignment, not the only way). But it does require that the alignment claim — "our target is consistent with a 1.5°C pathway" — be supported with the scenario reference and methodology. Self-declared 1.5°C alignment without scenario documentation will be challenged during assurance.

Where the Two Systems Align

The structural overlap between SBTi and ESRS E1 is genuine and significant. Both:

• Require absolute reduction targets on Scope 1 and 2
• Require Scope 3 coverage when material
• Use a GHG Protocol-compatible inventory as the baseline
• Reference IPCC 1.5°C-compatible pathways
• Require disclosure of interim milestones (SBTi explicitly for near-term, ESRS E1 via transition plan)
• Expect year-on-year progress reporting against the committed trajectory

For an enterprise that has already completed SBTi near-term validation, approximately 70-80% of ESRS E1-4 disclosure requirements are satisfied by documenting the validated targets, the base year inventory, and annual progress. The incremental work is in structuring the SBTi information into the specific MDR fields ESRS E1 requires, and supplementing with the transition plan requirements (ESRS E1-1) that SBTi doesn't formally address.

Where the Two Systems Diverge

The divergence points matter for practical implementation.

Offset and Removal Accounting

SBTi Corporate Net-Zero Standard has explicit rules on carbon removals and offsets. Market-based offsets (voluntary carbon credits from projects outside the value chain) do not count toward SBTi targets — they can be used for "beyond value chain mitigation" claims but must be separately accounted from the near-term target progress. Only in-value-chain removals (direct air capture, BECCS associated with the company's operations or supply chain) can contribute to the residual ≤10% in the long-term target.

ESRS E1-7 requires separate disclosure of GHG removals and carbon credits, including the amount, the type (in-value-chain vs outside), and the quality criteria applied. The accounting principle is similar to SBTi — removals and credits are disclosed separately from emission reductions — but ESRS E1 doesn't disqualify external credits from being reported. They just have to be clearly separated from the reduction figures.

The practical implication: don't net offsets against your reported emissions when disclosing ESRS E1-6 GHG inventory. Report gross emissions, then separately report offsets and removals in E1-7. This approach is also SBTi-compliant.

Base Year Flexibility

SBTi requires a base year of 2019 or later for near-term targets. Many enterprises using 2018 or earlier base years for their GHG inventories (common for those with long-running voluntary reporting programs) need to select a more recent base year for SBTi purposes, which may mean maintaining two base years: an older one for historical trend reporting and a 2019+ one for target-setting purposes.

ESRS E1 allows the reporting entity to select the base year, but it must be disclosed and consistently applied. If your CSRD disclosure uses a 2019 base year and your SBTi near-term target uses a 2019 base year, they should produce identical inventory figures for that year — if they don't, the discrepancy will require explanation.

Transition Plan Specificity

SBTi does not require a transition plan disclosure — it validates targets based on the trajectory, not the specific actions used to achieve them. ESRS E1-1 requires a transition plan that specifies: the actions planned, the CapEx and OpEx commitments associated with those actions, the timeline for each action, and how the actions relate to meeting the near-term targets.

This is additive work for SBTi-committed companies. The target is already set; what ESRS E1-1 requires is the operational roadmap that makes the target believable.

"We've worked with enterprises that had strong SBTi-validated targets but no documented transition plan. For CSRD purposes, the target commitment alone is necessary but not sufficient. The auditor wants to see how you intend to achieve it."

— Felix Gruber, Head of Climate Science, Carbonkindle

Running One Target-Setting Process That Satisfies Both

For enterprises that have not yet submitted SBTi targets, there is a clear opportunity to design the target-setting process to satisfy both requirements simultaneously. The steps are:

1. Build a consolidated Scope 1, 2, 3 inventory using GHG Protocol methodology, with a 2019 or later base year (2022 works well for companies starting now, as it avoids the COVID-year distortion in 2020-2021 activity data).
2. Apply SBTi's sector decarbonization approach (SDA) to derive the 1.5°C-aligned absolute reduction trajectory for Scope 1 and 2, and the supply chain or FLAG pathway for Scope 3 as applicable.
3. Document the resulting near-term and long-term targets with the scenario reference, base year, and coverage percentage — this documentation simultaneously serves the SBTi submission and ESRS E1-4 disclosure.
4. Build the transition plan (required by ESRS E1-1 but not SBTi) as the action plan behind the targets: the facility-level and business-unit initiatives, the capital allocation, and the interim milestones that make the trajectory credible.
5. Submit to SBTi for validation. Once validated, update the ESRS E1 disclosure to reference the SBTi validation status as evidence of 1.5°C pathway alignment.

This process produces one target architecture, one inventory baseline, and one documented pathway — which serves both frameworks without duplication of effort.

Timing Considerations for Wave 1 and Wave 2 Filers

Wave 1 CSRD filers (large EU-listed companies, FY2024 disclosure) faced mandatory target disclosure in their first CSRD report, with targets that may have been formally committed but not yet validated by SBTi. In that case, the ESRS E1-4 disclosure references the committed target and the scenario used to derive it, with SBTi validation pending as a subsequent event.

Wave 2 and Wave 3 filers (FY2025 and FY2026 mandatory) have more time to complete SBTi validation before the first CSRD filing. Using that window — typically 18-24 months before the first mandatory disclosure date — is practical. SBTi validation currently takes 6-18 months from submission to approval, so starting the target-setting process 24 months before your first CSRD filing date is the right lead time.

Alignment between SBTi and CSRD is achievable with careful design. The two frameworks were built by different organizations with different governance structures, but their scientific basis is the same — IPCC 1.5°C scenarios — and that shared foundation makes genuine alignment possible rather than just cosmetically so.