What Sustainability Leaders Need to Know About GHG Protocol and SBTi Revisions

By Daniel Taylor, Zettawatts Intern, Undergraduate at Purdue University

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Introduction

This report is an overview for leaders in sustainability of the upcoming changes to sustainability frameworks and analysis of how these changes might impact their climate strategy.

Carbon accounting is a common yet complex business function, sharply rising in importance. How companies measure and communicate their environmental impact is crucial in helping to slow down climate change and secure their brand. However, this increased significance brings about dynamic changes in carbon emission reporting standards.

Currently, two major sustainability framework organizations are undergoing significant revisions. The Greenhouse Gas (GHG) protocol and Science Based Targets initiative (SBTi) are organizations that lay out a series of rules and targets for companies looking to become sustainable and demonstrate credible proof of these environmental efforts. The proposed changes were met with varying levels of opposition and support, but these ongoing updates are critical as they seek to align corporate climate action with the latest climate science and enhance the impact of emissions, particularly when it comes to how companies account for emissions for their energy usage (scope 2 emissions).

Zettawatts’ additionality REC marketplace provides an innovative way for companies to offset their carbon emissions. By connecting businesses with clean energy projects still under development, buying an additionality REC from Zettawatts allows them to claim additionality - meaning they directly fund new clean energy projects that are added to the grid, rather than clean energy projects that are already in production. This approach is particularly relevant as organizations such as SBTi and the GHG protocol revise their protocols, impacting how companies navigate the evolving landscape of scope 2 accounting.

Background

The Greenhouse Gas Protocol was developed in 1998 by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) to establish a global standard for greenhouse gas accounting and reporting. The GHGP’s current scope 2 guidance, published in 2015, provides some detailed instructions for companies to measure and report their emissions from purchased electricity. It introduced two primary accounting methods: the location-based method and the market-based method. Location-based reporting requires companies to account for the average emissions intensity in the geographic region where their energy consumption occurs, whereas the market-based method accounts for emissions based on contracts (such as RECs and PPAs) (Jennifer L., 2023, 4). This distinction is important as the two methods often lead to different reported emissions: location-based reporting reflects decarbonization progress of the grid itself, while market-based reporting highlights how a company has influenced renewable energy deployment. For this reason, the GHG protocol classifies them separately and has different regulations for each.

(Stein, 2022, 11)

The Green House Gas Protocol Revisions

GHG Revision Timing

In June 2023, after public feedback, the GHG Protocol announced the start of its process to revise its corporate standards and guidance. Although the changes aren’t expected to take effect until 2027 at the earliest, draft proposals have already been published, offering insight into what’s being considered and what may change. See the expected timeline below, created by Carbon Direct.

(Millot, 2025, 11)

GHG Scope 2: Hourly Matching

In recent GHG Protocol Technical Working Group proposals on Scope 2, the idea of introducing an hourly matching requirement was raised several times. If adopted, this would require companies to track their Scope 2 emissions on an hourly basis and match those emissions with equivalent offsets each hour. As the GHG Management Institute puts it, “hourly matched RECs seek to be far more accessible than PPAs and more impactful than annual RECs” (Gillenwater, 2025, 1). This update would require companies to be able to measure and report their emissions on an hourly basis. It also raises questions about the future of existing contracts that only support annual matching.

GHG Scope 2: Location Based Matching

Another significant proposed change in the latest release is the introduction of location-based matching, which would require companies to match their Scope 2 emissions with clean energy generated within the same geographic region or grid zone. This approach strengthens companies’ claims that the renewable energy they purchase could have physically supplied the power they used, addressing concerns about the environmental credibility of buying RECs from distant projects. It would also change how companies source renewable energy, potentially limiting options in regions with less developed clean energy infrastructure.

GHG Scope 2: Marginal Emissions

Marginal emissions tracking was brought up in the recent scope 2 proposals to better reflect the incremental effect of a company on the grid. As the GHG Protocol explains: “with limited volumes of low-cost renewables available, GHG indifferent states and consumers would tend to extend their reliance on existing and new fossil resources to meet demand for electricity from sectors that do not require clean electricity” (Spees, 2024, 10). For example, if a company consumes 100 MWh of electricity, the emissions depend on which energy sources kick in to meet that demand. On a clean grid, that 100 MW might barely change emissions because renewable energy meets the demand, whereas on a dirty grid, the same 100 MW could trigger a spike in emissions because high carbon production is required to meet that demand. The GHG Protocol is proposing a new Marginal Emissions Impact (MEI) metric, which measures how much a clean energy purchase reduces fossil fuel emissions on the grid. This metric would help quantify the climate benefit of clean energy purchases, even if they don’t fully meet the new requirements.

GHG Scope 2: Additionality

The last major proposal has to do with requiring additionality in clean energy purchases. This would make it mandatory for companies offsetting their emissions to source clean energy from projects not yet online, fundamentally restructuring the REC market by not allowing the vast majority of REC supply from operational projects. The idea is that additionality will help fund and develop renewable energy projects that otherwise might not come online, meaning the purchase is effectively adding new clean energy to the grid rather than ‘buying’ from existing energy sources that would produce the same amount of clean energy regardless. This could lead to much more effective energy investments and make alignment with the GHG protocol more meaningful by directly linking corporate sustainability spending to actual increases in renewable energy capacity. However, this would also require companies to engage in more complex, longer-term procurement strategies and accept potentially higher costs and greater risks associated with funding projects still under development.

GHG Scope 2: Proposal Challenges

The GHG Protocol overhaul aims to significantly change how carbon accounting is conducted, so unsurprisingly, the proposals have received mixed feedback. A common concern is the feasibility of implementing hourly matching. Most REC registries across the US do not currently support hourly minting and retiring of RECs. Many leaders are unsure how to make this work in practice, as it requires updated technology and changes to how energy is measured and credits are purchased. Many also believe that hourly matching shouldn’t be the priority, and the issue of increasing renewable energy is more important. There is currently a group of around 70 companies (including Zettawatts) that is sending a letter to the ISB saying the proposed 24/7 matching requirements are ineffective and should be reconsidered. The proposed additionality requirement is prompting companies to question how they can access investments in new, undeveloped projects, and what the added costs might be. 

On August 1st, 2025, the ISB voted on several of the proposals from the technical working group. They voted 10-1 to approve the location-based and market-based method revisions, including hourly and geographical matching, for the public consultation later this fall. 

GHG Scope 2: Transition & Safe Harbor

Another overarching concern stems from the little information on the transition period. The changes are planned to begin coming into effect in 2027 and be implemented over time, and many companies don’t think that is enough time. One potential transition solution that was brought up recently was the potential to ”support the use of estimated electricity use data so organizations can continue relying on their current annual electricity data while applying standard hourly profiles” and to ”potentially exempt smaller, lower-capacity electricity users” (Huckins, 2025, 3). 

Still, many companies with long-term REC contracts, such as PPAs and VPPAs, are concerned about safe harbor and whether or not there will be any flexibility with the upcoming changes. There is currently limited information released that addresses these concerns; however, the draft will open for public consultation in October 2025, which will be an important opportunity for anyone to voice concerns about the changes and advocate for things such as a safe harbor for long-term contracts.

The report also detailed what a transition period would look like, noting that “to support feasibility, the draft includes exemptions for smaller organizations, a legacy clause for long-term contracts, and allows estimated hourly data to be used—meaning companies can continue using the annual or monthly consumption data they already collect and match it with hourly generation data” (Huckins, 2025, 2). Though exact details aren’t out, this confirms that the draft includes details for long-term contracts signed before the changes are put into place and is giving them relief.

Science Based Targets initiative Revisions 

SBTi Revision Timing

In March 2025, the Science Based Targets initiative (SBTi) released a draft of its corporate net zero standard, version 2.0, for public consultation, with the expectation of a final product in 2026 and implementation in 2027. This update revises the existing standard (version 1.2 of October 2024) to align with the latest climate science and accelerate corporate decarbonization. The proposed changes make scope 2 target setting and reporting more rigorous and transparent, with significant implications for corporate climate strategies. 

SBTi Scope 2: Mandatory Reporting Separation

One of the changes included in the draft is the mandatory separation of scope 2 targets. In V1.2, combined scope 1 and 2 emissions targets were allowed; however, in V2.0, companies are required to set distinct scope 2 targets, which “ensures companies remain focused on reducing emissions they are directly responsible for and prevents scope 1 emissions from being overlooked due to the scale of scope 2 emissions and decarbonization of electricity grids” (SBTi Net-Zero Standard, 2025, 8). This heightens the need for targeted strategies to reduce electricity-related emissions, encouraging companies to move towards fully carbon-free operations. The V2.0 draft also requires category A companies (large and medium-sized companies in higher-income countries) to set long-term goals that are supported by the short-term goals. This will keep large companies more accountable while not making requirements too strict for small companies. 

SBTi Scope 2: Location-Based Targets

The SBTi draft also requires a new scope 2 target based on location-based emissions, departing from previous versions that allowed companies to focus primarily on market-based accounting. This location-based target would require companies to lower location-based scope 2 emissions or offset them with contractual purchases on the same grid, ensuring that corporate sustainability efforts drive decarbonization in the regions where they operate, rather than allowing companies to purchase RECs from renewable energy projects in different regions. It also notes that any of these contractual purchases must also align with the GHG protocol, which would include the changes discussed previously.

SBTi Scope 2: Data Transparency

Another major focus in the draft is data transparency, with companies facing stricter requirements for the data they have to collect and report. For example, larger companies may be required to obtain third-party verification for their carbon credits and mitigation efforts. They’ll also be required to report separate annual progress on scope 1 and 2 emissions, keeping them accountable to their specific targets. Additionally, they might be required to report their data based on the discussed changes to the GHG protocol, which would add greater visibility.

SBTi Scope 2: Cyclical Process

To help with long-term accountability, the draft also includes proposals for a 5-year cyclical process that requires companies to assess progress at the end of their target timeframe and set new targets that account for their previous performance. This would also include mandatory spot checks throughout the cycle to maintain integrity, with companies potentially facing stricter inspections, revised targets, or additional reporting requirements if they consistently underperform. 

(SBTi Net-Zero Standard, 8)

SBTi Scope 2: Feedback and Safe Harbor 

The public consultation (closed on June 1, 2025) has generated mixed feedback. Many strongly support the long-term and short-term targets, praising how they help both to attack the climate crisis head-on and to immediately support renewable energy projects. However, many companies have expressed concerns about the feasibility of meeting location-based targets and the costs associated with transitioning long-term REC contracts. 

Some changes are expected to be given short-term transition solutions, for example, “contributions to zero-carbon electricity in other grids shall count towards scope 2 targets as an interim measure” (SBTi Net-Zero Standard, 8). Additionally, small companies may be given relief by not having mandatory third-party assurance in their reporting (see SBTi’s company size definitions below). Like the GHG protocol, there is currently no word on a transition or safe harbor process for long-term contracts; however, it can be expected as SBTi refines the draft based on the feedback received.

(SBTi Net-Zero Standard, 8)

Zettawatts’ Perspective

From Zettawatts’ standpoint, the evolving standards for stricter reporting requirements represent both validation of our approach and significant market opportunities. A potential mandatory additionality requirement is a crucial step towards fostering meaningful climate impact. Our marketplace addresses this need by facilitating transactions for long-term clean energy contracts for projects not yet in operation. This change would level the playing field and ensure that all corporate clean energy purchases contribute to actual grid decarbonization rather than just distributing RECs from existing projects.

 We have some concerns about the proposed hourly matching requirements. First, the software and technological infrastructure needed to track and match these emissions would create barriers for many companies, which could potentially divert resources from actual decarbonization efforts. We also question how effectively hourly matching attacks the core climate challenge. The fundamental issue isn’t perfect temporal alignment of RECs with consumption, but rather increasing the total amount of clean energy on the grid. Companies would be better off focusing their investments on funding new projects that wouldn’t otherwise be built, rather than developing and navigating complex hourly accounting systems. These concerns are being communicated to the ISB by the aforementioned group of companies via a letter with this perspective.

The emphasis on geographical matching aligns with our commitment to supporting local clean energy development. The Zettawatts AREC marketplace can help companies identify and invest in projects in their operating region, creating direct connections between energy consumption and renewable energy development. 

We acknowledge the concerns about transition timelines and contract flexibility. The frameworks need to release clear guidance on safe harbor for long-term contracts, such as AREC contracts, PPAs, and VPPAs. As the standards evolve, we’re committed to helping our clients navigate the changing landscape while maintaining their sustainability commitments and supporting additional clean energy projects.

Works Cited

1. Gillenwater, Michael, and Michael Leggett. “Hourly Matching Claims for Scope 2 Reporting.” GHG management institute, May 30, 2025. https://ghginstitute.org/2025/05/30/hourly-matching-limitations-for-scope-2-reporting/.

2. Huckins, Sarah. “Scope 2 Standard Advances: ISB Approves Consultation on Market- and Location-Based Revisions; Signals Cross-Sectoral Work Ahead on Avoided Emissions: GHG Protocol.” Scope 2 Standard Advances: ISB Approves Consultation on Market- and Location-Based Revisions; Signals Cross-Sectoral Work Ahead on Avoided Emissions | GHG Protocol, January 8, 2025. https://ghgprotocol.org/blog/scope-2-standard-advances-isb-approves-consultation-market-and-location-based-revisions. 

3. Huckins, Sarah. “Scope 2 Technical Working Group Progress Update.” GHG Protocol, November 6, 2025. https://ghgprotocol.org/blog/scope-2-technical-working-group-progress-update.

4. L, Jennifer. “Market-Based VS Location-Based Emissions: What’s the Difference?” Carbon Credits, November 9, 2023. https://carboncredits.com/market-based-vs-location-based-emissions-whats-the-difference/. 

5. Millot, Julia. “Key Updates to GHG Protocol and SBTI: What Companies Need to Know.” Carbon Direct, June 5, 2025. https://www.carbon-direct.com/insights/key-updates-to-ghg-protocol-and-sbti-what-companies-need-to-know. 

6. “Proposed Changes to GHG Protocol Scope 2 Guidelines Threaten to Reshape Corporate Clean Energy Procurement.” Morrison Foerster, June 26, 2025. https://www.mofo.com/resources/insights/250626-proposed-changes-to-ghg-protocol-scope-2-guidelines.

7. “SBTi: Decoding the Changes in Draft Corporate Net-Zero Standard 2.0.” ClimateSeed, May 7, 2025. https://climateseed.com/blog/decoding-sbti-net-zero-standard-v2.

8. “SBTi CORPORATE NET-ZERO STANDARD Version 2.0 - Initial Consultation Draft with Narrative.” Science Based Targets initiative, March 2025. https://sciencebasedtargets.org/resources/files/Net-Zero-Criteria-Draft-for-Public-Consultation-v1-0.pdf.

9. “Scope 2 Technical Working Group Meeting.” GHG Protocol, February 19, 2025. https://ghgprotocol.org/sites/default/files/2025-02/S2-Meeting8-Presentation-20250219.pdf.

10. Spees, Kathleen, Long Lam, and Kala Viswanathan. “Assessment of Studies on US Hydrogen Tax Credits and Potential Takeaways for Scope 2 Guidance.” GHG Protocol, November 21, 2024. https://ghgprotocol.org/sites/default/files/2024-11/S2-TheBrattleGroupReport-20241121.pdf.

11. Stein, Zach. “Scope 2 Emissions.” Categories, How to Calculate & Importance, August 29, 2022. https://www.carboncollective.co/sustainable-investing/scope-2-emissions. 

12. Wyburd, Inigo. “SBTi Proposes Improvements to Net-Zero Standards.” Carbon Market Watch, March 25, 2025. https://carbonmarketwatch.org/2025/03/25/sbti-proposes-improvements-to-net-zero-standards/.

13. Fellers, David. “Are You Ready for ‘Carbon Accounting’  Compliance?” Bramasol Blog, July 22, 2024. https://ignitepossible.bramasol.com/blog/are-your-ready-for-carbon-accounting-compliance.