A Practical Guide to Setting
Science-Based Targets (SBTi)
for Canadian Companies

✦Why SBTi Matters in 2026

The Science Based Targets initiative has become the de-facto global standard for validating corporate climate ambition. For Canadian companies, SBTi validation signals far more than regulatory compliance — it is increasingly a prerequisite for access to European supply chains, institutional capital, and talent that prioritizes sustainability credibility.

In a landscape crowded with net-zero pledges of varying quality, a validated SBTi target is one of the few signals that independent parties — investors, procurers, regulators — treat as credible. With the EU CSRD specifically recognizing validated SBTi targets as a strong disclosure signal, Canadian companies exporting to or raising capital in Europe have direct commercial reasons to pursue validation.

✦What SBTi Actually Requires

Before diving into the process, it helps to understand what SBTi validation actually certifies. At its core, SBTi requires companies to set greenhouse gas reduction targets that are aligned with the most ambitious pathway of the Paris Agreement — limiting warming to 1.5°C above pre-industrial levels.

Under the current framework (Corporate Near-Term Criteria V5.3.1, April 2026), two types of validated targets are available:

Core requirements at a glance

1Commit — Registering Your Intent

The SBTi process formally begins with a commitment letter — a public declaration of your intent to set science-based targets. This is not merely administrative; it is a public pledge visible on the SBTi Target Dashboard, which institutional investors, procurement teams, and NGOs actively monitor.

What the commitment entails

• Submission of commitment form through the SBTi Services portal (sbtiservices.org)
• Payment of commitment fee (included in the validation fee structure)
• Public listing on the SBTi Target Dashboard as "Committed"
• 24-month window to submit targets for validation (commitment lapses if targets not submitted)
• Senior leadership sign-off — typically CEO, CFO, or CSO

Internal governance requirements

Before committing, ensure you have:

• Board or executive-level mandate for the target-setting initiative
• Clear ownership — typically Sustainability, Finance, or Operations
• Budget allocated for GHG inventory work, external support, and validation fees
• Cross-functional steering group (Finance, Operations, Procurement, Legal)

2Build Your GHG Baseline Inventory

The GHG inventory is the technical foundation of your SBTi targets. Without a complete, defensible inventory covering Scopes 1, 2, and 3, you cannot set meaningful targets — and the SBTi will not validate them. This is typically the most time-intensive step in the entire process.

Inventory requirements for SBTi

Scope 3 — the critical category

For most Canadian companies, Scope 3 represents 70–90% of total emissions, meaning it cannot be deferred. The 15 GHG Protocol categories span the full value chain. For prioritization, start with the categories most likely to be material for your sector:

Calculation methodology — choosing the right approach

The GHG Protocol allows several calculation approaches. The SBTi recommends a hybrid approach: use spend-based methods for initial materiality screening, then progressively shift high-impact categories to activity-based calculation as supplier data quality improves.

3Choose Your Reduction Pathway

Once your baseline inventory is established, you must select the science-based pathway against which you will set your targets. The SBTi provides several sector-specific and cross-sector methods. For most Canadian companies, the cross-sector methods will apply unless you operate in a sector with dedicated SBTi guidance.

Primary method: Absolute Contraction Approach (ACA)

The ACA is the most widely used method and requires companies to reduce their absolute greenhouse gas emissions by at least 4.2% per year to align with a 1.5°C pathway. This updated approach (April 2026) applies to all Scopes combined and does not allow intensity-based targets to substitute for absolute reductions in most sectors.

Sector-specific methods (check if applicable)

If your company primarily operates in any of the following sectors, sector-specific guidance takes precedence over the cross-sector ACA:

4Set and Model Your Targets

Target-setting is where the technical work of the GHG inventory converts into formal reduction commitments. The SBTi provides free target-setting tools (downloadable from the SBTi Services portal) that guide companies through the calculation of required absolute reductions.

What your targets must specify

• Base year — no earlier than 2015; inventory data must be ≤2 years prior to submission. For 2026 submissions, 2023 or 2024 base years are required.
• Target year — between 5 and 10 years from submission. For H1 2026 submissions: 2031–2036 range.
• Base year emissions — verified Scope 1, 2, and material Scope 3 figures in tCO₂e
• Reduction percentage — expressed as a % reduction vs base year, consistent with the ACA 4.2%/year trajectory or sector-specific method
• Coverage — which entities, operations, and Scope 3 categories are included and excluded, with justification for exclusions

Scope 2 — location-based vs market-based

For Scope 2, the SBTi requires companies to report both location-based and market-based figures. If your company has renewable energy contracts (PPAs, RECs), the market-based figure will be lower. However, the SBTi increasingly scrutinizes the quality of renewable energy instruments — not all RECs are treated equivalently. Unbundled RECs purchased from a different grid region than your consumption may not be credited in the same way as matching PPAs or bundled instruments.

Internal modelling before submission

Before submitting, model your reduction pathway against your operational plans. The questions to answer are: Does the required absolute reduction trajectory align with your capital expenditure plans? Which facilities, business units, or supply categories will be responsible for delivering reductions? Is your target year realistic given planned asset lifecycles and supplier engagement capacity?

5Submit for Validation

Validation is the formal review process through which SBTi Services assesses whether your targets meet the SBTi criteria. Since the corporate and SBTi Services organizational separation completed in 2024, validation is conducted through SBTI Services Limited (a wholly owned subsidiary).

What the submission package requires

• Completed SBTi target-setting tool (Excel-based, downloadable from SBTi Services portal)
• GHG inventory data for base year — all Scopes with coverage documentation
• Scope 3 screening results and materiality documentation
• Target boundary documentation — entities included and excluded, with justification
• Supporting data for any Scope 2 market-based accounting (REC/PPA certificates)
• Evidence of senior-level approval of targets
• Validation fee payment confirmation

Typical validation timeline

Once a complete submission package is received, the SBTi Services validation process typically takes 8–20 weeks depending on company complexity and current queue. Large companies with complex Scope 3 inventories or sector-specific methods tend to require longer review periods. Budget for at least one round of clarification requests from the validation team.

6Disclose, Report, and Track Progress

Validation is not the finish line — it is the starting line for ongoing accountability. The SBTi requires companies with validated targets to publicly disclose and annually report on progress.

Annual reporting requirements

• Annual GHG inventory update covering all Scopes included in targets
• Progress disclosure against target trajectory — absolute emissions vs target path
• Public disclosure — in annual report, sustainability report, or CDP submission
• CDP Climate reporting is strongly recommended (SBTi and CDP are founding partners)

Target status on the SBTi dashboard

Since December 2025, the SBTi Target Dashboard uses an expanded set of status categories reflecting the new Commitment and Target Statuses document. Statuses now include: Committed, Targets Set, Active, Extended, Updated, Expired, Inactive, Withdrawn, and Archived. Companies should monitor their dashboard status actively — a lapsed or expired status is publicly visible and can damage stakeholder relationships.

7The Mandatory 5-Year Review

Since December 18, 2025, SBTi has required all companies with validated targets to undergo a mandatory review at the five-year anniversary of their validation date. This is a significant new accountability mechanism — and one that Canadian companies with early SBTi targets (validated 2020–2021) are already encountering.

How the review works

• Trigger date: 5-year anniversary of original target validation date
• Review window: 6 months from trigger date to submit review evidence to SBTi Services
• Update window: If updates are needed, revised targets must be submitted for validation within 12 months of trigger date
• Flexibility for 2025 reviews: Companies with targets validated in 2020 may submit updated targets through 2026

✦Fees, Timelines & Total Cost

SBTi validation fees are set by SBTI Services Limited and are paid through the Services portal. The following fee structure applies to near-term and net-zero target validation as of 2026:

✦The SME Validation Route

For companies meeting the SME eligibility criteria, the SBTi offers a streamlined validation route with simplified requirements and significantly reduced fees. This is the recommended starting point for most Canadian mid-market companies.

SME eligibility

• Fewer than 500 employees (250 in some sector definitions) — verify current threshold on SBTi Services portal
• Annual revenue below sector-specific threshold
• Not a financial institution (separate pathway applies)

Simplified requirements for SMEs

• Near-term targets only required — net-zero validation optional
• Simplified Scope 3 screening — less granular category breakdown required
• Reduced documentation requirements — SBTi SME target-setting form used instead of full corporate tool
• $1,250 USD validation fee — significantly lower than large corporate fees

"The SME route makes SBTi validation accessible for the mid-market companies that make up the backbone of Canadian supply chains — and the ones European buyers most frequently ask for sustainability data from."

✦Preparing for Net-Zero Standard V2.0

The SBTi Corporate Net-Zero Standard V2.0 is currently in its second public consultation (draft released November 2025). Finalization is expected by end of 2026, with V2.0 becoming operational for new submissions in 2027. V1.3.1 remains valid for submissions up to 2030.

Key changes in V2.0 to prepare for

✦The Canadian Context

Canadian companies setting SBTi targets operate in a distinct regulatory and energy environment that creates both advantages and complications.

Advantages

• Clean electricity in key provinces. Quebec, British Columbia, and Manitoba have among the cleanest electricity grids in the world. For companies with operations in these provinces, Scope 2 emissions are very low — and market-based accounting with provincial RECs is meaningful.
• Carbon pricing as a target driver. Canada's federal carbon pricing escalating to $170/tonne by 2030 creates financial incentives for Scope 1 reductions that make the SBTi trajectory more commercially attractive than in jurisdictions without carbon pricing.
• CSSB standards alignment. The Canadian Sustainability Disclosure Standards (CSDS) align with IFRS ISSB, which in turn is methodologically compatible with SBTi target frameworks. Building an SBTi program contributes to CSDS readiness simultaneously.

Complications

• Alberta grid intensity. Companies with operations in Alberta face significantly higher Scope 2 emissions than those in central or coastal Canada — and the transition to clean electricity is slower, requiring more careful Scope 2 target design.
• Oil sands and FLAG sectors. Companies with operations or suppliers in the oil sands, agriculture, or forestry sectors face sector-specific SBTi requirements (FLAG guidance, oil and gas framework) that are more complex than the cross-sector ACA.
• US supply chain exposure. Most Canadian manufacturers have significant US supplier exposure, where Scope 3 data quality and supplier engagement on emissions is less mature than in Europe. Expect lower data quality from US suppliers than from European counterparts.

✦Common Mistakes to Avoid