SBTi or CSRD? Overcoming the climate target dilemma

By Natalie Sepke and Luca Bisio

Originally published 2 October 2024.

The Corporate Sustainability Reporting Directive (CSRD), which began phased implementation in 2024, was set to require thousands of companies across Europe to provide detailed, standardised ESG disclosures, including the disclosure of climate targets and their details.

However, the regulatory landscape has shifted significantly. In February 2026, the European Commission published the Omnibus I Directive, which dramatically narrows the scope of CSRD reporting. At the same time, the Science Based Targets initiative (SBTi), long the primary body encouraging companies to set science-based targets aligned with the Paris Agreement, continues to evolve its framework, introducing greater flexibility in how companies can achieve their targets.

For companies navigating climate target-setting, the question is no longer simply "SBTi or CSRD?" but rather: "How do I build a climate data foundation that serves both frameworks and delivers value?"

SBTi and CSRD: Three key target setting differences

Despite the initial alignment between the SBTi and CSRD in terms of ambition (reducing emissions by 42% by 2030 and 90% by 2050), there are key differences that companies preparing to set targets should consider: base year, coverage, and sector-specific guidance.

Base year

The base year is a reference point for measuring a company's greenhouse gas (GHG) emissions, which serves as the benchmark for assessing progress in reducing emissions over time. The SBTi:

• does not allow for the normalisation of outliers
• permits a base year as early as 2015
• does not consider dynamic updates to the base year (i.e., reduction measures always refer to the initial set year)
• and excludes reductions made before the base year from counting toward the target

On the other hand, the CSRD:

• requires normalisation efforts to ensure representativity
• allows a base year to be set as early as three years before the first reporting period
• requires the base year to be updated every five years starting from 2030
• and permits reporting of reductions achieved between 2020 and the base year

These differences do not necessarily mean that companies with existing targets set under the SBTi need to update their base year to comply with CSRD standards. Both frameworks reference the 2020 – 2030 timeframe to define a minimum reduction target of 42%. Since the SBTi does not account for reductions made before the base year, companies should choose a base year that predates significant reduction measures.

The CSRD, however, considers reductions from 2020 onward. Therefore, selecting a later base year does not impede progress toward the target. An SBTi base year as early as 2020 may be appropriate, while the SBTi's most-recent-year can serve as the CSRD base year. The fixed 2020 reference in both frameworks allows SBTi alignment with the CSRD dynamic base year approach. Redefining the SBTi base year may be unnecessarily complex for some businesses, offering little benefit for CSRD compliance and risking the loss of recognition for earlier reduction efforts.

Coverage

While the SBTi requires targets to include 95% of scope 1 and scope 2 emissions, and 67% of scope 3 emissions, the CSRD guidance does not mention coverage. It is unclear whether companies can adhere to their set coverage or if the 42% reduction defined by the CSRD must apply to 100% of GHG emissions. If no coverage limitation can be applied under the CSRD, the absolute reduction in total emissions will be lower under SBTi guidance compared to the CSRD, assuming a company has chosen the minimum requirements of the SBTi.

Sector-specific guidance

Under SBTi framework, companies in specific sectors are required to follow dedicated methodologies and rules to set their targets. In practice, companies operating in the Forest, Land and Agriculture (FLAG) sector, as well as financial institutions, must establish two distinct sets of targets in accordance with SBTi guidelines. One set addresses sector-specific emissions, while the other covers emissions under the standard corporate Net-Zero guidance. With the CSRD set to publish its sectoral guidance in 2026, these types of targets may not yet be aligned. Moving forward, it is crucial that the dual target-setting requirements do not conflict with CSRD provisions, and extra care should be taken to ensure future alignment between SBTi and CSRD sectoral pathways.

Post-omnibus update: The European Commission is no longer empowered to adopt binding sector-specific reporting standards under the CSRD. This means the anticipated dual-alignment challenge between SBTi sectoral pathways and CSRD sectoral standards will not materialise. Companies with SBTi FLAG or financial institution targets can proceed without concern about conflicting CSRD sectoral requirements. A significant simplification compared to the situation anticipated in 2024.

SBTi flexibility and CSRD rigidity

While there are these three target setting misalignments between the SBTi and CSRD, other differences often come down to the flexibility offered within the SBTi framework. For example, the CSRD mandates that companies align their targets with the 1.5°C pathway for all three scopes while the SBTi allows companies to choose between the 1.5°C pathway and the "well below 2°C" pathway for scope 3 emissions.

Another area of divergence is the target year. The CSRD requires the first target to be set for 2030 at the latest, while the SBTi provides a more flexible timeline, allowing companies to set targets within a five to ten year range from the submission date, which could extend to 2034 if submitted in 2024.

Moreover, the CSRD insists on absolute reduction targets but permits additional intensity targets if they are meaningful. On the other hand, the SBTi allows more flexibility for scope 3 emissions by offering companies the choice between absolute, intensity, and engagement targets.

The data serves both frameworks

Regardless of whether your company remains in CSRD scope post-omnibus, the underlying climate action work is the same. The omnibus changes the reporting obligation, but not the science of climate change, the expectations of your customers, or the financial logic of decarbonisation.

A validated SBTi target fulfils the CSRD's regulatory requirements on climate targets. The same CCF data powers both your SBTi submission and your ESRS E1 disclosures. And for companies now outside mandatory CSRD scope, having SBTi-aligned targets and climate data ready is a competitive advantage. Large customers still in scope need value chain data.

The smartest move is not to stop climate action because reporting timelines shifted, but to ensure the data you're building creates value across every framework that applies to you.

Helping you navigate the frameworks

Despite these differences, the overall ambition and scientific foundation of both the SBTi and CSRD are aligned, reflecting a shared commitment to limiting global warming to 1.5°C. At ClimatePartner, we assist your company in developing credible, sustainable targets that meet the requirements of both the SBTi and CSRD frameworks. We guide you through their complexities, selecting the most appropriate options within the SBTi to ensure CSRD compliance and communicating any differences that might remain.

For more information or support, feel free to reach out to us.