POLICY & REGULATION · 7 min read
The SBTi’s New Net-Zero Standard Turns on a 1,000-Employee Test — Putting Sri Lanka’s Largest Companies in the Strictest Tier
The Science Based Targets initiative published Version 2.0 of its Corporate Net-Zero Standard on 11 June 2026, with mandatory use for all target submissions from 1 February 2028. The consequential detail for Sri Lankan companies is a headcount threshold: any company with 1,000 or more full-time equivalent employees falls into Category A, the strictest tier, regardless of turnover or national income classification.
By the ESGNexus Editorial Team · August 2026 · Estimated reading time: 7 minutes
KEY TAKEAWAYS
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A Sri Lankan company with 1,000 full-time employees carries the same net-zero target-setting obligations as a European multinational. That is the operative consequence of the categorisation table in the Science Based Targets initiative’s Corporate Net-Zero Standard Version 2.0, published on 11 June 2026. It is not qualified by revenue. It is not qualified by sector. It is not qualified by the national income level.
The SBTi’s launch material says Version 2.0 contains “accommodations for small and medium-sized enterprises, and companies in lower-income countries.” That is true in design but has limited effect in Sri Lanka, because the operative threshold is headcount and much of Sri Lanka’s corporate sector is labor-intensive.
What Version 2.0 Actually Changed
Version 2.0 is the first structural rewrite of the Standard since its introduction. It was built on two public consultations, in March and November 2025, drawing responses from more than 1,800 stakeholders, and on pilot testing with more than 320 companies in the first phase and more than 50 in the second. It takes effect on 1 February 2027.
The headline change is the split into two company categories with different obligations. Beneath it sit several substantive shifts. Near-term targets must now cover a five-year period, and long-term targets must be set for 2050 at the latest, with emissions reduced to residual levels described in the executive summary as “10% or less”. Companies with significant electricity use must report the share of consumption matched with low-carbon electricity on an hourly basis, not merely on an annual basis. High-integrity carbon credits are positioned as “a complement and not a substitute” for reductions.
One widely reported feature deserves precision. The Standard establishes a voluntary Ongoing Emissions Responsibility programme and states that “the intention is to mandate ongoing emissions responsibility from 2035”. That is a stated intention in a published standard. It is not a rule, and it should not be reported as one.
The Threshold That Catches Sri Lanka
The categorisation table has two routes into Category A. The first applies in any country: a company qualifies if it meets at least one of “Net turnover: ≥ €450 million” or “FTE: ≥ 1,000”. The second applies only in high-income countries and sets a far lower bar — scope 1 and 2 emissions of 10,000 tCO₂e or more, or any two of a €25 million balance sheet, €50 million turnover, and 250 employees. Everything else is Category B.
The two limbs of the first route are alternatives, not conditions. A company clears the headcount threshold regardless of whether it comes anywhere near €450 million in turnover. For a labor-intensive economy, that is the whole story.
| Company | Employees | Group revenue, same period |
| MAS Holdings (private) | 96,488 | Not disclosed |
| Hirdaramani (private) | 53,796 | USD 1.2 bn |
| Hayleys PLC | 38,746 | Rs. 585,021 mn |
| Aitken Spence PLC | 20,300 | Rs. 96,591 mn |
| Cargills (Ceylon) PLC | 10,667 | Rs. 241,840 mn |
| Hemas Holdings PLC | 6,504 | Rs. 127,362 mn |
| Hayleys Fabric PLC | 3,435 | USD 123.8 mn |
| Dialog Axiata PLC | 2,865 | Rs. 179,641 mn |
Source: each company’s own most recent annual, integrated, or sustainability report. Periods differ and are not directly comparable: MAS and Hirdaramani are for the calendar year 2024; Hayleys, Aitken Spence, Hemas, and Hayleys Fabric are for the year ended 31 March 2026; Cargills is for the year ended 31 March 2025; Dialog is for the year ended 31 December 2025. Hirdaramani’s report gives a headline figure of over 55,000 and a gender breakdown summing to 53,796; the lower, itemised figure is used here. Brandix is absent because its ESG report could not be retrieved.
Every company in that table is Category A on headcount alone. Two of them make the point sharply. Hayleys Fabric PLC reported revenue of USD 123.8 million for 2025/26 — a fraction of the €450 million turnover test — and is nonetheless Category A, because it employs 3,435 people. At the other end, Dialog Axiata is the least labor-intensive large listed company in the sample, and still clears the threshold nearly threefold.
The practical reading is uncomfortable. The Standard’s small- and medium-sized enterprise accommodation is designed to cater to genuinely small companies. In Sri Lanka, a company can be modest by revenue, unlisted, and entirely domestic, and still sit in the same tier as a global corporation — because it employs a thousand people.
The Concession for Poorer Countries Does Not Work the Way It Appears
On 1 July 2026, three weeks after Version 2.0 was published, the World Bank reclassified Sri Lanka from lower-middle-income to upper-middle-income in its 2026–2027 country classification. Sri Lanka was one of six economies to move up, alongside Jordan, Micronesia, the Philippines, and Viet Nam, and the World Bank noted that it “only narrowly crossed the threshold” — the upper-middle band begins at USD 4,636 of gross national income per capita.
The intuitive conclusion is that Sri Lankan companies have just lost the Standard’s lower-income accommodation. They have not. The categorisation table does not distinguish between low-, lower-middle-, and upper-middle-income countries at all. It draws a single line: high-income countries on one side, any country on the other. Sri Lanka has moved from one non-high-income band to another. Under the Standard, nothing has changed.
This is worth stating plainly because the Standard’s own plain-English summary invites the error. Section A.1 describes Category B as comprising “small companies from all countries and medium-sized companies from lower-income countries” — language the operative criteria table never uses. Where the summary and the table diverge, the table governs. Geography is determined by “the jurisdiction of incorporation of the ultimate parent company” and is classified using World Bank income categories.
So the accommodation survives Sri Lanka’s reclassification intact. It is of little use, because the companies it would help are almost all disqualified by their payrolls before the income group is ever reached.
What Category A Costs
The distinction between the two categories is not cosmetic. Three obligations that are optional for Category B are mandatory for Category A, and each carries a real cost.
| Requirement | Category A | Category B |
| Separate scope 1 and scope 2 targets (C9.1) | Required | Required |
| Separate scope 3 targets (C9.1, C14, C15) | Required | Optional |
| Identify scope 3 categories at 5% or more of the total (C5.7) | Required | Not applicable |
| Publish a transition plan within 15 months of validation (C2.4) | Required | Optional |
| Independent third-party assurance, at least limited, over base-year data (C7) | Required | Recommended |
| Track and report progress annually (C36) | Required | Required |
| Long-term target set for 2050 at the latest (C9.3) | Required | Required |
Source: SBTi, Corporate Net-Zero Standard Version 2.0 Criteria, June 2026 — criterion numbers as published. Assurance under C7 covers scope 1, scope 2, and scope 3 emissions for the target base year, low-carbon electricity calculations, and emissions from significant emissions-intensive activities.
For a Sri Lankan finance function, the assurance requirement is the first to price. It attaches to the base year, not to the target. A company that has never had its emissions inventory independently assured cannot simply commission an opinion on last year’s figures; it needs assurance over the year to which its target is anchored, which may be several years back and may have been compiled to a standard that no longer holds.
Three Sri Lankan Companies Are Already Inside This
A caveat first, and it is not a formality. ESGNexus was unable to retrieve the SBTi’s target dashboard filtered for Sri Lanka; the initiative’s company data files are not accessible for automated retrieval, and the dashboard renders client-side. Everything that follows is what the companies say in their own published reports, not confirmation from the SBTi register. Readers who need the register position should check it directly.
MAS Holdings is the furthest along and the most exposed. Its Impact Report 2024 records an “SBTi validated 2025 target of 25.2%” for scope 1 and 2 against a 2019 base year, and scope 3 coverage extending to “85% [of] our suppliers by spend and 100% of joint ventures”. It also contains the single most consequential sentence in this story.
MAS is proposing revised SBTi targets for 2030 in line with an adjusted baseline and new SBTi guidance.
— MAS Holdings, Impact Report 2024
The country’s largest private employer is already rebasing its targets against the new regime. It is not waiting for 2028.
Hayleys Fabric PLC states in its 2025/26 annual report that it “emerged as the first fabric manufacturer in Sri Lanka to obtain verification of its net-zero GHG emissions targets” by the SBTi. The report discloses no base year, target years, or scope coverage percentages. Under Version 2.0, the base year is precisely what must be assured — so the missing detail is not a presentational gap.
Aitken Spence PLC’s annual report for the year to 31 March 2026 records that its near-term targets “are currently under review for validation by the SBTi”. A company release dated 5 June 2026 announced that it had become the first Sri Lankan diversified group to receive SBTi validation. The sequence is consistent — the report closed before the validation landed. The release does not disclose the targets, scopes, base year, or validation date. An announced validation that names none of these tells an investor nothing they can check.
Two absences are worth recording alongside them. Hayleys PLC’s group report makes no mention of SBTi, despite a listed subsidiary’s claim, and records its own 2030 targets as not validated against third-party frameworks. John Keells Holdings’ 2025/26 annual report contains no reference to SBTi. Dialog Axiata’s net-zero commitment is aligned with its Malaysian parent Axiata’s SBTi-approved targets rather than validated in its own right—a distinction that matters because Category A status is assessed based on the jurisdiction of the ultimate parent.
SLFRS S2 Already Asks the Question
Sri Lankan boards may be tempted to file this as a voluntary matter. It is not, once it interacts with the reporting mandate already in force.
IFRS S2, on which SLFRS S2 is modeled, requires an entity disclosing a climate-related target to state “whether the target and the methodology for setting the target have been validated by a third party” — paragraph 34(a) — and “whether the target was derived using a sectoral decarbonisation approach” in paragraph 36(d). SLFRS S1 and S2 have applied to Sri Lanka’s top 100 CSE-listed companies by market capitalization since 1 January 2025, to all Main Board-listed entities from 2026, and will reach unlisted companies with turnover above LKR 10 billion from 2028.
The disclosure obligation therefore already exists. What Version 2.0 changes are is what the answer means. A company writing “validated by the SBTi” in its 2027 or 2028 report is describing a validation under one of two different standards with materially different requirements — and from 1 February 2028, only one of them is available.
Source: IFRS S2 Climate-related Disclosures, paragraphs 34(a) and 36(d), cited from UK SRS S2, the UK Government’s licensed reproduction of IFRS S2 with identical paragraph numbering — assets.publishing.service.gov.uk. SLFRS S1 and S2 implementation timeline: CA Sri Lanka, Sustainability Disclosure Standards and Implementation Roadmap — casrilanka.com
The Dates That Matter
| Date | What happens |
| 11 June 2026 | SBTi publishes the Corporate Net-Zero Standard Version 2.0. |
| 1 July 2026 | World Bank moves Sri Lanka to upper-middle-income. No effect on SBTi company category. |
| 1 February 2027 | Version 2.0 effective date. |
| Q1 2027 | Target submissions are open under Version 2.0. Version 1.3.1 remains available. |
| 31 January 2028 | The last day on which a target may be submitted under Version 1.3.1. |
| 1 February 2028 | Version 2.0 becomes mandatory for all target submissions. |
| 2035 | SBTi’s stated intention is to mandate ongoing emissions responsibility. An intention, not yet a rule. |
Source: SBTi, The new Corporate Net-Zero Standard Version 2.0 and Corporate Net-Zero Standard Version 2.0, June 2026 — sciencebasedtargets.org; World Bank, 2026-2027 Country Income Classifications, 1 July 2026 — blogs.worldbank.org
What to Do Before the First Quarter of 2027
1. Count your full-time equivalents and settle your category. This takes an afternoon and determines everything else. If the group is at or above 1,000 FTE, it is Category A, and the scope 3, transition plan, and assurance obligations all apply. Consolidate at the level of the ultimate parent, because that is where the Standard assesses it.
2. Fix and defend your base year now. Base-year emissions are what must carry independent assurance under Category A. Identify which year your target will anchor to, and establish whether the inventory for that year was compiled to a standard an assurer will accept. This is the longest-lead item on the list.
3. Test whether your scope 3 inventory can carry a target, not just a disclosure. Category A companies must identify every scope 3 category that accounts for 5% or more of the total and set targets for them. Reporting a scope 3 number under SLFRS S2 is a materially lower bar than setting a validated target.
4. Price the assurance before you commit to a submission date. Ask your assurer what limited assurance over base-year scope 1, 2, and 3 data, low-carbon electricity calculations, and emissions-intensive activities would cost and how long it would take. In Sri Lanka, the constraint may be assured capacity rather than fee.
5. If you already hold a Version 1 validation, establish what happens to it. MAS Holdings is already proposing revised 2030 targets in response to the new guidance. Any company holding a validated target should ask the same question now rather than in the last quarter of 2027, when the queue forms.
ESGNexus will track which Sri Lankan companies submit targets under Version 2.0 once the window opens in the first quarter of 2027, and will record the base year, scope coverage, and assurance position for each in our company disclosure profiles — the same three fields that decide whether a net-zero claim can be checked. Our profiles of Hayleys, John Keells, Aitken Spence, Dialog Axiata, Hemas, and Cargills already carry the target and assurance positions those companies disclosed in their first mandatory SLFRS filings. For most of them, the gap between what is disclosed there and what Category A will require is the work of the next eighteen months.
Sources & Further Reading
Science Based Targets initiative, “Corporate Net-Zero Standard Version 2.0”, June 2026 — sciencebasedtargets.org
Science Based Targets initiative, “Corporate Net-Zero Standard Version 2.0 Criteria”, June 2026 — sciencebasedtargets.org
Science Based Targets initiative, “The SBTi releases Corporate Net-Zero Standard V2.0 to accelerate corporate climate action”, 11 June 2026 — sciencebasedtargets.org
Science Based Targets initiative, “The Corporate Net-Zero Standard Development”, 2026 — sciencebasedtargets.org
World Bank, “Who moves up and why? A closer look at the 2026-2027 World Bank Group Country Income Classifications Release”, 1 July 2026 — blogs.worldbank.org
World Bank, “World Bank Country and Lending Groups”, FY2027 classification — datahelpdesk.worldbank.org
IFRS Foundation, IFRS S2 Climate-related Disclosures, paragraphs 34 and 36, cited from UK SRS S2 — assets.publishing.service.gov.uk
MAS Holdings, “Impact Report 2024 — Lives Changed for Good” and “Our Planet Changed for Good” — masholdings.com
Hirdaramani, “Apparel Sustainability Report 2024” — sustainability.hirdaramani.com
Hayleys PLC, “Annual Report 2025/26” — hayleys.com
Hayleys Fabric PLC, “Annual Report 2025/2026” — cdn.cse.lk
Aitken Spence PLC, “Annual Report 2025-2026” and “Aitken Spence becomes Sri Lanka’s First Diversified Group to receive SBTi validation”, 5 June 2026 — aitkenspence.com
Cargills (Ceylon) PLC, “Integrated Annual Report 2024/25” — cdn.cse.lk
Hemas Holdings PLC, “Annual Report 2025/26” — hemas.com
Dialog Axiata PLC, “Integrated Annual Report 2025” — dialog.lk
John Keells Holdings PLC, “Annual Report 2025/26” — keells.com
CA Sri Lanka, “Sustainability Disclosure Standards” and “Implementation Roadmap” — casrilanka.com
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Data disclaimer: Information in this article is sourced from publicly available documents. ESGNexus does not independently verify company disclosures. Errors and omissions excepted.