The forest, land, and agriculture (FLAG) sector accounts for approximately 24 percent of greenhouse gas (GHG) emissions globally. The FLAG sector is a key driver of climate change through crop cultivation, livestock production, and deforestation. As a result, this sector plays a critical role in the aims to reduce global GHG emissions - the 1.5°C reduction scenario needed to stave off the worst impacts of climate change.

The FLAG sector also stands to lose tremendously, as the impacts of a changing climate become a reality rather than a distant existential threat. Dangerously high temperatures for agricultural workers, unprecedented rainfall, drought-induced wildfires, and pollinator habitat destruction are among the many climate-related impacts that have already jolted the FLAG sector and those who rely on it for their livelihoods, across the world.

With these imperatives front and center, leading authorities developed guidance on FLAG emissions accounting and target-setting, priming companies to take a closer look at and actively manage the FLAG GHG impacts within their own operations and across their value chain activities.

Here is what you should know about these guidance documents and how companies can address their land sector GHG impacts.

Accounting for FLAG emissions

In 2022, the Greenhouse Gas Protocol (GHGP) released the Land Sector and Removals Guidance (LSRG) draft, which explains how companies should account for and report GHG emissions and removals from land management, land use change, biogenic products, carbon dioxide removal technologies, and other land-related sources. This guidance builds on the Corporate Value Chain (Scope 3) Accounting and Reporting Standard and requires that companies separate out FLAG-related emissions into a handful of categories to provide insight into the practices that drive GHG emissions for a particular commodity. These categories include:

• Non-land related emissions or fossil fuel emissions,
• Land use change emissions,
• Land management carbon dioxide emissions,
• Land management non-carbon dioxide emissions,
• Carbon removals, and
• Gross biogenic product emissions.

The idea is that having this level of emissions disaggregation will ultimately help identify where companies should focus carbon mitigation strategies across different commodities. For example, land management emissions from fertilizer application might drive the carbon footprint of conventional corn purchased from the United States, whereas land use change emissions from deforestation might drive the carbon footprint of palm oil purchased from Indonesia. While both will require a strong understanding of a company’s own supply chain, the mitigation strategies will be different for each commodity, under these circumstances.

While the GHGP LSRG is currently available in its draft form, GHGP announced that the Guidance will be finalized in 2024. Until then, companies are encouraged to begin using the LSRG draft to develop their first FLAG inventories.

Setting a FLAG target

To guide companies to set meaningful targets, the Science-Based Targets initiative (SBTi) published the Forest, Land and Agriculture Science-Based Target-Setting Guidance. This framework outlines how land-intensive companies should update their current climate targets and/or set new targets to mitigate their FLAG emissions.

Companies that opt to set FLAG targets then have two separate components to their target – the “energy/industry” (or non-FLAG) component and the FLAG component. The energy/industry target includes emissions from all activities that occur after the “farm/forest gate”, such as energy required to process raw materials into finished goods, fuel burned to transport materials across the value chain, and product end-of-life emissions. The FLAG component of the target includes all emissions that occur before the commodity leaves the “farm/forest gate”, such as soil emissions from fertilizer application, enteric emissions from livestock, emissions from manure management, etc.

Targets may ultimately be combined for communication purposes; however, each component requires different levels of reductions and must be achieved separately using different mitigation strategies. Additional information on energy/industry targets can be found here.

While all companies should account for and report on their land sector carbon emissions per the GHGP LSRG, SBTi only requires companies that produce, manufacture, or sell forestry or agricultural commodities, plus companies in other sectors with 20 percent or more of their total GHG emissions coming from FLAG sources, to set FLAG targets. The detailed list of FLAG-designated sectors includes:

• Forest and Paper Products companies – Forestry, Timber, Pulp and Paper, Rubber,
• Food Production companies– Agricultural Production and Animal Source,
• Food and Beverage Processing companies,
• Food and Staples Retailing companies,
• Tobacco companies, and
• Companies in other sectors with 20 percent or more of their scope 1-3 emissions coming from FLAG sources.

Depending on where your company sits within the value chain, you may be required to set a target using either the FLAG Commodity Approach or the FLAG Sector Approach.

The FLAG Commodity Approach is an intensity-based target approach reserved for supply-side companies with emissions associated with the production of one or more of these common commodities: beef, chicken, dairy, leather, maize, palm, oil, pork, rice, soy, wheat, or timber and wood fiber. The commodity approach includes different reduction pathways for each commodity, depending on the production region (26 regions currently available.)

Companies that either have diversified land-intensive activities in their supply chain, operate in demand-side capacities (e.g., consumer-facing brands, retailers, etc.), or produce a commodity not yet covered in the list of commodities above (e.g., rubber, coffee, cocoa) are required to set their target using the FLAG Sector Approach, which applies an absolute reduction target. Additional details on the most appropriate FLAG target-setting approach can be found in the Guidance document as well as the SBTi FLAG Tool.

Another key component of the FLAG target, regardless of the approach taken, is the no-deforestation commitment. All companies setting FLAG targets are required to not only publicly commit to no-deforestation across key deforestation-linked commodities, but also to achieve it by year-end 2025 (i.e. December 31, 2025)—just two short years away. With the launch of mandatory forest-related regulation and popularization of voluntary forestry pledges, deforestation risk is already top of mind for many multinational companies, as they are beginning to think about risk mitigation and traceability across their value chains. Setting a FLAG target and committing to no deforestation by 2025 is not a far leap from the work required to comply with these regulations and pledges.

In fact, the new European Union Deforestation Regulation (EUDR) requires operators and traders in the EU to collect geographic coordinates of the plots of land where deforestation-linked commodities were produced. This level of detail is much more specific than what is strictly required to set a FLAG target, however, having raw material traceability will enable companies to better estimate the statistical and direct land use change (sLUC and dLUC) needed to calculate emissions, develop emissions reduction plans, and eliminate deforestation within their value chain. Traceability to the exact production site will also allow for companies to invest in and capitalize on carbon removals, which require strict monitoring and traceability criteria.

Once the final GHGP LSRG draft is published, companies have six months to develop and submit their FLAG target. Some industry leaders have already submitted and gained approval for their targets. Danone, for example, was among the first companies to have their target approved by SBTi. Their comprehensive GHG reduction targets include the following components:

• Reduce absolute scope 1 and 2 GHG emissions 47.2 percent;
• Reduce absolute scope 3 GHG emissions from purchased goods and services, fuel-and energy-related activities, upstream transportation and distribution, waste generated in operations, downstream transportation and distribution and end-of-life treatment of sold products 42 percent;
• Reduce absolute scope 1 and 3 FLAG GHG emissions 30.3 percent; and
• Achieve no deforestation across its primary deforestation-linked commodities with a target date of FY2025.

Translating guidance into action

We are over a year into the journey of measuring FLAG emissions and setting FLAG targets. While there is still some uncertainty as the industry awaits consensus on the final accounting guidance, this much is clear – business as usual is not the path forward.

Clear actions include:

• Reduce emissions from land use change and eliminate deforestation.
• Improve the way we manage our farms and forests.
• Reduce food waste and losses across the entire value chain from farm to consumer.
• Shift our diets to favor more climate-friendly options.

And there is no time to waste. Investing in FLAG climate mitigation activities, e.g., carbon removals, may not have an immediate GHG reduction impact, as building healthy soil, vetting novel on-farm technologies, and reforesting degraded land can all take time. However, herein lies the opportunity to connect climate to nature. For example, nature-based climate solutions can contribute up to 30 percent of emissions mitigation needed to achieve global climate targets as well as provide many other co-benefits, such as improved water quality, air quality, and biodiversity.

Neither upstream suppliers nor downstream customers can go at it alone. It is crucial that companies invest in value chain activities to build capacity for resilient forestry, food, and agriculture supply chains via carbon removals, insetting, or other mitigation activities. When companies invest in climate, the benefits are compounding. As companies advance their climate programs, FLAG or otherwise, more business value is realized through progress on nature strategy, improved productivity, risk reduction, and continued growth opportunities.