.jpg)
Over the last several years, awareness of the FLAG sector as a significant source of climate warming greenhouse gas (GHG) emissions and as a major opportunity area for mitigation has soared.
With leading international organizations like the GHG Protocol and the Science Based Targets Initiative (SBTi) recently establishing calculation methods and target requirements, organizations must assess their exposure to FLAG emissions within their value chain, what risks and opportunities this presents, and what actions should be taken now to address them.
What is FLAG?
FLAG stands for “forest, land and agriculture” and is a sector comprising a range of emissions generating activities associated with intensive land use. Although “FLAG” is now the prevailing term for this sector, it is synonymous with other acronyms used in the scientific community like AFOLU, which stands for Agriculture, Forestry and Other Land Use.
What are SBTi’s FLAG Emissions?
GHG emissions from FLAG come from a range of activities that primarily fall into two categories:
- Land Use Change
- Deforestation and conversion of soil-carbon-rich environments such as coastal wetlands, peatlands, and grasslands
- Land Management
- Fertilizer use and nutrient management
- Methane release from enteric fermentation (cow belching)
- Biomass burning
- Manure management
As indicated, emissions result from a diverse group of processes, including combustion (biomass burning), loss of sequestration potential (deforestation), passive release (in the case of fertilizer management), and interacting combinations of the three. This diversity is part of the reason the calculation and management of FLAG sector emissions has been so challenging.
Why are SBTi’s FLAG Emissions relevant?
Emissions from FLAG comprise approximately 22% of global GHG emissions per year. For context, this exceeds all global emissions attributable to transportation (15%), is on par with emissions from heavy industry (24%), and is only substantially exceeded by emissions from energy production (34%).
Yet, to date, management of FLAG emissions has largely been left to national governments, who typically do not regulate such emissions directly. Likewise, FLAG emissions are often left out of corporate GHG inventories, given the absence of reliable and standardized calculation approaches for companies to utilize.
Given the scale of FLAG emissions and the significant mitigation potential in the sector, however, these emissions must be measured and managed as part of any Paris-aligned strategy. As a result, organizations like the GHG Protocol and the SBTi have been working to define a reliable management approach for the last several years.
What kind of businesses have SBTi’s FLAG emissions exposure?
Companies that operate in sectors which rely directly on land intensive activities are likely to have significant FLAG emissions, including forest and paper products and agricultural production.
Additionally, sectors which offer products and services that are dependent on FLAG inputs as raw materials or intermediate products are likely to have significant FLAG emissions across their extended supply chains, including textiles and apparel, food distribution, processing and retailing, as well as any other retailers marketing FLAG-based products.
SBTi’s FLAG Emissions in the Policy Context
What are the leading standards and frameworks for FLAG calculation and management?
Until recently, no definitive standards have existed to guide companies in calculating their emissions from the FLAG sector. This changed in September 2022 when the Science Based Targets Initiative (SBTi) released its FLAG Science Based Target-Setting Guidance standard and when the GHG Protocol released its draft Land Sector and Removals Guidance. Together, these standards now establish the foundation for FLAG emission calculation and management.
What is SBTi’s FLAG Target-Setting Guidance?
The SBTi FLAG Target-Setting Guidance (“FLAG Guidance”) is a FLAG standard that establishes criteria and recommendations for companies to establish SBTi’s FLAG targets. With the standard, companies in specified FLAG sectors or which have significant FLAG emissions across their operational footprint are required to set FLAG-specific targets as part of their SBTi targets going forward. More on the FLAG Guidance, applicability, and deadlines below.
What is the GHG Protocol Land Sector and Removals Guidance?
The GHG Protocol released its first draft Land Sector and Removals Guidance (“LSR Guidance”) in September 2022, designed to establish standardized boundaries and calculation methods for quantifying emissions and removals from the land sector. Spanning more than 400 pages, the LSR Guidance proposes detailed and specific calculation approaches for different types of emissions generating (and removing) activities.
The draft LSR Guidance provides that companies reporting organizational footprints using the GHG Protocol will be required to follow the LSR Guidance for land sector emissions within their operational boundaries, meaning the LSR Guidance is poised to join the GHG Protocol Scope 2 Guidance and Scope 3 Standard as one of the core and essential standards for corporate accounting.
The LSR Guidance is not yet final. The GHG Protocol most recently forecast that the LSR Guidance would be finalized by Q1 2025 as both a standard and accompanying calculation guidance.
Setting SBTi’s FLAG Emissions Targets as Standard
Is My Business Required to Set SBTi’s FLAG Emissions Targets?
SBTi has made it mandatory for companies setting science-based targets with SBTi to set separate FLAG targets as standard if the business falls within either of the following two categories:
- The Company is from one of the following FLAG-designated sectors:
- Forest and Paper Products–Forestry, Timber, Pulp and Paper, Rubber.
- Food Production: Agricultural Production.
- Food Production: Animal Source.
- Food and Beverage Processing.
- Food and Staples Retailing.
- Tobacco.
- The company has FLAG-related emissions that total 20% or more of its overall GHG emissions across Scopes 1, 2 and 3.
The latter category may capture many retail businesses or brands that sell FLAG-intensive goods, like textile and apparel companies.
What Targets Need to be Set?
Companies required to set SBTi’s FLAG emissions targets must set them as additional, separate targets to their other science-based targets (which focus instead on energy/industry related emissions). This separation is, in part, to ensure that the large reduction potential from FLAG is not credited to a company’s standard science-based targets.
Target coverage is expansive, requiring 95% of a company’s Scope 1 SBTi FLAG emissions and 67% of its Scope 3 FLAG emissions. Targets must also be met separately for emissions in each of the company’s Scope 1 through 3 FLAG inventory. This ensures action is taken in all Scopes, particularly for companies with small Scope 1 FLAG emissions that might have otherwise relied on Scope 3 FLAG emissions reductions to meet their targets.
Companies may use different approaches to setting their FLAG targets or combine them, including a “sector” approach for companies with diversified sources of FLAG emissions and a “commodity approach” for 11 specific FLAG commodities.
Companies must set near-term targets (between 5 and 10 years) and are encouraged to develop long-term net-zero targets as well.
All companies setting SBTi’s FLAG emissions targets are also required to publicly commit to no-deforestation covering all emission Scopes, with a target date no later than the end of 2025. These targets are setting a new standard for FLAG emissions.
What is the Deadline for Setting SBTI FLAG Emissions Targets?
The timeline for setting SBTi’s FLAG emissions targets varies based on whether the company already has a validated target in place or not:
- Companies with a validated science-based target must submit an updated FLAG target within 6 months of the release of the final GHG Protocol LSR Guidance. This is currently forecast for Q1 2025, meaning FLAG targets must be submitted by mid-2025.
- Companies setting their SBTi for the first time (or updating an existing target) must set a FLAG target upon submission using the current September 2022 draft GHG Protocol LSR Guidance. This applies to companies that have not submitted their target submission form and booked their validation slot prior to 30 April 2023.
What Businesses Need to Calculate FLAG Emissions?
It may be self-evident that businesses that must set a FLAG science-based target must calculate their FLAG emissions as part of that project. But the obligation to simply calculate FLAG emissions now in effect applies to all companies setting an SBTi.
This is in part because it is not possible to know whether the 20% threshold applies without first undertaking that calculation. The SBTi explicitly clarified this obligation with respect to Scope 3 land-based FLAG emissions in December 2023.
What Methodology do Companies use to calculate FLAG emissions for SBTi targets?
Companies calculating their FLAG emissions are expected to use the GHG Protocol LSR Guidance. Both SBTi and GHG Protocol have been collaborating from the outset to ensure consistency between the two.
Companies that must submit FLAG targets now must use the current draft version of the LSR Guidance. Companies that already have validated targets can wait to use the finalized LSR Guidance (expected Q1 2025).
Action Steps for Companies with Potential FLAG Emissions
Companies in the land-intensive sectors mentioned above or which otherwise may have significant FLAG exposure must take action now in order to ensure their existing GHG reporting and science-based targets remain in line with expectations.
This is particularly true if the company is already measuring its corporate carbon footprint following the GHG Protocol Corporate Standard or the company has or intends to set science-based targets with SBTi.
Key action steps:
- Companies should assess now, or with their next annual corporate footprint, what their FLAG emissions are at an organizational level, and how much those emissions contribute to their overall corporate carbon footprint. This visibility is critical for understanding the applicability of the SBTi FLAG target requirements and will soon be mandatory for calculating a GHG Protocol corporate carbon footprint once the GHG Protocol LSR Guidance is finalized and effective in Q1 2025.
- If the level of FLAG emissions meets or exceeds 20% of the company’s overall gross GHG emissions inventory, and the company otherwise has or plans to set a science based target, it must then plan to set a separate FLAG-specific target with SBTi according the timelines set forth above.
How to calculate FLAG emissions
Calculating FLAG emissions requires a detailed understanding of land-based emission impacts associated with a company’s operations.
Companies will need to collect specified data on their land-intensive activities that generate emissions, such as agricultural practices, deforestation, and land management strategies. This involves quantifying emissions from direct operations and assessing upstream and downstream impacts in the supply chain.
The use of standardized methodologies such as those provided in the GHG Protocol’s Land Sector and Removals Guidance helps to ensure consistency and accuracy. By accounting for such activities and applying recognized calculation approaches, businesses can achieve a comprehensive and credible calculation of their FLAG emissions, setting the stage for targeted mitigation strategies.
Vaayu offers companies comprehensive and verified corporate carbon footprint assessments, as well as AI-powered Targets and Scenarios features across our suite of solutions. Our tech is built to help guide partners so they can remain compliant and credible, even in the face of new and updated standards.
Understanding and managing FLAG emissions is pivotal for aligning with global sustainability goals. As outlined in this guide, the complexities of FLAG sector emissions are significant, but with the frameworks provided by the GHG Protocol and the SBTi, companies now have a clear path toward accounting for these emissions and driving significant mitigation efforts throughout their value chains.
Disclaimer: This Insight is provided for informational purposes and is not intended to be relied upon or used as specific legal advice.
If your organization needs guidance on assessing SBTi’s FLAG emissions or setting science-based targets, connect with us to explore how we can support your sustainability journey. Discover how to integrate FLAG emissions into your corporate strategy by reaching out to our experts today.
.png)
.png)
.png)
.png){kind=icon}