Global ambition to combat climate change, backed by increasing regulatory, consumer, and investor demands, is driving businesses to address near-and long-term physical and transition climate risks. Since 2015, over 4,600 companies have committed to science-based targets (SBT), which provide a clearly defined pathway for companies to embed greenhouse gas (GHG) emissions reductions, aligned to the Paris Agreement’s goal to limit global warming to 1.5°C, into business operations and supply chains. However, for many businesses that depend directly or indirectly on forestry, land use, and agriculture (FLAG) for essential goods and services (e.g., food and beverage, apparel, and biopharma), guidance to address FLAG-related impacts in a sustainable and measurable manner was lacking.
Due to the significant business risks imposed by climate change and nature loss, stakeholders are demanding greater transparency and accountability. The recent launch of the Science Based Target initiative (SBTi) FLAG guidance, which provides the world’s first standard method for companies in land-intensive sectors to set science-based targets that include land-based emission reductions and removals, alongside the draft GHG Protocol Land Sector and Removals guidance, which details how companies should account for and report GHG emissions and removals from land management, land use change, biogenic products, carbon dioxide removal technologies, and related activities in GHG inventories provide a mechanism for companies to address these requirements. However, they also ask key questions about their operational practices; environmental impact; and financial, regulatory, social, reputational, and business continuity risks.
The FLAG sector is not only capable of reducing emissions but also can actively remove and store carbon emissions through carbon sequestration from improved forest management, agroforestry, afforestation and reforestation, soil organic carbon, and biochar. FLAG accounting and target setting are important to identify such opportunities and ambitions, as well as to protect brand reputation, enable supply chain resiliency, improve bottom-line savings, and deliver a competitive edge.
With FLAG guidance comes expectations and deadlines for many companies, specifically those in the SBTi-designated FLAG sectors and those whose FLAG emissions exceed 20% of their Scope 1, 2, and 3 carbon footprint. After April 30, 2023, the following will apply:
Companies that do not have an SBT and plan to implement one—these organizations must comply with the SBTi FLAG guidance and establish FLAG targets in parallel to their non-FLAG targets (i.e., energy and industry).
Companies whose SBT was approved before January 2020 and FLAG applies—these organizations will need to establish FLAG SBT by the end of 2023. This will also impact their current SBT.
Companies whose SBT was approved between January 2020 and April 2023—these organizations’ FLAG SBT will be required by the end of 2024.
FLAG investments are a critical step toward achieving a nature-positive net-zero roadmap, and companies should not wait to translate the FLAG guidance into an operational strategy, as early review and assessment of the guidance is required to understand and identify its impacts. Considering the complexity, businesses should take near-term action to identify the implications of FLAG on their emissions baseline, specifically, companies that operate in a FLAG-designated sector or if FLAG contributes to greater than 20% of their Scope 1, 2, and 3 emissions. Measuring and reducing FLAG impacts in “carbon” terms will serve as a segway to expanding organizational understanding of nature, land, and biodiversity in the long term.
Guidehouse helps organizations account for land-based GHG impacts and set FLAG targets that are relevant to their unique impact areas and business activities. Our approach enables companies to pursue tailored climate strategies with a higher degree of success. These mitigations bridge climate and nature agendas, resulting in a win-win strategy to achieve a net-zero, nature-positive, and equitable future.
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