How land use change emissions impact your business – and what to do about it

As regulations, competitive pressures and investor demands push more companies to calculate and disclose their greenhouse gas (GHG) emissions, the standards for these calculations have been evolving as well. These new standards offer companies more details on quantifying key sources of emissions that were not well covered under the more general Corporate Standard created by the GHG protocol, such as land sector emissions.

For example, Nestlé, one of the largest food and beverage companies in the world, reports that 70% of its GHG emissions come from sourcing their ingredients, including emissions from soil and forests. Although preliminary guidance on land sector emissions has been available since 2006, there were still several open questions around how to quantify these emissions. The GHG Protocol recently updated its guidance to reflect the latest best practices and emission factor sources. In addition, the Science-Based Targets initiative (SBTi) also published guidance on setting FLAG (forest, land, and agriculture) targets. These updates will help companies like Nestlé better understand how to track and reduce these emissions.

Alongside updated guidance, new regulations around land sector emissions are also starting to emerge. In 2023, the EU passed the land use, land use change and forestry (LULUCF) regulations, which required each member state to set specific targets for these emissions to support the EU’s 2050 climate goals. In addition, the EU passed the Regulation of Deforestation Free Products, aimed at reducing emissions from deforestation (a key area of focus for the land sector) by promoting deforestation-free products.

With all this attention on land sector emissions, more companies will be considering and quantifying these emissions in the future. But what exactly are “land sector emissions”? These emissions include four main types of emissions associated with:

• Land use change
• Land management
• CO₂ removals and carbon storage in land, products, and geologic carbon pools
• Biogenic products and products derived from technological CO₂ removals across the value chain

In this article, we will focus specifically on the first type of emissions: land use change emissions.

What are land use change emissions?

Land use change (LUC) emissions account for changes in carbon emissions that occur when land is converted from one type to another. Land stores carbon through vegetation, where plants absorb CO₂ and store the carbon in their biomass, and in the soil, which acts as a carbon sink by accumulating organic matter, including decayed plants and animals.

The GHG Protocol recognizes six different types of land with varying degrees of carbon stored:

When land is converted from one type to another, the amount of carbon stored in the land changes as well. For example, if a growing farm expands into a nearby forest to meet growing demand, trees may be removed, vegetation may be burned, and soil could be treated with chemicals. LUC emissions would capture the emissions created by this land conversion process, and companies like Nestlé, who might source their ingredients from this farm, would need to consider these emissions.

Land use change emissions are most relevant for companies in the agriculture, food, or forestry sectors, where land change activities are an integral part of day-to-day business. However, these emissions may also be significant for other types of companies, such as real estate or infrastructure developers, mining companies, biofuels, and bioenergy feedback companies, etc. All companies should assess whether their activities involve land use change and if the associated emissions are material and relevant for reporting.

Note: Land change results in other environmental impacts beyond emissions, including changes to biodiversity. For companies looking to quantify the biodiversity impact of a land change, please see Ramboll’s free biodiversity tool.

How do companies account for land use change emissions?

At a high level, companies account for land use change emissions by calculating:

• Carbon stored in the land BEFORE the change in land type.
• Carbon stored in the land AFTER the change in land type.

LUC emissions are the difference between these two values. Although it sounds simple, determining these values is not always straightforward. Directly measuring carbon in land can be complex and expensive, involving activities like field surveys or soil sampling to assess carbon content in the land on an annual basis. For companies without directly measured data, finding a representative benchmark for estimating can be difficult. Although the GHG Protocol published a list of resources for land calculations, that list contains 49 different resources for LUC emissions, making it challenging for companies to determine which one is most suitable for them.

It is also important to note that, according to the GHG protocol, companies must use an assessment period of 20 years or more when accounting for land use change emissions. These emissions can be evenly spread across 20 years or can be linearly applied, with more emissions accounted for in the years immediately following the land change event and reducing over time.

To illustrate how this calculation works, consider a real estate developer who recently purchased 1,000 hectares of undeveloped land to build a new community. During development, the land is converted to a new land type, and the developer must account for land use change emissions.

• Before development, the land is classified as “grassland”. The developer has no site-specific measurements of carbon in the soil or any local/regional studies to use as a surrogate, so they use a global IPCC emissions factor of 88 tonnes carbon/hectare¹.
• After development, the land is classified as “settlement.” The IPCC assumes that all living biomass is lost when land is converted to a settlement, so the developer assumes an emissions factor of 0 tonnes carbon/hectare.
• Based on this, the developer assumes that 88,000 tonnes of carbon were lost due to the 1,000-hectare land change. The developer decides to account for these emissions evenly over the next 20 years, at 4,400 tonnes of carbon per year.

Given that the changes to the GHG Protocol guidance and SBTi’s new FLAG guidance are relatively recent, most companies are still investigating what this means for them. However, some companies have already adopted this guidance and are already targeting reductions:

• Heineken, a brewing company, aims to reduce its agricultural emissions, including land use change emissions, through low-carbon farming projects and a no-deforestation commitment.
• SD Guthrie, a palm oil company, has committed to reducing land use change emissions and specifically highlights reforestation initiatives and no-deforestation commitments throughout its supply chain.

As more companies begin to account for land use change emissions, more decarbonization roadmaps will include actions to target these emissions.

What should companies do next?

Companies should begin by determining if their business activities result in any types of land use change. Certain industries, such as agriculture, forestry, food/beverage, etc., are likely to have these emissions within their operations or value chain. Other industries, like real estate, may have these emissions depending on the specific activities of the company.

If companies do have activities resulting in land use changes, they should develop high-level estimates of these emissions to determine whether they are significant (and therefore material). Companies with material land use change emissions should account for these in their GHG inventories going forward and consider developing a strategy to manage and reduce these emissions.

Ready to take action?

As land use change emissions come into sharper focus, now is the time to assess their impact on your business. If your business includes changing land, understanding and managing LUC emissions is key to achieving your long-term sustainability goals. Contact Ramboll’s team of experts to explore how you can start tracking, managing, and reporting LUC emissions today.

Notes:

1 – Emissions factor used in this example is specifically for a warm, temperate, moist region with high activity clay soil. See page 3.117 for more details.