Setting FLAG targets: Overcoming common challenges

In recent years, more companies have begun setting emission reduction targets. By the end of 2023, over 10,000 companies had publicly committed to reducing emissions, a number expected to grow as regulatory and competitive pressures continue to rise.

A specific subset of decarbonization targets focuses on emissions related to land use, often referred to as FLAG targets. According to the GHG protocol, which establishes rules for calculating emissions, these emissions should be tracked separately from non-land use emissions and require distinct reduction targets (for more details on these emissions, see our previous article on land use change emissions).

To help companies set these targets, the Science-based Target initiative (SBTi) published a guidance document in 2023 outlining who needs to set these targets and what they need to cover. According to this guidance, the following companies are required to set FLAG targets:

• Companies in specific land-related sectors, including forest and paper products, food production, food and beverage processing, food and staples retailing, and tobacco.
• Companies in any other sector where FLAG-related emissions account for more than 20% emissions of total emissions (Scope 1, 2, and 3).

While several companies have successfully set SBTi-validated FLAG targets, including well-known brands such as Chanel, Nestlé, Heineken, and Domino’s Pizza, many others find it challenging to quantify and address these emissions. Below, we explore three common challenges companies face when setting FLAG targets and how to overcome them.

Challenge #1: Accurately measuring land use emissions

Calculating GHG emissions from land use can be more complex than measuring GHG emissions from energy consumption, such as those from stationary combustion (Scope 1) or business travel (Scope 3). Land use emissions are subject to significant regional variation, and high-level estimations often fail to capture local differences. Even the most accurate methods, such as soil measurements, involve a high degree of uncertainty and can be prohibitively expensive. Furthermore, standards for these calculations are still evolving, particularly in relation to carbon removals. Data on emissions factors also is not as readily available or as granular as companies may need. For example, while there is an emissions factor quantifying the carbon emissions from converting grassland to development it may not account for regional differences, such as converting grassland to development in the US versus Brazil.

To address this challenge, companies should first conduct a screening of their land use GHG emissions. This process should identify key sources of land use emissions and assess their relative magnitude. Companies should then focus on leveraging existing GHG calculation tools, which often include the best emission factor sources for completing calculations on their most relevant emissions. Some existing calculation tools recommended by Ramboll include:

• FAO Ex-Ante Carbon-balance Tool (EX-ACT) – A publicly available tool covering the GHG released or sequestered from FLAG activities globally.
• Cool Farm Tool – Developed by the Cool Farm Alliance, a science-led, not-for-profit community. This tool targets global agriculture supply chains and draws on a broad range of published data sets and IPCC methodologies.
• COMET-Farm tool - Published by the US Department of Agriculture is a publicly available tool for GHG emission accounting in agriculture in the US.

Despite the availability of these tools, companies may still need to identify their own emissions factors for certain calculations. Determining which set of emissions factors will be the most relevant for a specific situation can be difficult. Companies can start with the IPCC Emission Factor Database (EFDB), a publicly available database containing emission factors and other parameters with relevant background documentation. In addition, carbon accounting experts from Ramboll can help review individual cases and identify the most appropriate data set to use for specific calculations.

Challenge #2: Understanding land-based emissions in the value chain

Although guidance from the GHG protocol and SBTi offers insights for sectors directly engaged in land use, such as agriculture, most companies across various sectors are likely to have some land-based emissions in their value chains.

Consider the example of Company A, an automotive manufacturer:

• Company A’s vehicles contain steel parts sourced from Company B, a tier 1 supplier
• Company B produces its vehicle components using processed steel purchased from Company C
• Company C creates its processed steel from raw steel purchased by Company D
• Company D is directly engaged in mining to obtain raw steel

Should Company A include land use emissions from Company D’s activities within its value chain emissions? According to the GHG protocol, all land use emissions in the value chain should be included. However, best practices for consistently defining boundaries, particularly when it comes to complex and long value chains, have not yet been clearly defined.

To manage this challenge, companies should start by mapping their value chains to identify potential sources of land use emissions. For value chain emissions with clear and direct links – such as a food and beverage provider sourcing directly from farms – companies should begin calculating land-based emissions and setting FLAG targets where appropriate.

For companies with more complex value chains or indirect links to land-based emissions, waiting for additional guidance on this subject might make more sense. The GHG protocol is expected to release finalized guidance on land use emissions in early 2025, which could provide further clarity on boundary setting.

Challenge #3: Committing to no-deforestation within supply chains by 2025

Under the SBTi’s FLAG guidance, companies must commit to achieving no-deforestation in their supply chains and key commodities by December 31, 2025. They are also encouraged to prevent the conversion of natural ecosystems in alignment with the Accountability Framework Initiative (AFi).

While essential, these commitments are challenging to implement, particularly for companies with complex international supply chains. Collecting accurate data and maintaining transparency regarding deforestation and land use is difficult, especially for commodities such as cocoa or palm oil, which are often sourced from the open market without direct links to production regions. Furthermore, guidelines, certification schemes, and best practices for verifying no deforestation are still evolving, making the verification process particularly challenging in regions with limited regulatory oversight.

Before committing to no-deforestation, companies should first assess the availability of relevant data, including field boundaries, georeferenced maps of production units, and certificates of origin and/or sustainability. This evaluation helps companies understand the origins and compliance status of materials within their supply chain. From this information, companies can identify whether materials are being sourced from high-risk areas and how this might complicate achieving a no-deforestation commitment.

Once a company decides to commit to no-deforestation under the SBTi framework, they should identify specific implementation actions tailored to their unique challenges. For instance:

• Companies struggling with a lack of transparency and data availability on deforestation within their supply chain could address this by engaging with key actors. This engagement could include providing suppliers with tools and/or financial support to improve data collection capabilities.
• Companies that have identified one or two key sources of deforestation, such as those sourcing specific commodities from certain high-risk areas, should directly engage with suppliers to identify suitable alternative sourcing areas with low risk for deforestation. They should also consider integrating no-deforestation requirements into new purchase contracts.

In addition, companies should continue to monitor evolving guidance around the verification of no-deforestation, particularly in the EU where regulations such as the EU Deforestation-free Product Regulation will require no-deforestation commitments for specific commodities in the future.

What should companies do next?

Setting FLAG targets is an important part of a company’s emission reduction commitment, particularly for those with direct links to land-based emissions. However, challenges such as accurately measuring emissions, understanding value chain impacts, and committing to no-deforestation by the end of 2025 can make this process daunting.

For companies beginning this journey, it can feel overwhelming, and seeking expert guidance can simplify the process. Our team at Ramboll has extensive experience guiding clients through calculating land-based emissions, mapping and managing value chain emissions, and setting no-deforestation commitments. Contact us today to learn how we can assist you in achieving your FLAG target goals.