The GHG Protocol has finalized its Land Sector and Removals Standard (LSRS)—the first comprehensive framework for accounting for forest, land, and agriculture (FLAG) emissions. For companies that grow, source, process, or sell agricultural products, this is a defining moment for how land-related emissions show up in their inventories.
This framework was in development for more than five years. Here's what changed, what's new, and what companies should do next.
What this article covers
- The Land Sector and Removals Standard (LSRS): The GHG Protocol's first comprehensive framework for accounting for forest, land, and agriculture (FLAG) emissions.
- Who is affected: Companies with significant land sector activities or that grow, source, process, or sell agricultural products.
- Key changes in the finalized standard: Including the January 1, 2027, effective date, mandatory linear discounting for land use change (LUC) emissions, new requirements for land leakage, and more flexible chain of custody models like mass-balance.
- Other updates: The option for jurisdictional direct LUC (jdLUC), the reclassification of on-farm energy use, and the status of carbon removals (optional, reported in-inventory if it occurs in value chain and maintains traceability).
- What comes next: Calculation guidance is expected by mid-2026, and companies should begin planning for compliance before the 2027 deadline.
Why FLAG emissions matter
FLAG emissions encompass the many ways land use change and land-related activities contribute to climate change—from converting forests to cropland, to methane from rice cultivation, to nitrous oxide from fertilizer use. Globally, the agriculture, forestry, and other land use sector (AFOLU) accounts for roughly 22% of annual net anthropogenic greenhouse gas emissions. For many food, beverage, consumer goods, and apparel companies, FLAG can represent a significant share of their carbon footprint.
Despite their scale, FLAG emissions have historically been difficult to calculate. Unlike fossil fuel combustion, where the science is relatively straightforward, land-related emissions involve complex dynamics: carbon stocks that shift over decades, agricultural processes that produce non-CO2 gases, and supply chains that span thousands of farms across dozens of countries. The LSRS provides the standardized framework companies have been waiting for.
Who does this affect?
The LSRS is relevant for any company with significant land sector activities in its operations or value chain. That includes companies that:
- Own or control significant areas of land
- Purchase, consume, process, or sell food, fiber, feed, bioenergy, or other agricultural products (e.g., wood, cotton, leather, wool, cashmere)
- Supply significant amounts of products to agricultural producers
"It's pretty straightforward to know that you’re subject to the LSRS in certain industries like food and beverages," says Megan Schlosser, Sustainability Advisor at Watershed. "But you can also have significant FLAG emissions in sectors that aren’t necessarily considered squarely related to agriculture or the land sector—maybe you’re in the personal care industry and happen to have a lot of palm oil in your supply chain that ends up making up a big portion of your footprint."
For companies pursuing science-based targets, the Science Based Targets initiative (SBTi) considers FLAG relevant when land-related emissions exceed 20% of total scope 1, 2, and 3 emissions. The LSRS, however, does not give a specific threshold.
Ten takeaways
1. No conclusion on forest carbon accounting
The GHG Protocol's Independent Standards Board (ISB) acknowledged significant disagreements around forest carbon accounting. Rather than hold up the entire LSRS, the GHG Protocol decided to release the standard without forest carbon accounting and will resolve the issues in a future update. Deforestation driven by commodity supply chains (beef, soy, palm oil, cocoa, etc.) is fully covered by the LSRS. The gap is around forest carbon accounting for management forests.
2. The standard takes effect January 1, 2027
Companies have until the end of the year to prepare. This shouldn't trigger immediate panic—but companies should make an effort to understand the new requirements now.
3. Linear discounting is required for land use change emissions
Land use change (LUC) emissions are assessed over a 20-year lookback period. The finalized standard requires linear discounting—an approach that assigns greater weight to more recent land conversion events—unless companies provide justification for an alternative method.
“This is good news for target-setting, as it supports more actionable deforestation strategies,” Schlosser explains. “Any recent deforestation or peatland conversion causes a very high emissions penalty in your inventory, whereas events that took place 20 years ago are less impactful to your inventory."
4. Land carbon leakage is a new required metric
Land carbon leakage occurs when a company takes actions to reduce its GHG footprint which, as a side effect, displace food or feed production, driving agricultural expansion and LUC emissions elsewhere. Think of a company using 100% biodiesel for its fleet. This means growing corn, soy, or other oil crops for conversion to biodiesel: the land used for these crops displaces food production, which may push farming onto previously unconverted land.
This concept is entirely new to the standard and companies at high risk of leakage through their reduction actions are required to account for it. Detailed calculation guidance is still forthcoming.
5. Jurisdictional direct LUC is now an option
The LSRS introduces jurisdictional direct land use change (jdLUC), a middle ground between broad statistical estimates and specific farm-level data. Companies can now calculate direct LUC emissions at the country, state, or municipal level—not just the individual farm level, as the draft had implied.
This matters because it rewards companies that source responsibly from specific regions. "Right now, if you use statistical LUC at a global or national level, you just have one soy value that's reflective of the entire soy supply chain,” says Schlosser. "But going more specific allows you to capture the nuance of the real world. Maybe you decided to source soy from one Brazilian province over another because you knew it had a lower emission factor from less recent land conversion—with geospatial data to support it. Now you can actually get credit for that."
Remote sensing technologies are already making this kind of jurisdictional data available at scale.
6. More flexible physical traceability chain of custody models
The draft standard required near-total physical segregation to claim sustainable attributes—an impractical bar for many supply chains. The finalized LSRS introduces mass-balance with safeguards as an accepted chain of custody model.
Watershed Environmental Scientist Dr. James Joyce illustrates what this means in practice:
"Say you make shampoo and you use RSPO certified palm oil derivatives to claim your palm oil value chain is deforestation-free,” he says. “Under the previous rules, only ‘identity-preserved’ or ‘segregated’ certifications would allow you to reflect the absence of deforestation in your GHG inventory, requiring parallel processing and a high administrative burden.”
Under mass balance, certified and uncertified products can be mixed at any point in the value chain, as long as input and output volumes are tracked and balanced correctly. Under the updated rules, this mixing can be at batch-level, site-level or even multi-site level, allowing a lot more flexibility for companies, like shampoo makers, with complex value chains to reflect positive action driven by their procurement policies in their GHG footprint.
“It also allows smallholder farmers, whose output would have previously been too small to take part in segregated or identity-preserved value chains, to reach the market for sustainable materials—so it’s a win-win," he adds.
It’s worth noting though that “book-and-claim” certification remains out of scope for the GHG inventory—companies still need to demonstrate physical traceability.
7. Removals are optional
Companies may report removals within their inventory if they occur in their value chain, as long as they have physical traceability and an ongoing monitoring program. For example, companies with a spatial boundary at sourcing region, land management unit (LMU), or harvested area and physical traceability can include removals associated with managed lands as well as proximate and adjacent non-productive lands. However, with no conclusion on forest carbon accounting, guidance is still evolving on how companies would actually reflect most removals in their inventory.
Removals outside the value chain (e.g., purchased carbon removal credits) must be reported outside the inventory.
8. On-farm energy use is reclassified
Combustion of fossil fuels in tractors and other farm equipment, as well as upstream production emissions of fertilizers, are now classified as fossil and industrial emissions—not land management. This is a change from the draft guidance.
9. Impact traceability is introduced
Physical traceability is tracking the actual physical flow of goods and materials through the supply chain (e.g., knowing this specific soy came from this specific farm). Impact traceability is tracking the climate impacts/interventions associated with goods, even when you can't trace the physical product itself. The LSRS allows for impact traceability reporting outside of the physical inventory, giving an opportunity for companies that cannot prove traceability to still quantify the impact of their interventions.
"Impact traceability is a meaningful step forward for companies that are doing the right thing but can't yet prove physical traceability across their entire supply chain,” explains Joyce. “It gives them a way to quantify the effect of their sourcing interventions—things like regenerative agriculture programs or supplier engagement—without those efforts disappearing into a footnote outside the inventory."
10. Calculation guidance is still coming
One important caveat: the LSRS does not yet include calculation guidance or examples. The GHG Protocol has said it expects to release supplementary calculation materials by mid-2026. Until then, the standard sets the requirements but leaves some practical implementation questions open.
The bottom line
"The 2027 deadline sounds far away, but companies that wait for the calculation guidance before starting will find themselves behind,” Schlosser says. “The structural work—understanding which commodities drive your FLAG footprint, mapping your supply chain, and identifying data gaps—can and should start now."
The LSRS takes effect January 1, 2027. Watershed can help you prepare.
