GHG Protocol_Guidance_Coffee_Chapter8.pptx

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1. GHG Land guidance | chapter 8 LAND MANAGEMENT ACCOUNTING November 2022

2. 8.1 INTRODUCTION TO LAND MANAGEMENT ACCOUNTING 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS 8.3 LAND MANAGEMENT NON-CO2 EMISSIONS Chapter 8 LAND MANAGEMENT ACCOUNTING* *Land management accounting applies to lands remaining in the same land use  For land-use change accounting: Chapter 7

3. 8.1 INTRODUCTION TO LAND MANAGEMENT ACCOUNTING Requirements Calculation Methods 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS 8.3 LAND MANAGEMENT NON-CO2 EMISSIONS Chapter 8 LAND MANAGEMENT ACCOUNTING* *Land management accounting applies to lands remaining in the same land use  For land-use change accounting: Chapter 7

4. NET CO2 and NON-CO2 emissions to be accounted for 8.1 INTRODUCTION TO LAND MANAGEMENT ACCOUNTING REQUIREMENTS Companies shall account for, and report Land management net CO2 emissions based on annual net land carbon stock changes. Companies shall account for and report Land management non-CO2 emissions CALCULATION METHODS Net land carbon stock changes can be calculated using either: the stock-difference method quantifies the net land carbon stock change based on the change in total carbon stocks across land-based carbon pools (aboveground biomass, belowground biomass, dead organic matter and soil carbon) over time, as shown in equation 8.1. or the gain-loss method quantifies the net land carbon stock change based on the difference between carbon gains (gross CO2 removals and other non-atmospheric C inputs to land-based carbon pools) and carbon losses (gross CO2 emissions and other C transfers from land-based carbon pools) in a given period, as shown in equation 8.2.

5. 8.1 INTRODUCTION TO LAND MANAGEMENT ACCOUNTING 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS  Accounting Process 8.3 LAND MANAGEMENT NON-CO2 EMISSIONS Chapter 8 LAND MANAGEMENT ACCOUNTING* *Land management accounting applies to lands remaining in the same land use  For land-use change accounting: Chapter 7

6. LAND MANAGEMENT CARBON ACCOUNTING AND REPORTING 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS To account for Land management net CO2 emissions or removals, companies should estimate net carbon stock changes on land that remains within the same land use category and subcategory in the reporting year. To estimate carbon stock changes, companies should follow the following accounting process: Determine the approach used to estimate anthropogenic impacts on land carbon stocks STEP 1 Determine relevant spatial boundaries and the monitoring frequency for data used to estimated the net land carbon stock change STEP 2 Identify which carbon pools and land uses will be included in the estimate of net land carbon stock changes along with the methods applied STEP 3

7. LAND MANAGEMENT CARBON ACCOUNTING AND REPORTING 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS To account for Land management net CO2 emissions or removals, companies should estimate net carbon stock changes on land that remains within the same land use category and subcategory in the reporting year. To estimate carbon stock changes, companies should follow the following accounting process: Determine the approach used to estimate anthropogenic impacts on land carbon stocks STEP 1 Determine relevant spatial boundaries and the monitoring frequency for data used to estimated the net land carbon stock change STEP 2 Identify which carbon pools and land uses will be included in the estimate of net land carbon stock changes along with the methods applied STEP 3

8. STEP 1 – approach for carbon stock changes 8.2 STEP 1 – CLASSIFY LANDS AND estimate anthropogenic impacts To determine the approach used to estimate anthropogenic impacts on land carbon stocks, companies have two options: Classify all land as managed land: Assume all land carbon stock changes are anthropogenic and apply the managed land proxy to all lands. OPTION 1 Develop and consistently apply an approach to classify lands as managed or unmanaged : criteria to distinguish between managed and unmanaged lands, then apply the managed land proxy to all managed lands. OPTION 2  Companies only have partial control of land carbon stock changes. In addition to anthropogenic management decisions (e.g., harvesting, replanting, and prescribed burning), land carbon stocks also change due to natural factors (i.e., natural unassisted growth and disturbances).  Therefore, the Land Management Proxy is an approximation from the IPCC for determining anthropogenic land management net CO2 emissions and removals, which accounts for all net carbon stock changes on managed land but acknowledges that on managed lands a combination of anthropogenic and natural factors impact carbon stock changes.  Companies shall fully account for all land-based carbon stock changes on land designated as managed lands , including changes due to degradation and carbon stock losses from fires, storms, and other natural disturbances . THE RATIONALE BEHIND In selecting the approach, companies should consider issues such as their exposure to natural disturbance risks, the suitability of monitoring systems for differentiating anthropogenic from natural events, and potential impact on any mitigation targets .

9. STEP 1 – approach for carbon stock changes 8.2 STEP 1 – CLASSIFY LANDS AND estimate anthropogenic impacts To determine the approach used to estimate anthropogenic impacts on land carbon stocks, companies have two options: Classify all land as managed land OPTION 1 Develop and consistently apply an approach to classify lands as managed or unmanaged OPTION 2 Develop clear definitions of managed and unmanaged lands with criteria . If companies choose to separate managed from unmanaged, they need to include a description of the definitions and criteria used to distinguish managed and unmanaged lands. 1 Outline an approach to determine how managed and unmanaged lands are determined over time : Consistent designation : once lands are designated as unmanaged, they remain classified as unmanaged even if they are brought into management to deal with natural disturbance events Base year recalculation for newly managed lands : allows for managed lands to be brought into the inventory boundary that were previously considered unmanaged lands; trigger a base year recalculation where companies recalculate base year emissions and removals to account for carbon stock changes on lands previously considered unmanaged land 2

10. STEP 1 – DEFITINIONS 8.2 STEP 1 – CLASSIFY LANDS AND estimate anthropogenic impacts DEFINITIONS Unmanaged lands , including Lands where no industrial, commercial, residential, infrastructure construction, or other activities are conducted on the land (with the potential exception of some recreational, research, etc. activities where there is no particular intervention occurring) Lands where no management plans are in place and being implemented on the land. This includes that there are no management plans that involve harvesting biomass , conservation, wildfire management, invasive species and species at risk management, or any other type of intervention on the land Lands where no land use change is occurring or has occurred on the lands in the last 20 years Managed Land Is land where human interventions and practices have been applied to perform production, ecological or social functions (IPCC) Most lands classified as cropland and settlements will typically meet definitions for managed lands . Natural disturbances are defined as those that are not the direct result of management actions taken by the company , land managers or other actors in their value chain and that are beyond the control of, and not materially influenced by a company, land management practices or other human interventions in their value chain. The GHG Land Guidance defines three methods to separate natural from anthropogenic impacts.

11. LAND MANAGEMENT CARBON ACCOUNTING AND REPORTING 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS To account for Land management net CO2 emissions or removals, companies should estimate net carbon stock changes on land that remains within the same land use category and subcategory in the reporting year. To estimate carbon stock changes, companies should follow the following accounting process: Determine the approach used to estimate anthropogenic impacts on land carbon stocks STEP 1 Determine relevant spatial boundaries and the monitoring frequency for data used to estimated the net land carbon stock change STEP 2 Identify which carbon pools and land uses will be included in the estimate of net land carbon stock changes along with the methods applied STEP 3

12. TEMPORAL BOUNDARY FOR CARBON ACCOUNTING 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY Land management net CO2 emissions or removals are accounted for based on either: The annual net carbon stock change monitoring; or 1 The net carbon stock change annualized over a longer monitoring frequency (calculated by dividing the estimated net carbon stock change by the years between monitoring years as provided by the stock-difference equation 8.1 in section 8.1.2) 2 Factors to determine monitoring frequency: The land management practices and frequency at which they are expected to impact carbon stocks in the measured land-based carbon pools The expected magnitude of carbon stock changes within the selected spatial boundary relative to the uncertainty associated with estimating carbon stock changes over that area Recommended monitoring techniques and protocols for the given land use, sector and carbon pools Cost-effectiveness of the monitoring process Impact and frequency of unexpected events, such as natural disturbances.  Where annual data collection is not possible, resampling of plots should occur at least every 5 years to estimate the annualized carbon stock change.

13. ATTRIBUABLE MANAGED LANDS 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY  Companies with scope 3 land management impacts shall account for net land carbon stock changes on all attributable managed lands in their value chain or lands related to leased assets, franchises, and investments. Attributable managed lands depends on: The reporting company’s activities The relevant scope 3 category The degree of traceability  Based on the scope 3 category, lands included in the company’s scope 3 boundary are either: Specific lands that are franchises, leased assets or investments of the reporting company (if not included in scope 1) 2 Attributable managed land that are associated with the product life cycle of biogenic products or materials (e.g., crops, animal products, wood products, agricultural inputs etc.) purchased, processed, used or sold by the reporting company where the specific land area may be known or unknown. 1 Those mentions give me the impression that removals accounting and reporting will be tightly linked to a “coffee” approach of boundaries  Companies shall use a consistent scope 3 spatial boundary to account for land use change emissions and land management carbon stock changes, by product type, based on their level of traceability .

14. TRACEABILITY & SPATIAL BOUNDARIES 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY Traceability: Knowledge companies have regarding the specific land area where biogenic products or materials purchased by the reporting company are produced , or where products sold by the reporting company are used to support biogenic material production.  The spatial boundary used to estimate land management carbon stock changes should correspond to the level of traceability a company has and the scale at which management decisions are made. 5 scales of spatial boundaries defined in the GHG Land Guidance: Harvested area of origin Land management unit of origin (LMU) Sourcing region of origin Jurisdiction of origin Unknown origin Some value chains allow for physical traceability to a specific land management unit or harvested area within a land management unit (e.g., a coffee retailer tracing coffee beans back to specific coffee plantations or fields within that plantation).

15. Level of physical traceability Definition To a harvested area Spatially explicit area of agricultural or managed forest land that was harvested at a given time to produce the relevant raw material This narrow spatial boundary accounts only for the impacts of a discrete harvest and does not include the broader carbon flows of other managed lands that are not harvested at that point in time. To a land management unit A land management unit (LMU) is a predefined, spatially explicit area of a given land use, managed according to a clear set of objectives according to a single land management plan (forest lands, grasslands, croplands) Croplands: An agricultural management unit, such as a farm , plantation, orchard, vineyard, etc. Land management units can include conservation or set aside areas that are part of the land management unit, owned by the same entity and managed according to a consistent land management plan To a sourcing region / Supply shed/base level Spatially explicit land area that supplies harvested biogenic materials to the first collection point * or processing facility in a value chain . Can comprise a single or multiple land management units in one or multiple countries. Factors to determine the appropriate approach for setting boundaries: Multiple collection points : with close proximity and overlapping sourcing areas Setting a consistent boundary over time : considering current and future sourcing needs Focus on land management units: carbon stock changes are only reported from LMU from which biogenic material is sourced ; land unaffected by sourcing is excluded Attributable managed lands for crops = all croplands where the crop type purchased by the reporting company was harvested in the reporting year Lands excluded: unmanaged lands, not relevant to biogenic product or material, with restrictions on harvests, not producing sufficient volumes of the product, with other protective status To a jurisdiction Subnational jurisdiction, country or political region of origin. Excluding certain lands for sourcing region level (see above)  Not sufficient traceability to determine attributable managed lands for removals accounting. DEFINITIONS FOR SPATIAL BOUNDARIES 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY + - *Collection point is a location that receives harvested biogenic materials from land management units for processing or distribution further down the supply chain

16. SOURCING REGION LEVEL IN DETAILS 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY Again here, the sourcing region level : Seems to be defined in relation to its connection with the “harvested biogenic material” e.g coffee Rather than in geographical or ecological terms

17. SOURCING REGION LEVEL IN DETAILS 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY

18. CORRESPONDANCE WITH NESTLE INSETTING FRAMEWORK 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY + - *Collection point is a location that receives harvested biogenic materials from land management units for processing or distribution further down the supply chain Level of physical traceability Traceability Nestlé Insetting Framework Harvested area Known field or forested stand of origin #1 – ON FARM Project occurs on a farm that is a known supplier (direct or indirect) of an ingredient or raw material to Nestlé. LMU Known land management units of origin (e.g. forest management unit, ranch or farm) #1 – ON FARM Project occurs on a farm that is a known supplier (direct or indirect) of an ingredient or raw material to Nestlé. Sourcing region / Supply shed Known first collection point or processing facility #2 – SUPPLY SHED FARM Project occurs on a farm that is part of a group of suppliers in a specifically defined geography and/or market Nestlé purchases from. Jurisdiction Known subnational jurisdiction, country or political region ( eg EU) for origin #3 – SOURCING LANDSCAPE ADJACENT #3 – SOURCING LANDSCAPE ADJACENT Project occurs on the landscape directly adjacent to a Nestlé’s supply farm or supply shed

19. RELEVANT BOUNDARIES BASED ON TRACEABILITY 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY + - *Collection point is a location that receives harvested biogenic materials from land management units for processing or distribution further down the supply chain Level of physical traceability Traceability Data Specificity Emissions Reporting Removals Reporting Harvested area Known field or forested stand of origin Primary data from producers for the specifics harvested area(s) More precise If the company meets other removals requirements LMU Known land management units of origin (e.g. forest management unit, ranch or farm) Primary data from producers for the specifics managements unit(s) If the company meets other removals requirements Sourcing region / Supply shed Known first collection point or processing facility Primary data on attributable managed lands in the sourcing region(s) or secondary data representative of average management for lands within the sourcings region(s) Subject to pilot testing question #3 if the final guidance allows for sourcing region-level accounting for removals this would only be until 2030 but then revisit the need for more precise traceability requirements Jurisdiction Known subnational jurisdiction, country or political region ( eg EU) for origin Average national or regional secondary data for attributable managed lands in the jurisdiction Least precise Requires more precise traceability and primary data  Not sufficient traceability to determine attributable managed lands for removals accounting.

20. LAND MANAGEMENT NET Co2 REMOVALS REQUIREMENTS 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS 1. Ongoing storage monitoring Regardless of if the company’s activities are still relevant to those lands in the current reporting year. 2. Traceability Subject to Open Question #3 3. Primary data Direct field measurement of land carbon stocks or model-based or remote sensing-based. Global average data on carbon stock for a given climate type, ecological zone and soil type are not sufficient to meet the primary data requirements (i.e., IPCC Tier 1 default carbon stock and stock change factors). Parameters based on secondary data: Root to shoot ratios; wood density; biomass, deadwood or litter carbon content; biomass conversion and expansion factors 4. Uncertainty If the increase is statistically significant based on quantitative uncertainty estimates 5. Reversals accounting As net CO2 emissions or reversals from land-based storage if no longer on the GHG inventory boundary. Companies that change suppliers and/or sourcing regions do not need to account for reversal for associated lands if they can continue to monitor land carbon stock changes, they only need to report reversals when they lose the ability to monitor carbon stocks on such lands

21. SOURCING REGION LEVEL & OPEN QUESTION #3 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY 1 e.g., climate , vegetation , soil type, topography , etc.) 2 e.g., plantation forest age-classes, prescribed fire management, cropping systems, tillage practices, etc. We invite pilot testing companies to account for and report on net land carbon stock changes at both a land management unit-level and sourcing region level following the safeguards (next slide) for land-based products and materials (where they have the necessary data to complete both analyses), to inform the decision in the final Guidance.

22. SOURCING REGION LEVEL | SAFEGUARDS 8.2 STEP 2 – SPATIAL BOUNDARIES & MONITORING FREQUENCY Attributable managed lands Only include attributable managed lands that contributed to producing crops Excludes: unmanaged lands, not relevant to biogenic product or material, with restrictions on harvests, not producing sufficient volumes of the product, with other protective status Capturing variability Measurement of net carbon stock changes shall be based on a sample size that is representative of the variation due to both natural factors ( climate , vegetation , soil type, topography , etc.) and management factors (plantation forest age-classes, prescribed fire management, cropping systems, tillage practices, etc.) Conservative assumptions Within uncertainty range to estimate removals at sourcing region level Consistent allocation Using physical or economic allocation, based on the annual share of relevant material outputs sourced by the first collection point or processing facility. Avoiding double counting With managed lands attributed to other biogenic raw materials of the reporting company; GHG credits generated on attributable managed lands in the sourcing region boundary (Chapter 13) Reversal accounting Does it mean that removals from trees planted in unproductive lands owned by coffee farmers cannot be accounted for? Does it mean that removals from trees planted in intercropping with annual crops within other parcels of the coffee farms cannot be accounted for?

23. 8.1 INTRODUCTION TO LAND MANAGEMENT ACCOUNTING 8.2 LAND MANAGEMENT NET C02 EMISSIONS AND REMOVALS 8.3 LAND MANAGEMENT NON-CO2 EMISSIONS Source categories Guidance for production vs. value chain impacts Chapter 8 LAND MANAGEMENT ACCOUNTING* *Land management accounting applies to lands remaining in the same land use  For land-use change accounting: Chapter 7