Carbon Removals for Corporate Net Zero Strategies

Renewed Potential of Carbon Removals Due to SBTI FLAG

The Science-Based Targets initiative (SBTi) launched the new Forest, Land and Agriculture Guidance (FLAG). The FLAG guidance offers sector-specific guidance on how to set climate targets on land-based emissions and removals. Before its release, high-quality carbon removals only played a limited role in achieving corporate climate targets, as they were only accepted as a method to neutralize residual emissions that a company cannot mitigate in the long term¹, a point in the decarbonization journey that many companies have not yet reached. SBTi FLAG now offers corporations active in land-based value chains the opportunity to account for carbon removals to lower their FLAG emissions.

As a result, it is now possible for a farmer to achieve net negative emissions (on-farm), and for downstream value chain actors to account for these negative emissions in Scope 3, as opposed to reporting it separately from the footprint. This drives down their overall Scope 3 footprint. For this type of land-based carbon removals, no carbon-removal credits need to be procured.

Corporate Risks of Carbon-Removal Credits

Future Policies Will Regulate Carbon Removals By Using Standardized Methodologies

Carbon removals have been a largely unregulated topic for years, relying instead on VCM certification standards. With the European Commission’s (EC’s) upcoming Carbon Removal Certification Framework (CRCF), the first steps are undertaken to develop regulations on how to quantify and verify the climate benefits of carbon removals, and encourages further market development. Furthermore, the California Air Resources Board (CARB) has proposed the Carbon Dioxide Removal Act, as part of which CARB aims to establish rules and processes for certifying carbon-removal practices.

The policies proposed by the EC and CARB are likely just the first steps of international policymakers in regulating how consumers and corporations are to account and report on carbon removals. In the absence of clear regulatory standards, corporations are hesitant to invest in and account for carbon removals in fear of anti-greenwashing litigation.

Corporate Due Diligence to Understand Risks and Opportunities on Carbon Removals

Corporations should strategize on carbon removals before they engage in long-lasting carbon-removal schemes, or are confronted with suppliers aiming to sell carbon removals as credits to parties outside of their value chain. By establishing appropriate minimum requirements that ensure a credible use of removals, risks of greenwashing allegations and litigation can be minimized. 

Why Guidehouse?

Guidehouse helps organizations design and implement their sustainability strategies, including toward nature, from calculating impacts, setting targets, and assessing risks, through to designing implementable solutions and innovative finance models.

Table 2 below shows how Guidehouse can support its clients in developing a credible carbon-removal strategy in line with best-in-class climate frameworks and initiatives.