Read our first report for an overview of ESG.
Climate has become a central focus for forests and the marketplace. This report comes as a second installment of Sightline, an initiative of the Northeast Climate Hub to illuminate and unpack the marketplace climate and sustainability initiatives that are affecting our world of forests.
This issue provides an orientation to the climate policies and concepts that serve as a backbone for emerging sustainability programming. A host of finance approaches have emerged to address climate, as the focal sustainability issue. These include regulations like the US Securities and Exchange Commission’s climate disclosure rules, anticipated for final release in fall of 2023, and the Corporate Sustainability Directive (CSRD) in the European Union. There are also several voluntary programs focused squarely on disclosing and drawing down climate impacts including the Climate Pledge, CDP (Climate Disclosure Project, Science Based Targets Initative (SBTi) and many others.
Most Roads Lead to Paris
The Paris Agreement serves as a unifying reference point for most climate policies and programs. The Paris Agreement is an international climate treaty adopted in 2015. The central goal of the Paris Agreement is to secure the greenhouse gas (GHG) reductions needed to limit global temperature rise in hopes of avoiding the worst impacts of climate change. Most climate-related programs and policies are designed to identify and reduce GHG emissions at various scales and over time. Very often, these efforts are directly linked to the Paris Agreement’s goal of limiting the change in temperature to less than 2° Celsius.
In general, climate programs were not designed with forestry in mind. Rather, they are focused on GHG emissions as the driver of climate change. While forests are usually acknowledged as a piece of the puzzle, in many cases, guidance specific to forests is still under development. Nonetheless, companies inside and outside of the forest sector have already started figuring forests and forestry into their climate and decarbonization plans. As climate programs stabilize and become more widely adopted, there is a growing need to clarify how to handle forests more specifically to address concerns of fraud, create a consistent set of rules and, thus, an even playing field. The use of forest-related carbon offsets, a concept to be further explored in future installments of Sightline, creates additional urgency for forest related guidance. To this end, continued refinement to how these programs address forests into the future is expected.
In 2021, International Paper announced that it received approval of its 35% GHG reduction target by the Science Based Targets Initative (SBTi). The company set its GHG emissions target in line with the Paris Climate Agreement goal to limit global temperature rise to well below 2°C relative to pre-industrial levels. As part of their 2030 climate impact framework, International Paper notes that it will use sustainable management, conservation, and restoration efforts to mitigate climate change through carbon storage in forests.
Targets and Timing, Documentation and Disclosure
While each of the climate programs has its own emphasis, most of them share a common strategy and goal: reduce and report GHG emissions that contribute to global warming. Climate programs tend to share some common elements and workflow.
Climate programs tend to share some common elements and workflow:
Set a Goal
Most climate programs require an organization to set goals or make commitments related to GHG emissions reduction within a given timeline. The commitments are often expressed as a specific date by which an organization will achieve a specific GHG emission reduction. Often, the goal is net zero (LINK) carbon emissions. Additionally, these goals often tie back to the Paris Agreement’s goal to limit warming to less than a 2° temperature increase.
- The Climate Pledge is an initiative, linked to Amazon, where companies commit to reaching net zero carbon emissions by 2040 and develop a plan to get there.
- The Science Based Targets Initaitive (SBTi) program begins with making commitments to GHG reduction including a long term goal for net zero emissions by 2050.
Weyerhaeuser Company joined the Climate Pledge in late 2022 with a commitment to reach net zero emissions by 2040, drawing on the diversity of its operations including manufacturing and distribution but also management of its timberlands, renewable energy, and production of carbon storage via durable wood products.
Walmart has its own climate initiative, Project Gigaton, which has the goal of reducing or avoiding one billion metric tons (a gigaton) of GHG emissions from the global value chain by 2030. Through this initiative, Walmart is encouraging its suppliers to set their own GHG emissions reduction targets to, thereby, reduce its own company Scope 3 emissions (see below). Walmart’s Project Gigaton nestles forest products and the forest management producing those products under its Nature Pillar. In this pillar, Walmart asks its suppliers of forest products, such as tissues and paper towels, to assess GHG emissions for each product supplied and conduct a nature impact assessment across the value chain and through realms including biodiversity and land. Suppliers are, then, asked to set a goal for each product and engage in actions to reduce or offset GHG emissions and the nature loss resulting from the sourcing and production of raw materials, including forest products. The use of forest certification, such as FSC, SFI or PEFC, figures into a “Good, Better, Best” sourcing categorization.
Organize by Scope
The goals that companies set are generally organized by the scope of the emissions. Often, an organization’s declared climate goal will go through a “validation” phase, where experts from the climate program will review the goal to determine if it is realistic and appropriate, for the kind of organization making the goal but also according to the latest climate science. A part of this process may also be calibrating how an organization of a certain size and type can or should be contributing toward the 2° aim of the Paris Agreement. For example, this validation process is a key feature of the SBTi system.
Announce the Goal
Most climate programs require a public announcement of the climate or GHG reduction goal. For example, SBTi requires that the goal be made public within 6 months of validation, including through publication on their website.
Beer giant AB InBev, maker of Anheuser-Busch, Stella Artois and other beer brands, announced their Net Zero under SBTI goal in 2018. The commitment includes a 38.4% reduction in GHG emissions associated with packaging, which is usually forest-based, including a pledge to increase recycled content in packaging. Additionally, to neutralize or offset GHG emissions that cannot be eliminated, the company promotes the use of natural climate solutions including watershed reforestation projects, windbreak installation, vegetative buffers, and agroforestry projects.
Build a Plan
Once a goal for GHG emissions has been set, companies are generally required to lay out a plan for GHG emissions reduction or decarbonization. Climate programs tend to have guidance for identifying leverage points to reduce GHG emissions. For example, Walmart’s Project Gigaton identifies strategies for reducing GHG emissions through packaging design and material selection, such as post-consumer recycled materials or replacing plastics with biobased materials.
Additionally, decarbonization plans may identify actions to address other sustainability concerns such as forests, biodiversity, ecosystem services or water. For example, the Colgate-Palmolive Climate Transition & Net Zero Plan notes that deforestation and forest degradation contribute to GHG emissions. In response, the company has set a No Deforestation Policy that applies to several commodities, including pulp and paper-based packaging. The plan also includes descriptions of recent efforts to address biodiversity, a small project to reclaim a wastewater lagoon in South Carolina and the use of forest-based carbon offsets to address GHG emissions it cannot remove from its business activities.
In 2021, Delta Airlines announced an intention to set SBTi climate goals in line with the Paris Agreement, along with a decarbonization plan. The goals have been submitted for validation by SBTi but that process is not yet completed. The company set a goal of net zero no later than 2050. Delta’s decarbonation plan includes a goal of replacing at least 5% of the conventional jet fuel it uses with sustainable aviation fuel (SAF). To support this specific goal, in the last several years, Delta has supported research to promote the development of sustainable aviation fuels and, in 2021, signed an offtake agreement estimated at a billion dollars with Aemetis, a renewable fuel and biochemical company, for 250 million gallons of sustainable aviation fuel including from derivatives of wood waste. As part of its decarbonation plan, Delta also includes forest-based carbon offsets including afforestation and reforestation.
Climate programs generally require annual disclosures to enable the tracking of progress toward climate goals and specific GHG reductions. Disclosures are often organized by calendar year with reporting for the previous year due in the summer or fall.
How widely an organization must disclose their emissions or progress varies greatly. Very often, an organization is only disclosing the details of its GHG emissions and performance on other ESG factors, including biodiversity and deforestation, to a limited audience such as their customers or their own company board of directors.
Organizations may or may not be required to publicly disclose in the voluntary climate programs. This is largely because disclosure questionnaires often require specific information about a company’s operations and their supply chains that extend far beyond their own emissions. As such, public disclosures are often in the form of a composite score or summary. For example, SBTi provides a dashboard where companies publicly disclose their goals and progress, in broad stokes, including the scopes affected, but not the details of their GHG emissions. Likewise, CDP has a searchable database allowing varying degrees of access or information. CDP allows companies to submit their disclosures to be scored or not. If scored, the disclosure is reviewed and assigned a letter grade, based on evaluation by CDP. If the disclosure is unscored, the dashboard merely confirms if a disclosure was submitted.
Some organizations choose to make their disclosures public. Indeed, some of the largest forest products companies in the US routinely publish their voluntary climate disclosures in full, along with their annual ESG reports, to promote transparency.
Many believe that publicly reporting GHG emissions is central to the credibility of an organization’s climate goals and moving the needle to address climate change. For these reasons, public disclosures will be required by regulatory bodies, as in the case of the proposed US Securities and Exchange Commission disclosure rule.
A System for Identifying and Measuring Climate Impacts
While there are many different reporting platforms and programs, climate impacts are generally organized into three categories or scopes of GHG emissions. The system of scopes was established under the Greenhouse Gas Protocol, as a common international standard and methodology for identifying, measuring, and reducing the GHG gasses that contribute to global warming.
Often called “direct emissions,” Scope 1 emissions are created by an organization directly. These include the emissions related to their production methods, the machines they use, the vehicles they drive and power used in running their computers and heating and powering their buildings.
Scope 2 emissions are referred to as “indirect” and are related to the power an organization buys and how that power is generated. Using renewable energy sources, like solar or wind, can reduce a company’s Scope 2 emissions.
Like Scope 2, Scope 3 emissions are also “indirect” and are often described as “in the supply chain” because they are associated with what happens before and after a company’s direct activities (contained in Scope 1). For example, Scope 3 emissions includes the GHGs emitted by a company’s suppliers in making a product a company uses in its own production or by its customers in using the product the company makes. Scope 3 emissions are widely regarded as the most difficult to identify, understand, quantify and, importantly, control or influence.
While the Greenhouse Gas Protocol, scope categories and the Paris Agreement provide guideposts for GHG reporting, there remains inconsistency in how organizations calculate and disclose their GHG emissions. In fact, this inconsistency is a major driver for government regulatory action, including the US Securities and Exchange Commission’s proposed disclosure rule which seeks to standardize the ways that companies make their climate disclosures. Many investors are keen to see these SEC rules go into effect because it will enable them to make “apples to apples” comparisons and more effectively gauge the climate risks and opportunities, as well as the financial conditions of organizations they are or would potentially invest in.
How Do Forests Fit In?
Forests and forestry can fall into any of the three scope categories (LINK), depending on the kind of organization involved. Many organizations in the forest sector are struggling to understand how they fit into these reporting frameworks because forests can fall on both sides of the equation. Forests sequester carbon and carbon can be stored in harvested forest products. They are also a source of emissions, when forests are converted to other land uses, suffer impacts of insects or disease or are burned in fires. Additionally, the management of forests and harvesting of forest products also involves emissions. Inputs such as fertilizers, the use of harvesting machinery, processing and transportation to market all have their own carbon calculations to consider. In subsequent Sightline products, we will explore carbon offsets and other dimensions of GHG emissions associated with forests.
Recognizing the complexity of forests in the climate picture, along with other land use implications, the GHG Protocol has been in the process of developing the Land Sector and Removal Guidance since 2020; it is expected to be finalized and published in 2023. This guidance is anticipated to bring greater clarity to questions related to GHG emissions associated with forest management, as well as forest products, biomass and other biogenic products.
Similarly, recognizing that forestry, along with the agricultural sector, is an industry at elevated risk from the impact of climate change but is also a significant source of emissions, SBTi has developed specific guidance for forest, land and agriculture (FLAG) sectors. This guidance was only published in April of 2023 and, thus, has not yet been fully implemented. Even in the context of all these moving pieces, many organizations in the forest sector have begun to estimate and disclose their GHG emissions, along with their public climate commitments.
Sappi, the South African paper company which operates a primary sourcing mill in Somerset, Maine has an SBTi approved climate target to reduce scope 1 and scope 2 GHG emissions by 41.5% per ton of product by 2030. The company also commits that 44% of its suppliers, by dollars spent, will have science-based targets by 2026. To this end, the company says that it will be “vigorously engaging” its suppliers to create science-based targets of their own. This suggests that logging companies and institutional forest landowners may soon feel pressure to account for their own emissions to meet their customer demands.
How are the forest certification standards handling GHG emissions?
Each of the traditional forest certification programs is aimed at advancing the practice of sustainable forest management. This includes measures that may reduce GHG emissions and increase climate benefit such as the retention of forest lands, minimizing risk of catastrophic fire, soil protection and other measures. For example, Walmart’s Project Gigaton recognizes forest certification schemes in a Basic, Better, Best framework for sourcing forest products like paper towels and tissues, toilet paper and other goods. However, the inclusion of specific provisions related to GHG accounting is not consistent across the forest certification space. Here is a quick summary of how each of the largest forest certification systems is addressing GHG identification and reduction.
The 2022 SFI Forest Management Standard includes a new Objective (9) for Climate Smart Forestry, which includes specific elements to identify and address climate change risks to forests, and address mitigation opportunities. Additionally, the standard includes a requirement that certified organizations establish a program to identify and address greenhouse gas emissions within their operational control (9.2.3). While the 2022 SFI Fiber Sourcing Standard includes provisions related to climate generally, neither this standard nor the 2022 SFI Chain of Custody Standard include requirements related to GHG emissions accounting or reduction.
Neither the FSC International Principles and Criteria for Forest Stewardship (FSC-STD-01-001) nor the FSC International Generic Indicators (FSC-STD-60-004-20) contain requirements related to GHG emissions identification or reduction. The final draft of the FSC Forest Stewardship Standard for the Conterminous United States (FSC-STD-USA-02-2022 DRAFT 3.0), which has been submitted to FSC International and is pending approval, does include management elements that affect the climate or carbon. These include protection of high conservation values (HCVs) and forests associated with high carbon stocks, fuels reduction, soil protection and measures to avoid conversion of forests. However, it does not include requirements related to GHG emissions identification or reduction. Likewise, the current FSC CoC standard (FSC-STD-40-004 V3-1 EN), approved in 2021, does not include requirements related to GHG emissions identification or reduction.
The American Forest Foundation (AFF) 2021 Standards of Sustainability V 2.1 for the American Tree Farm System include elements to promote climate positive practices. Examples include adaptive management, promoting forest health, following best management practices for maintaining water quality and quantity, wildfire risk reduction, and/or efficient use of resources during harvesting operations. However, the standards do not include requirements related to GHG emissions identification or reduction. The American Tree Farm System (ATFS) is a nearly 100-year-old landowner outreach and education program that targets family landowners in the United States. The ATFS program also offers a third-party forest certification.
PEFC introduced into its requirements for forest management standards (1003:2018) a provision that PEFC-endorsed national standards require climate positive practices in management operations, such as greenhouse gas emission reductions and efficient use of resources shall be encouraged (indicator 8.1.3). However, GHG emissions identification and reduction is not a requirement of the current global chain of custody standard (2002:2020)
The Climate Pledge is an initiative founded by Amazon and Global Optimism with the goal of reducing warming to less than 2° Celsius above preindustrial levels. The Climate Pledge has three elements: regular reporting, carbon elimination and credible offsets. Companies join the Climate Pledge and make their own commitments and plan to net zero carbon emissions by 2040.
Different organizations define nature-based solutions in different ways, and no single definition has been universally adopted. In general, the term is used to describe the protection, sustainable management or restoration of natural ecosystems, including forests, to mitigate or adapt to climate change or provide ecosystem services to meet other needs. Carbon offsets, including the planting of trees and specific management of forests to promote carbon sequestration and storage, is a notable and widely used nature-based solution.
Net Zero is a term used by many organizations and governments as their end goal for their emissions and contribution to addressing climate change. Indeed, many climate goals are expressed as a specific date by which an organization will achieve net zero carbon emissions. It is estimated that almost two-thirds of global emissions and a slightly higher share of global gross domestic product are covered by net-zero targets today (see Black et al, 2021), including the government of the United States. However, there is a lack of clarity about what is meant by net zero (see Science, 2022). While there is no official, globally accepted definition for the term net zero, the general meaning is the reduction of an organization’s GHG emissions to nothing or zero. Some, including the United Nations, take the term to include that any remaining emissions, those that cannot be cut, be re-absorbed from the atmosphere, by oceans and forests for instance.
Project Gigaton is Walmart’s initiative aimed at reducing or avoid one billion metric tons (a gigaton) of greenhouse gases from the global value chain by 2030. Through this initiative, Walmart is encouraging its suppliers to set their own GHG emissions reduction targets and taking science-based, measurable action to reduce emissions across six areas critical to reaching zero emission. Aligned with the Paris Agreement’s original 2° Celsius warming scenario, Project Gigaton was designed in consultation with World Wide Fund (WWF), Environmental Defense Fund (EDF) and CDP.
Science Based Targets Initaitive (SBTi) is an collaboration between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund (WWF). SBTi is a global body designed to work with businesses to set ambitious emissions reduction targets aligned with the latest climate science. SBTi’s goal is to accelerate companies’ efforts in a way that would halve emissions of the global economy before 2030 and achieve net-zero before 2050.
The Paris Agreement is a legally binding, international climate treaty. The Agreement was adopted in 2015 and entered into force in 2016. The overarching goal of the Agreement is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.” It is important to note, however, that, in recent years, world leaders have stressed the need to limit global warming to 1.5°C by the end of this century. As of August 2023, 195 countries around the globe have become signatories to the Paris Agreement, including the United States, which signed on in 2021. The way the Agreement works is each country develops a climate plan with own “Nationally Determined Contributions” or NDCs. These are the actions that each country is committed to taking to reduce their own emissions and make an appropriate contribution to the 2°C reduction goal.
The term value chain is used to refer to all the economic activities involved with bringing a product or service to the market. Supply chain tends to refer more specifically to the physical materials and their flow through the production process, from source to end consumer. Whereas, value chain tends to also include services or elements that have or add value to an end market good or service, long the supply chain.
An Invitation to Engage
The focus of Sightline is to illuminate and unpack the climate mitigation and sustainability trends in the business community that will affect our world of forests. As the Northeast Climate Hub launches this new initiative, we welcome your engagement. Which topics would you like to see explored? What questions are coming up in your communities and with your partners, stakeholders, customers or suppliers?
Please email us at firstname.lastname@example.org to provide feedback or input that will help us plan the content of this initiative.
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