Serving as the practical companion to the LSR Standard, this document officially replaces outdated agricultural guidance and establishes a rigorous global rulebook for accounting for land-based emissions and removals.
For companies with agricultural, forestry, or land-reliant supply chains, this update fundamentally changes the compliance landscape. While the SBTi's Corporate Net-Zero Standard (CNZS) V2.0 governs your implementation hierarchy and opens the door for activity-pool or market-instrument approaches, the new GHG Protocol LSR Guidance provides the calculation guidance underneath it. Crucially, the LSR Guidance introduces rigorous rules around sourcing regions and impact traceability, making it the definitive operational rulebook for how you structure, fund, and legitimately claim long-term value from your insetting strategies.
With the 1 January 2027 effective date rapidly approaching, senior leadership teams must move past theoretical commitments and prepare their data systems for audit. Here are the most critical questions business leaders are asking, split by sector, and what you need to do to prepare.
The LSR Guidance is the exact execution playbook for the new GHG Protocol rules. Preparing for the 2027 deadline requires an immediate, cross-functional response:
The newly finalised SBTi CNZS V2.0 introduces context-specific target setting, an implementation hierarchy, and a mandatory Ongoing Emissions Responsibility (OER) framework under SBTi CNZS V2.0. Crucially, updated Scope 3 rules now explicitly open the door to market-instrument approaches for agricultural value chains, making this directly relevant to scaling your insetting strategies.
Effective 1 January 2027, disaggregated accounting and physical traceability are mandatory if you want to claim any on-farm interventions within your corporate inventory. The guidance clarifies that while mass balance models qualify as physical traceability, they are now subject to rigid, auditable reconciliation conditions. If your raw commodity inputs cannot be reconciled within the geographical boundary and purchase volume, the carbon reductions or removals achieved on those farms cannot be included in your physical GHG inventory.
The guidance introduces Jurisdictional direct Land Use Change (jdLUC) as a distinct, highly pragmatic accounting tier. Instead of requiring you to trace every single crop back to an individual farm gate—a process that is often financially prohibitive—you can now use advanced remote sensing and institutional data to calculate regional emission factors. This allows you to maintain strict audit rigor and satisfy assurance providers while improving cost-effectiveness and feasibility.
Carbon removals are no longer a static, one-time claim. Under the new SBTi Scope 3 targets framework and GHG Protocol LSR Standard and Guidance, agricultural carbon removals require perpetual monitoring. In the past, a carbon removal was often reported as a static, one-time victory; you planted the tree or restored the soil, and you checked the box. Now, the guidance demands an active, long-term asset ledger. Because companies have to actively detect and report 'reversals', meaning any subsequent loss of tracking stored carbon over time, removals require continuous data infrastructure and regular monitoring. It treats carbon permanence with the same rigorous, ongoing governance you would apply to a long-term capital asset on a balance sheet.
This is perhaps the most significant financial risk introduced by the new guidance. While mass balance accounting allows for non-proportional attribution, your physical GHG inventory claims are now strictly limited by proportional allocation and a sourcing volume cap.
For example, if your brand provides 100% of the funding for a farm’s regenerative agriculture practices, but you only physically purchase 20% of that farm's crop yield, you are only permitted to claim 20% of the carbon removals within your physical Scope 3 inventory. Your allocated impact is further diluted if you purchase a co-product instead of the whole kernel. Without a clear strategy to manage investment relative to sourced volumes, impact from your existing carbon investments risk becoming stranded assets that cannot be leveraged for your primary climate targets.
Absolutely. The 1 January 2027 deadline applies equally to apparel brands sourcing natural fibres and animal products. Disaggregated accounting and physical traceability are fully mandatory to claim any on-farm carbon reductions for cotton, wool, and leather supply chains. Just like the food sector, any biogenic removals linked to your regenerative apparel programmes will require long term monitoring and mandatory five-year resampling.
Tracing leather or cotton through growing, processing and finishing tiers is notoriously difficult. By leveraging the newly formalised jdLUC, fashion brands can map their supply chains using broader sourcing region boundaries. This provides a legally defensible method to calculate more accurate land use change factors without requiring hyper-expensive, farm-by-farm physical segregation through every step of the manufacturing process.
For the fashion sector, this is a critical accounting nuance that is frequently overlooked. Many textile manufacturers and dyeing facilities use biomass boilers fuelled by agricultural waste or wood pellets to generate thermal energy. The new guidance clarifies that bioenergy cannot automatically be assumed to be "carbon neutral”. Brands must unbundle these energy choices: direct biogenic CO2 from combustion must be reported separately alongside your physical GHG inventory, while upstream land sector impacts, such as LUC and land management emissions from feedstock sourcing, must be accounted for within your Scope 3 FLAG footprint. Correctly categorising these streams ensures supplier energy transitions don't mask hidden land-use carbon liabilities.
Transitioning your corporate inventory to align with the LSR Standard and Guidance V1.0 requires strategic calibration. Technically, an immediate overhaul of your entire supply chain data flow is not strictly mandatory today. What is required is that your FY2027 inventory (which you will report in 2028) is in full conformance, specifically by providing a clear FLAG versus non-FLAG split and full FLAG disaggregation.
However, waiting until 2027 to review your data management systems introduces significant compliance risk. Here is your practical roadmap:
Evaluate how you currently calculate emissions. If your business relies on high-level estimates using standardised Emission Factor (EF) databases, your immediate compliance priority is ensuring those EFs are updated and capable of handling the mandatory FLAG/non-FLAG split.
If you are moving towards a more mature reporting model, now is the time to structure your data systems to process primary, disaggregated data directly from suppliers.
Decide your spatial boundaries and determine your traceability investment per commodity. Focus on updating your data management frameworks so they are structurally ready to ingest disaggregated reporting for the upcoming tracking year.
Your FY2027 tracking commences. Ensure your inventories, EF databases, and supplier data flows are actively operating under the new disaggregation requirements from this date forward to ensure a clean audit.
Submit your fully conformant FY2027 inventory. Prepare to continually optimise your strategy as rules around forest carbon and market instruments evolve, looking for opportunities to bring more primary data into your reporting.
Get in touch with our land sector experts to explore how you can develop a resilient supply chain strategy by integrating GHG Protocol LSR Standard and Guidance into your decarbonisation plans.
