What are the challenges involved in companies setting carbon sequestration targets?

This article is the second in a series on carbon sequestration published as part of the Net Zero Initiative in late 2024.

Although the concept of carbon offsetting is now being criticized or rejected by a growing number of standards and leading organizations, companies are still expected to demonstrate their ability to chart a course toward contributing to carbon sequestration, at a level of ambition consistent with the goal of global carbon neutrality.

While methodologies for setting gross emissions reduction targets—such as those of the SBTi—exist for many economic sectors, there is not yet a methodological consensus on how a company should develop a “science-based” carbon sequestration pathway.

Recent publications, such as the latest SBTi guidelines on net-zero^[1] and on the FLAG^[2] (Forestry, Land, and Agriculture), as well as the draft document from the GHG Protocol, *Land Sector and Removals Guidance*^[3] contribute to the methodological framework for implementing these carbon sequestration pathways. This series of articles aims to clarify the challenges, scope, and limitations of existing methods for carbon sequestration pathways by comparing them with the principles of the Net Zero Initiative (NZI).

A first article An assessment of global emissions and carbon sequestration in the land sector highlights issues related to the scope of accounting, on the one hand, and sequestration potential, on the other. The challenges of setting sequestration targets (SBTi standard) are analyzed in this second article in light of the NZI framework. The distribution of sequestration efforts among the various economic actors is addressed in a third article, based on a detailed analysis of the SBTi FLAG framework and the GHG Protocol’s draft document.

Introduction

The first article laid the groundwork for understanding the concepts of carbon neutrality and carbon sequestration on a global scale; this second article aims to explore how companies can leverage existing frameworks to contribute to the global goal of becoming a carbon sink. More specifically, this article reviews how the existing frameworks of the SBTi Net-Zero Standard (NZS) and the Net Zero Initiative address the issue of goal-setting. Furthermore, it highlights the challenges related to accounting for carbon sequestration that arise when striving to meet these targets and presents proposals to address them. In particular, since carbon sinks are limited on a global scale (see previous article), What are the accounting and carbon sink contribution challenges companies face in achieving their goals?

Principles of the SBTi Net-Zero Standard and NZI

SBTi Net-Zero Standard

In its Net Zero Standard (NZS) framework^[4], which aims to help companies set science-based long-term “net-zero” goals, the SBTi emphasizes that the top priority is meeting short-term emissions reduction targets.

The SBTi allows a company to claim it is “net zero” (unlike the Net Zero Initiative), but according to the framework, this “ "It cannot claim to be net-zero until the long-term goal has been achieved and the company has offset its residual emissions." Net-zero for a company, as defined by the SBTi, is therefore not feasible in the short term. Furthermore, the term “offsetting” has been removed from the SBTi’s vocabulary due to the abuses associated with its historical use by companies.

The SBTi thus highlights two steps for companies committed to becoming net zero, in addition to short-term (Step 1) and long-term (Step 2) emissions reduction targets:

• Step 3 (recommended) “ Beyond Value Chain Mitigation " which are emission reduction or avoidance actions outside the value chain. In the land sector, for example, these BVCM actions involve protecting and conserving carbon sinks (forests, wetlands, etc.) to prevent emissions resulting from their degradation. These BVCM actions may also involve energy efficiency projects, the development of renewable energy, or investment in technological carbon capture projects. These actions cannot be counted toward meeting emissions reduction targets.
• Step 4 (required) “ Neutralization of Residual Emissions " which corresponds to the permanent sequestration of residual emissions—emissions that cannot be reduced once long-term reduction targets have been met (~-90% reduction for most companies between now and 2050).

These two steps clearly articulate the principle of corporate contributions to the conservation and development of carbon sequestration capacity for global carbon neutrality, but without additional methodological details (scope, time horizon, arrangements) are proposed at this stage to help organizations define their approach and make operational commitments, for example through interim targets.

Furthermore, uncertainties still remain regarding the possible ways to achieve the emission reduction targets under the SBTi. In fact, the Board of Trustees In early 2024, it issued a statement authorizing the use of “environmental attribute certificates,” including carbon credits, to meet Scope 3 carbon footprint reduction targets^[5]. Although this approach has since been limited to the use of carbon credits within its value chain (“insetting”), it is still a subject of debate and has been the target of numerous criticisms and accusations of greenwashing, as it stands in stark contrast to the principles of science-based action championed by the Net Zero Initiative^[6].

Net Zero Initiative

The NZI is based on the principle that an organization must, within its own scope, take three complementary and non-fungible actions to contribute to global carbon neutrality^[7].

To contribute to the overall reduction in emissions, it must:

1. Reduce its own direct and indirect emissions (Pillar A)

2. Reducing others' emissions (Pillar B):

• By marketing carbon-reduction solutions
• By funding decarbonization projects outside its value chain

To help increase global removals, it must:

3. Increase carbon sinks (Pillar C):

• By expanding carbon sequestration at home and throughout the value chain
• By funding carbon sink projects outside its value chain

These three pillars of action correspond to the stages of the SBTi Net-Zero framework: Pillar A corresponds to stages 1 and 2, while Pillars B and C correspond to stage 3 (BVCM) and Step 4 (Offsetting Residual Emissions), respectively.

Differences remain because the SBTi Net Zero framework emphasizes emissions avoided outside the value chain—which correspond to B3 in the NZI matrix—while NZI primarily encompasses B2 emissions avoided, which correspond to the contribution to decarbonization made by products sold.

Furthermore, with regard to Pillar C, NZI considers that a company’s responsibility toward the development of carbon sinks^[8] is twofold, with:

• A global carbon sequestration target (Pillar C) related to the the actor's responsibility as a GHG emitter ;
• A specific objective for companies in the land sector that have a operational responsibility for the preservation and development of carbon sinks within their value chain (Categories C1 and C2 of Pillar C)

For the overall carbon sequestration target under Pillar C, companies must manage the evolution of their sink-to-emissions ratio (Pillar C to Pillar A ratio) over time so that it equals the global sink-to-emissions ratio or the ratio of the region with which it identifies each year (see graph).  For example, for every 1 tCO2eq emitted in 2030, the goal is to sequester 0.2 tCO2 (vs. 1 in 2050) in a global +1.5°C scenario. This approach makes it possible to set intermediate targets and develop technical and financial capabilities with a view to neutralizing residual emissions in the long term.

NZI has not yet published any methodologies for setting C1-C2 targets[jj1][GFa2]  (that is, within its value chain), and the analysis of the FLAG framework in the following article will aim to assess the extent to which this framework helps meet the NZI’s requirements.  The second part of this article aims to highlight the challenges associated with setting sequestration targets and how existing methods provide some solutions to these challenges.

Coordination of asset freezes between private and government actors

The SBTi (Net Zero Standard and FLAG) and the NZI Pillar C methodology encourage companies in both the land-based and non-land-based sectors to set targets for increasing carbon sequestration. Therefore, The issue of accounting for and claiming carbon sequestration is becoming key to measuring progress toward this goal.

• SBTi FLAG counts “intervention-based” carbon removals, which means that to make progress toward its goal, the carbon sequestration must be “additional”—in other words, it must result from human action that goes beyond the ecosystem’s baseline carbon uptake.
• NZI takes an inventory-based approach to well development targets within its value chain (categories C1 and C2), which means that the natural development of these wells contributes to the overall Pillar C target. NZI thus sets a complementary target for stakeholders who own land within their value chain—a target specific to the land in their value chain—which requires them to develop it in a specific manner. Consequently, acquiring land requires a commitment to actively and specifically develop the carbon sinks on that land.

These methodological safeguards are intended to limit the risk of land grabbing by private companies for carbon sequestration purposes, without implementing forestry projects or taking local socioeconomic issues into account. In practice, this is intended to ensure that a company cannot meet all of its carbon sequestration targets simply by purchasing a forest and letting it grow on its own.

The Net Zero Initiative is based on the principle that companies should contribute to the global goal of carbon neutrality. This global goal of carbon neutrality must be implemented by individual countries based on their carbon sequestration potential., ensuring that the sum of national targets is aligned with the carbon sequestration and carbon neutrality goals set forth in the Paris Agreement. Just as countries’ emission reduction trajectories are aggregated and compared against the Paris Agreement’s net-zero target, national carbon removal trajectories must be developed and analyzed in light of this collective goal.

By committing to the development of carbon sequestration, the company is certainly advancing its own objectives, but its primary aim is to contribute to the achievement of regional goals. The carbon benefits claimed by private buyers of carbon credits must therefore also be available to the countries where these projects are carried out. The contribution of Northern countries and the private sector to halting deforestation and advancing the ecological transition in Southern countries is essential. The effective and rigorous coordination of national targets and private carbon credit markets is a major challenge that the Paris Agreement must address. This challenge is addressed in a specific article (Article 6.4), the implementation of which began in 2023.

In its methodology for setting carbon removal targets (Pillar C), NZI proposes that companies contribute first and foremost to the national targets of the various countries where they operate, aligning with national trajectories where they exist. Thus, the carbon sinks developed by a company in a given country (for example, France) will be proportional to that company’s emissions in that country and aligned with the C/A ratio national (the National Low-Carbon Strategy in the case of France).

Setting Common Pillar C Objectives (NZI)

According to the NZI framework, a company’s carbon sequestration development goals (Pillar C contribution) must be proportional to its carbon footprint (Pillar A).

However, Pillar A of a company takes into account emissions both upstream and downstream of its value chain. This means that a single metric ton of carbon is counted in the carbon footprints of multiple companies. Since the sequestration target is based on Pillar A, this implies that several companies within the same value chain can set a Pillar C target corresponding to the same metric ton of carbon that has been counted multiple times, just as with Pillar A targets.

---

Example:In the figure below, if Company X produces steel for Company Y, which processes it, then the sum of the two carbon footprints results in double-counting. In Company Y’s carbon footprint, a portion of its Scope 3 emissions corresponds to purchases of products from Company X and is already accounted for in Company X’s carbon footprint. If these two companies independently set a Pillar C target proportional to their induced emissions, then the total amount of carbon sinks that these two companies would need to develop would automatically be greater than the amount actually required.

This example illustrates that, in complex value chains or regions where a single metric ton of CO2 emitted can be counted multiple times, the sum of the carbon sequestration targets of several companies may turn out to be significantly higher than the total actual emissions of those companies, excluding double-counting.

---

A simple solution to avoid this double-counting would be to calculate the Pillar C target based only on the company’s Scope 1 emissions, rather than on all direct and indirect emissions. However, this would obscure companies’ indirect responsibility for the development of carbon sinks and would also represent a missed opportunity to encourage actors within the same value chain to engage in dialogue toward a joint effort. Furthermore, setting targets based on the total carbon footprint ensures full consistency of the targets even if a company in the value chain does not commit, since the same work must, by default, be carried out by the other actors in the value chain. However, this type of situation should encourage companies to involve as many stakeholders as possible in their value chain and to promote climate action and its associated benefits.

The commitment by several companies to develop carbon sequestration projects independently, each targeting the same volume of emissions, is not problematic if it facilitates and accelerates the achievement of global carbon sequestration goals. However, the previous article highlighted the limited potential for carbon sequestration on a global scale; therefore, this development must not come at the expense of the quality and sustainability of carbon sequestration projects.. Thus, it is also possible to take collective action to offset a volume of emissions shared by several organizations.

This approach is thus similar to the one used for emissions reductions, in which actors within the same value chain act collectively and co-invest to reduce their shared emissions.. Thus, the process can be described as follows:

• Companies set an overall Pillar C target for their entire carbon footprint (Scopes 1–2–3) and a minimum target corresponding to their Scope 1 emissions. Companies are encouraged to break down these targets by geographic region whenever possible.
• Companies are directly responsible, both financially and operationally, for achieving the Pillar C target for direct emissions (Scope 1).
• Companies are responsible for achieving Scope 2 and 3 targets by collaborating with their suppliers and customers. The most important players in a value chain are called upon to take special responsibility for these shared targets and to support their partners (suppliers and customers) in implementing them.
  • To this end, companies can set collective goals with their value chain regarding shared emissions. This approach aims to catalyze collective action, pool costs and resources, and increase the overall impact of carbon sequestration strategies. Financial vehicles to facilitate this joint action can be developed, such as a carbon fund adequately funded by the various stakeholders in the value chain.
  • Companies can encourage their stakeholders to set and achieve Scope 1 carbon sequestration targets through commercial and contractual terms. In this case, the volume of carbon sequestration within the scope of shared emissions can be reported by other companies in the value chain as progress toward achieving their Pillar C Scope 2–3 targets.

A simplified example of the collective approach is provided below. It is clear that such an approach is difficult to implement for complex value chains. The leading companies in these value chains therefore play a crucial role in organizing collective action and ensuring that stakeholders contribute at the appropriate financial level.

---

Example: An Indusse-Alime agri-food company has a carbon footprint of 100 tCO2e in residual emissions, broken down as follows (simplified):

• 50 tCO2e, Scope 1;
• 40 tCO2e associated with purchases from their major supplier, Coop-Céréalis
• and 10 tCO2e associated with purchases from their smallholder supplier

Indusse-Alime aims to set carbon sequestration targets that will make a meaningful contribution.

• Following the NZI approach, the company sets targets for its overall carbon footprint using a C/A ratio—set at 0.5 for the example given here—which corresponds to a Pillar C target of 50 metric tons of CO2.
• As the entity responsible for its Scope 1 emissions, it sets specific targets of 25 metric tons of CO2 (0.5 × 50), which it funds and implements on its own.
• It then works with its suppliers to meet the value chain’s targets, namely 50 tCO2—an additional 25 tCO2.
  • Coop-Céréalis is financially sound and aims to meet its Scope 1 and 2 targets independently to meet the expectations of its members and investors. It has therefore set a sequestration target of 20tCO2 (0.5 × 40), which it is committed to financing on its own. However, it lacks the expertise and resources to monitor progress toward these targets on an operational level.
  • The company Petit-paysan is neither obligated nor able to set ambitious goals, but would like to contribute at an appropriate level. Following discussions, Petit-Paysan and Indusse-Alime agreed to split the cost equally to offset 5tCO2 (0.5*10), corresponding to Petit-Paysan’s Scope 1 and 2 emissions (2.5tCO2 each).
  • In order to share costs and facilitate the operational implementation of these various carbon sequestration goals, Indusse-Alime has decided to create a carbon fund for which it will assume operational responsibility, and to which the three companies will contribute financially according to their collectively agreed levels of responsibility: 27.5 tCO2 for Indusse-Alime, 20 metric tons of CO₂ for Coop-Céréalis, and 2.5 metric tons of CO₂ for Petit-paysan.

The approach proposed by NZI is therefore to act collectively to seek to sequester a volume of emissions shared by several organizations. This approach is similar to the one used for emissions reductions, where actors within the same value chain can act collectively and co-invest to reduce their shared emissions, driven in particular by the largest companies in the value chain. In other words, a volume of sequestered carbon corresponding to one metric ton emitted must be able to be reported as such by all actors who account for that same metric ton of carbon in their carbon footprint. The issue of allocating and accounting for carbon sequestration is therefore a key factor in companies’ ability to demonstrate progress toward their goals—and, consequently, in the funding they may receive.

---

In the next article, we will examine the issue of how global carbon sequestration potential is distributed and financed among land-sector actors and others, using the SBTi’s FLAG framework as a guide.and the draft of the GHG Protocol Land Sector & Removal Guide.