Company readiness for SBTi FLAG requirements is mixed

The uptake of companies setting SBTs is slow, with just 28% disclosing SBTi-validated targets in 2024, up from 23% last year. Most of these are demonstrating best practice by having validated net-zero SBTs (5%) or 1.5C scenario-aligned Scope 1, 2 and 3 SBTs (18%), led by European Aquaculture.  

Several new companies disclosed their commitment to SBTi validation of Scope 1 and 2 targets or confirmed submissions. There has also been a small rise in those setting zero soy deforestation and Scope 3 non-SBTs, indicating FLAG readiness.  

However, only seven other companies have mentioned FLAG progress within their corporate reporting this year, predominately in Europe and LATAM. Companies may be hesitant to set FLAG targets due to the SBTi’s varying requirements³ and the recent publication delay of the final GHG Protocol Land Sector and Removals Guidance until early 2025.⁴  

While companies are expected to increasingly disclose their FLAG target-setting activities as investors better understand the final guidance, the SBTi’s more stringent reporting requirements have, so far, seen some major companies remove their targets and commitments⁵ to pursue environmental goals outside the initiative’s framework. 

Regulatory developments driving FLAG-related disclosures

Just over half of Index companies disclosed a full scope GHG inventory, up from 48% last year, likely in response to FLAG-related emissions being increasingly incorporated into international climate-focused regulatory frameworks. 

These include the EU’s Corporate Sustainability Reporting Directive, the Task Force on Climate-Related Financial Disclosures framework in the UK, the US Securities and Exchange Commission’s Climate Disclosure Rule and the Climate-Related Disclosure regime in New Zealand.⁶ 

The number of companies disclosing full emissions from feed production and animal farming also increased by 8% and 18%, respectively. However, around five in six companies still do not disclose full or partial emissions from land use change. 

Companies have also made mixed progress in implementing four core FLAG mitigation measures across emissions reduction and mitigation, carbon removals and demand-side intervention.^{7, 8}  

Emission mitigation measures growing but reduction lagging

While investment in animal farming innovations to reduce emissions, such as using feed additives, has increased by almost 50%, just five companies explicitly reported reducing their methane emissions in absolute terms, by better managing the enteric fermentation of their livestock, for example, up from four last year. 

The number of companies invested in innovative practices, such as carbon-capturing and improved nutrient/fertiliser management, to reduce feed farming emissions has almost doubled, from 14 to 27. However, like last year, only 10% have explicitly reported an absolute emission reduction from feed production. 

On overall performance this year, 38% of companies disclosed a decrease in absolute total emissions against a comparable base year since 2020. Of this group, just two with complete inventories achieved an average annual emission reduction of more than 3.03%, indicating they are aligned with the SBTi FLAG emission reduction pathway.¹⁰ 

Uptake of nature-based solutions in feed farming for carbon removals

This year more companies moved towards sustainable feed sources or implemented projects to promote biodiversity and/or soil health in feed farming, with over half of Index companies (predominantly based in Asia) disclosing such nature-based initiatives. 

This is a positive development, given that the 2023 COP28 Global Stocktake¹⁰ found that the world is off-track to meet the Paris Agreement’s goals, and recommended that countries should ensure that national climate plans also promote carbon removals. 

Furthermore, the SBTi requires FLAG targets to account for emissions and carbon removals, as the sector is uniquely positioned to drive removals by adopting nature-based solutions for sustainable farming and ecosystem restoration. Read more on this in FAIRR’s report, Tackling the Climate-Nature Nexus.  

Alt proteins recognised as a carbon reduction tool but not yet reflected in climate plans 

Index companies are increasingly recognising that protein diversification can contribute to achieving carbon reduction targets and other climate, nature and health goals, with 17% now acknowledging this publicly, up from 12% last year.  

Just over half of Index companies currently have an alternative protein portfolio, 22 of which have a dedicated protein brand, including plant-based, fermentation-enabled and cultivated protein.  

Nonetheless, as highlighted in FAIRR’s report, Shifting Diets: A Market Opportunity to Abate Climate, Nature and Public Health Risks earlier this year, most companies have yet to integrate their growing plant-based product portfolios into their climate roadmaps to support the uptake of sustainable healthy diets. 

There has also been a 13% decline in companies investing in the future growth of alternative proteins, from 39 to 34, while many have stalled on setting time-bound targets to diversify protein sources. 

Reference

[1] Science-Based Targets initiative, (2024). SBTi Corporate Near-Term Criteria V5.2.

[2] Science-Based Targets initiative, (2024). Forest, Land and Agriculture Science-Based Target-Setting Guidance V1.1.

[3] From April 2023, companies setting SBTs for the first time, updating them and/or adding net-zero targets are required to submit FLAG targets using the draft guidance, whereas those with validated SBTs can wait for the final GHG Protocol Land Sector and Removals Guidance to be published before doing so.

[4] Greenhouse Gas Protocol, (2024, March 07). Land Sector and Removals: Workstream Update.

[5] Science-Based Targets initiative, (2024). Procedure for Validation of SBTi Targets.

[6] EU CSRD, the UK TCFD framework, the US SEC’s Climate Disclosure Rule, and the Climate-Related Disclosure regime.

[7] Calculated using proxy questions from the Index. Mitigation measures based on the SBTi FLAG guidance, which identifies critical areas of focus for the livestock sector and seven priority mitigation measures.

[8] FAIRR, (2023). Coller FAIRR Protein Producer Index 2023/24 How the animal protein sector addresses ESG risks and opportunities.

[9] Science-Based Targets initiative, (2024). Forest, Land and Agriculture Science-Based Target-Setting Guidance V1.1.

[10] United Nations. Global Stocktake reports highlight urgent need for accelerated action to reach climate goals.