Written by Anna Woodley from Trinity AgTech
The concept of natural capital may seem distant and complex. However, it is a collective asset that everyone involved in agriculture should acknowledge and actively manage. From understanding the value of natural capital, to taking credible actions to reduce carbon footprints, farmers and land managers play a pivotal role in shaping a sustainable future. Here are our essential insights for carbon to help guide you on this inevitable journey.
Calculating a carbon footprint for a farm means assessing the total amount of greenhouse gases produced directly and indirectly from farming activities, usually expressed in equivalent tonnes of carbon dioxide (CO2e).
Carbon dioxide equivalent (CO2e) is a yardstick measurement with a global warming potential of 1. Other gases have their potential expressed as the equivalent amount of carbon dioxide, usually expressed in million tonnes of carbon dioxide equivalents. Methane, for example, has a CO2e 28 times that of carbon dioxide. This means every 1m tonnes of methane released will be equivalent to emissions of 28m tonnes of carbon dioxide.
A carbon footprint calculation considers various sources including:
Direct emissions are emissions produced directly from farming activities. Examples include:
Methane (CH4) from enteric fermentation in ruminant animals. Nitrous oxide (N2O) from manure and fertilised soils.
CO2 from machinery and transport used in farm operations.
Indirect emissions are emissions related to the production of goods and services used in farming. Examples include:
Emissions from the production of fertilisers and pesticides. Emissions from electricity used on the farm.
Emissions from the production of purchased feed.
Carbon sequestration refers to the process by which farms absorb and store carbon, primarily through plants and soil. Certain farming practices can increase carbon storage, effectively offsetting some of the farm’s emissions.
The purpose of calculating a farm’s carbon footprint is to understand its environmental impact, identify areas for improvement, and implement practices to reduce emissions.
Baseline
The baseline establishes your farm’s annual emissions from current practices, which is crucial as any reductions from this point can generate credits. Incorporating historical management information is essential for realistic and credible reporting with Sandy.
Farmers have the option to input a minimum of one year’s worth of data, but it is advisable to establish a baseline spanning three to five years for more reliable and conservative carbon credit calculations that account for uncertainties.
Components of a farm’s carbon footprint
What is included in a carbon footprint can vary significantly based on the methodologies employed by the carbon footprinting tool and the standards it adheres to. Different tools might consider varied sources of emissions, have unique boundaries of assessment, or use distinct emission factors.
Moreover, the standards or protocols that a tool aligns with, such as the Greenhouse Gas Protocol or ISO 14067, further define the scope and precision of the calculation. Therefore, when evaluating or comparing carbon footprints, it’s essential to understand the underlying methodologies and standards.
Carbon standards
Adhering to rigorous standards in the creation of your carbon calculation, ensures the utmost accuracy and credibility in the assessments. Sandy by Trinity AgTech adheres to the highest standards.
IPCC 2019 Tier 2 and Tier 3 are advanced methods with high data and complexity demands. They’re viewed as more accurate if sufficient data is available.
ISO 14064-2 – quantification, monitoring and reporting of activities intended to cause greenhouse gas emissions reductions or removal enhancements.
ISO 14067 – quantification and reporting of the carbon footprint of a product, and the most comprehensive standard for carbon footprint reporting available.
Greenhouse Gas Protocol Land Sector and Removals Guidance standardises how companies measure and report their land-related GHG emissions and removals to accurately reflect their impact on climate. ISO 14067 provides good alignment with this guidance, and SBTi FLAG.
SBTi FLAG provides a standardised method for land-intensive sectors to set science- based targets, addressing the 22% of global emissions from agriculture, forestry, and other land uses.
PAS 2050 assesses the life cycle greenhouse gas emissions of products and services. While it’s largely been replaced by ISO 14067 and the GHG Protocol, some retailers still reference it.
Greenhouse Gas Protocol Product Standard – designed to understand, quantify, and manage greenhouse gas emissions.
Farmers have a great chance to boost profits and sustainability by delving into the world of carbon and natural capital. However, picking the right software for measuring and managing natural capital can be confusing. Some people liken the voluntary carbon market to the “Wild West” because they believe it lacks clear rules. They argue that the market’s unregulated nature, along with the varying prices and quality of carbon credits, reinforces this idea that there are no set guidelines for the developing carbon and biodiversity markets. But that’s a misconception.
The reality is that several standards exist to bring order and credibility to this field. While carbon reporting criteria can vary, there are international standards that ensure the credibility of carbon footprint reporting methods.
All the previously mentioned standards consider emissions and removals from land management, except for one: PAS 2050. PAS 2050 excludes changes in soil carbon content caused by actions such as farming practices and crop types from greenhouse gas (GHG) emissions assessments. Instead, PAS 2050 standards focus on changes in soil carbon resulting from alterations in land use.
Because PAS 2050 doesn’t consider emissions and removals caused by farming practices, it becomes challenging for agriculture to achieve net-zero emissions, and companies will struggle to meet their Scope 3 emissions targets.
The PAS 2050 guidelines also exclude the carbon that is stored in plants or trees with a lifespan of 20 years or more. These are plants or trees that have a relatively long life, such as fruit trees. This exclusion applies when these long-lived plants or trees are part of a larger product system but are not products themselves. In other words, if the carbon is stored in these plants or trees and they are not the main products being assessed, they are excluded from the carbon footprint calculation.
Carbon footprint definitions
Carbon leakage in farming refers to the unintended consequence where local efforts to reduce carbon emissions might lead to increased emissions elsewhere. For instance, a UK farm might adopt sustainable practices to lessen its carbon footprint, resulting in reduced yields. This decrease can prompt the UK to import more food to meet demand. If these imports come from countries with less sustainable farming practices, the global emissions might simply shift rather than decrease. Additionally, the transportation of imported goods can further contribute to emissions. Thus, while the UK farm’s emissions are reduced, the global output could remain unchanged or even rise due to these displaced production dynamics.
Emissions intensity is calculated by dividing the level of greenhouse gas emissions by the total product, for example t CO2e per tonne.
Global Warming Potential (GWP) and Global Warming Potential* (GWP*) are both metrics that assess the climate effects of greenhouse gases. GWP, developed by the IPCC, measures the heat-trapping ability of different gases compared to CO2 over set periods, like 20, 100, or 500 years. It’s a standard in climate modelling and policy-making.
GWP*, on the other hand, was created to better represent the impacts of short-lived pollutants like methane, which decrease quickly in the atmosphere. Unlike GWP that focuses on cumulative effects, GWP* considers the rate of emission changes, making it ideal for areas with significant methane emissions. In summary, GWP* offers a more detailed perspective for short-lived gases, guiding targeted mitigation strategies.
Scope 1 emissions are direct emissions controlled by the farm, including those from on- farm fuel use, livestock digestion, and manure management. These are distinct from Scope 2 and Scope 3 emissions, which involve indirect sources and activities beyond the farm’s control.
Scope 2 emissions are indirect emissions tied to the farm’s electricity, heat, or steam purchases. For instance, if a farm buys electricity from the grid, the emissions linked to how that electricity was generated (e.g., coal, natural gas, renewables) fall under Scope 2 emissions.
Scope 3 emissions are not directly controlled by the farm but result from its activities. They are diverse and often difficult to measure, including emissions from purchased feed production, product transportation, and the use of items like fertilisers and pesticides.
Sandy provides detail on Scope 1,2 and 3 emissions.
Monetisation
Trinity AgTech remains neutral when it comes to farmers deciding whether to trade carbon credits or not. Our primary goal is to provide farmers with the necessary tools, information, and resources to make informed decisions that align with their unique agricultural practices and goals. We respect the autonomy of farmers, understanding that the choice to engage in carbon credit trading is a complex one, influenced by various factors. Whether a farmer chooses to participate or not, we remain committed to supporting them in their pursuit of sustainable and environmentally responsible farming practices, emphasising that the decision is ultimately theirs to make.
For those who have made the conscious decision to engage in carbon trading, Trinity AgTech’s sister company, Trinity Natural Capital Markets (NCM) can provide a legally sound framework with a commitment to transparency and the exchange of high-quality carbon credits.
Before deciding if carbon credits trading is right for your business, ask yourself – do I know what natural capital assets I have? If I can grow those assets? What are those assets worth? If you can’t answer those questions, you should be measuring a baseline and running a set of natural capital accounts and scenario planning.
Understanding scenario planning
Scenario planning is a dynamic process that involves testing various scenarios or hypotheses regarding a farm’s carbon footprint. It builds upon the baseline data generated during the optimisation stage, where farmers aim to minimise their carbon footprint. Scenario planning takes this a step further by examining what could be achieved if specific parameters, such as management practices, were adjusted.
Natural Capital Valuation standards:
There are multiple standards and frameworks in natural capital valuation, and Trinity AgTech tries to comply with as many of these standards as possible to create a comprehensive solution that’s superior to any single standard. Our approach is rooted in the belief that by integrating multiple standards, we can provide a robust and reliable framework.
United Nations System of Environmental-Economic Accounting (SEEA) provides a framework for integrating economic and environmental data, which Trinity AgTech has adapted for agricultural use in Sandy’s natural capital valuation, making minor language adjustments for farmer accessibility while adhering to global standards.
BSI Natural Capital Accounting for Organizations (BS 8632:2021)is a standard providing guidelines for preparing natural capital accounts, focusing on clear documentation of the accounting process, including scope, data, assumptions, and gaps, to support transparent and informed decisions. It also shapes the output structure, specifying how financial documents like profit and loss accounts and balance sheets should be presented for compliance.
The Taskforce on Nature-related Financial Disclosures (TNFD) provides recommendations for organisations to disclose their interaction with nature, and Sandy’s natural capital valuation adopts TNFD’s definitions for assets like biomass and ecosystems in its valuation schedules.
Sandy’s Natural Capital valuation outputs
Natural Capital asset register
The BS 8632:2021 standard highlights the need for an asset register to list natural assets for valuation. Users choose the valuation’s scope and methods to ensure reliable outcomes. After method selection and timeline establishment, the evaluation yields schedules that offer an initial overview followed by detailed insights.
Profit and loss account
The profit and loss account for a given year displays a business’s net position by recording income and expenses, including the value of services from a farm’s natural assets as defined by the UN SEEA: provisioning, regulating and maintenance, and cultural services, all categorised distinctly to avoid overlap and ensure their combined value is accurate without needing adjustments.
Balance sheet
The balance sheet provides a snapshot of a business’s net worth by detailing what it owns and owes, traditionally focusing on assets rather than flows.
In natural capital accounting, it values assets based on te flows they facilitate, considering long-term effects and costs, like maintaining carbon stocks.
This approach categorises valuations into business and external flows, and accounts for the costs of maintaining natural capital as liabilities, offering a singular valuation of a business’s natural capital worth over time, beyond just short-term profit and loss.
Asset valuation
Asset valuation in natural capital accounting determines net value by deducting liabilities from the value of assets, which are categorised according to the Taskforce on Nature- related Financial Disclosures. It quantifies the flows produced by various natural capital assets on a farm and assesses their specific contributions and ratios.
Risk register
The risk register in natural capital valuation gathers intricate data to highlight potential risks and opportunities related to natural capital, aiming to clarify and boost confidence in the valuation process. It is flexible, allowing users to select relevant risks and spotlight opportunities, like identifying societal benefits not currently monetized, such as a farm’s carbon sequestration without selling credits.
Measurement, Reporting, and Verification
Monitoring, reporting, and verification (MRV) play a crucial role in carbon footprinting on farms, helping to assess and manage greenhouse gas emissions effectively. MRV systems, such as Sandy by Trinity AgTech, provide the necessary framework to track emissions, report progress, and ensure transparency in carbon reduction efforts.
Monitoring involves the continuous collection of data on various emission sources within the farm, such as livestock, fertiliser use, energy consumption, and land management practices.
Reporting is the process of documenting and communicating the collected data, emissions, and reduction strategies to stakeholders, including government agencies, consumers, and supply chain partners. Transparent reporting not only enhances accountability but also builds trust among consumers who increasingly seek sustainable products.
Verification is a critical component of MRV, ensuring the accuracy and reliability of reported emissions data. Third-party verifiers or certification schemes often assess a farm’s carbon footprint to validate its claims. Verification adds credibility to emission reduction efforts and can open up opportunities for carbon credits or participation in voluntary carbon markets.
Incorporating MRV into farm management is not only about reducing emissions but also improving overall efficiency and sustainability. Farmers can use the data collected to optimise resource use, reduce costs, and enhance productivity. Moreover, MRV systems empower farmers with insights into the environmental impact of their practices, enabling them to adopt more climate-friendly strategies.
Financial and legal transactions
Monitoring, reporting, and verification (MRV) hold paramount importance when farmers enter into financial or legal transactions because they need assurance that they possess an accurate and credible measurement platform for their carbon footprint. MRV not only provides a systematic way to quantify emissions but also builds trust and reliability, making it an invaluable tool in such transactions.
Farmers are often involved in various financial activities, including loans, investments, and carbon credit trading, where a precise understanding of their carbon footprint is essential.
Financial institutions and investors are increasingly scrutinising the environmental performance of businesses, including farms. Having a robust MRV system in place allows farmers to provide verifiable data that can support their requests for loans, attract sustainable investments, and enhance their overall financial standing.
Similarly, entering into legal agreements, such as contracts or compliance with environmental regulations, necessitates accurate carbon footprint data. Regulatory bodies and legal authorities may require farmers to adhere to emission reduction targets or provide evidence of sustainable practices. MRV ensures that farmers have the data necessary to demonstrate their commitment to environmental responsibilities, mitigating potential legal risks and liabilities.
