Webinar: Supply Shed - Achieving Credible Traceability in AgFood Value Chains

Improving Traceability in Agriculture supply chains: can Supply Shed help companies overcome this challenge?

Limited traceability and a lack of supplier-specific information present significant challenges for AgFood companies seeking to reduce their Scope 3 emissions. Segregated supply chains, which enable physical traceability, remain the exception rather than the norm, yet they are favored by third-party certifiers such as SBTi. Additionally, dynamic farming systems—despite their substantial environmental benefits—pose difficulties when accounting for the impact of specific crops, even within a single supply chain.

This is where the concept of the Supply Shed comes in: a group of suppliers within a specifically defined market that provides similar goods and services and can be shown to fall within a company’s supply chain. This approach is designed to help corporate adopt a pragmatic strategy to reduce their Scope 3 emissions, enhance traceability, and enable co-investment and co-claiming, all while preparing for the more time-intensive and complex demands of a fully traceable supply chain approach.

Speakers:

➡️ Silvana Paniagua Tufinio, Director of Development at Value Change Initiative

➡️ Lucia von Reusner, Director, Carbon Protocols & Policy at Regrow Ag

➡️ Camille Laurent, Value Chain Lead at Soil Capital

➡️ Andrew Voysey, Chief Impact Officer at Soil Capital

Event details:

📆 Wednesday, 12th February

🕦 16:00 CET  |  15:00 GMT

🗣 English

🌐 Online

💰 Free

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Q&A Summary:

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Why is it not possible to link the impact to the physical?

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Linking impact to the physical is feasible when that impact occurs at the farm level. This is made possible by Regrows digital MRV and is integral to Soil Capital's program. However, the challenge arises when the physical product moves through a complex commodity supply chain without physical traceability. In such cases, maintaining the association of information with the physical product becomes exceedingly difficult.

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How can we use mass balance as a tool to allocate carbon benefits to inventories with these different types of traceability?

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Ideally, we need a way to account for this mix. Physical traceability would require period and volume reconciliation at each node in the value chain. For example, if three kilos of coffee are sourced from a region without intervention and one kilo with intervention, only one kilo can be sold with a lower emission factor.

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Mass balance allows for some flexibility, as one kilo of coffee beans can be accounted for as having a lower emission factor, even if none of those beans were directly impacted by the intervention, provided that the total amount accounted for does not exceed the amount that was actually impacted.

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Using the supply shed as a market-based mechanism would not require this level of physical traceability but would still need proof of association with the value chain and the intervention.

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It is important to remember that the Land Sector Removal Guidance is currently under review and may change. Currently, it focuses on inventory accounting, which requires physical traceability, while market-based mechanisms, enabling impact traceability, are linked to narrative claims and cannot currently be used to report progress towards targets.  However, this is changing as the difficulty of building physical traceability becomes apparent. There are ongoing discussions by the Standards exploring whether these market based mechanisms could play a role towards targets.

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Going forward; how do you envision to incentivize farmers to move up on the KPIs and not lean on the effort of the others in the shed?

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From a technical perspective, one approach is to measure and report the performance of the entire supply shed as a whole. This would result in an average performance across all farmers within the shed, including those with and without interventions.

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Alternatively, a more nuanced approach involves stratifying the farmers into distinct groups based on their practices. This would allow for separate reporting on the performance of farmers with improved practices, and potentially enable the allocation of premiums or incentives specifically to those farmers.

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At Soil Capital, this is precisely our practical approach. Individual farmers implementing interventions within the specified stratum receive financial incentives and rewards based on their personal performance. Even if their performance is reported within the broader context of a supply shed by a company, the farmer's incentive remains tied to their individual results.

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Does GHG comment on the possibilities to use/claim reductions achieved on other crops on the same farm on my specific commodity, even if the measures are not implemented on my commodity's field?

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From what we can expect from the LSRG, only inventory with physical traceability can be reported. As a result, if crops other than the target crop are impacted, these effects cannot be accounted for in the inventory.

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However, within a market-based mechanism framework, one key advantage of using the supply shed approach is its ability to facilitate the Supply Shed Re-allocation solution. This method addresses challenges such as a lack of off-takers and diluted investments by enabling the reallocation of GHG mitigation outcomes within the supply shed. Rather than tying mitigation impacts to specific crops, this approach allows for a virtual exchange of impacts between crops. In other words, the supply shed framework enables the transfer of benefits from non-target crops to target crops, allowing companies to maximize their claimed mitigation impacts while ensuring off-takers for other crops in rotation.

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A major challenge for the GHG Protocol in advancing landscape-level regeneration is the need for long-term investment in soil health practices, such as cover cropping and reduced tillage, which are essential for carbon removal. A narrow focus on individual crop rotations overlooks the broader needs of both the field and the landscape. To enable large-scale impact, accounting frameworks must provide the flexibility to claim emissions reductions beyond a single crop rotation, supporting system-wide transformation.

For a deeper dive into this approach, you can refer to SustainCert's whitepaper on the Supply Shed Re-allocation method.