In recent years, the Food and Agriculture sector has made notable progress in understanding and addressing Scope 3 emissions, yet significant uncertainties remain about how to apply key accounting concepts in practice.  

As major standards continue to evolve and regulatory frameworks shift, companies face increasing pressure to act while lacking clarity on how to credibly measure and report outcomes.  While companies are engaged in value chain interventions to decarbonize their sourcing, many continue to struggle with the technicalities of how to account for these interventions.

To support this transition, the Value Change Initiative (VCI) convened the Food and Agriculture Working Group V in 2025 to clarify technical challenges in Scope 3 accounting. The aim was to enable more consistent, transparent, and credible reporting of value chain interventions across the sector. VCI has just published a new guidance titled “Advancing Scope 3 accounting in the Food and Agriculture Sector” based on the discussions that took place in the working group.

Below, we explore the key concepts from the new guidance:

– Recalculation of base year emissions

– The substitution approach

– Accounting for removals

– Physical traceability

How and when to recalculate base year emissions?

Companies with Science Based Targets (SBTs) must use inventory accounting to track progress toward their goals, comparing current emissions against those from a defined base year. However, historical base year emission factors (EFs) often come from databases that provide high-level data, and often differ in data sources, methods, and boundaries from those used to establish the intervention outcomes.  

This mismatch can make estimated emission reductions inaccurate, as the base year EF and post-intervention EF do not align. To correct for this, companies can recalculate past inventory years so that base year and post-intervention data are aligned and meaningful comparison can be made – a process known as base year emission recalculation.

Companies may adopt one of several approaches:

– Maintaining default values

– Assuming constant emissions from pre-intervention years

– Modeling historical data

– Using control fields

– Using full historical monitoring, reporting, and verification (MRV) data

Which approach provides the most meaningful comparison also depends on which methods are used to establish pre- and post-intervention EFs. Each method involves trade-offs between feasibility and data burden, accuracy, and consistency – there is no one best option. However, recalculation can substantially improve accuracy and comparability over time. By transparently documenting assumptions and selecting approaches appropriate to their data and value chain context, companies can ensure recalculations contribute to more credible Scope 3 tracking and reporting.

How to use the substitution approach?

When companies implement value chain interventions, they may use the substitution approach to update their EFs to reflect the mitigation outcomes of those interventions. The substitution approach provides a practical way for companies to integrate intervention results when only part of an EF can be updated with new primary data, instead of full primary data for the whole EF.

In this approach, companies substitute only the components directly affected by the intervention – such as fertilizer-related emissions – while retaining the rest of the EF as is. This allows inventories to evolve gradually as more accurate data becomes available. 

Once calculated, substituted EFs can be integrated into the Scope 3 inventory. In this way, substitution supports a stepwise improvement in Scope 3 reporting, enabling companies to better capture the impact of interventions across agricultural value chains wherever more accurate data is available.

How to use and account for removals?

Removals are essential for the Food and Agriculture sector’s transition toward low-carbon and regenerative practices. They not only capture and store carbon but can also contribute to strengthening soil health, restore ecosystems, and increase resilience. However, guidance on how to account for and claim removals is still limited.

The forthcoming GHG Protocol Land Sector and Removals Standard (LSRS) will define how removals can be included in corporate inventories, including rules on traceability, allocation, data quality, and permanence. The new VCI guidance clarifies how removals can be accounted for and used towards targets based on current SBTi guidance and the forthcoming LSRS.

What constitutes physical traceability?

As companies expand their accounting to include emissions at increasingly granular spatial scales while also reporting removals, the question of physical traceability becomes critical. Physical traceability is required when reporting at field, farm or sourcing region level. Without physical traceability, the link between the physical goods and their GHG profiles is lost, making it impossible to include these outcomes in inventories or towards targets.

Under the forthcoming LSRS, physical traceability should be established using Chain of Custody (CoC) models. CoC is a forward-looking system that defines how materials and their associated characteristics are controlled, transferred, and verified between entities in a value chain. The working group explored what this means in practice, diving into four CoC models – Identity Preservation, Segregation, Controlled Blending, and Mass Balance.

These CoC models have different implications under the LSRS for establishing physical traceability:

– Identity Preservation, Segregation, and Controlled Blending always qualify.

– Mass Balance qualifies under specific conditions, depending on the boundaries of the system and the volume reconciliation timeframes.

CoC systems can be difficult to implement in complex, fragmented agricultural value chains. The VCI recognizes that complementary traceability pathways could be needed where CoCs cannot be scaled. Alternatives such as Proof of Sourcing or probabilistic approaches, as well as impact traceability, can play a role.

Traceability and Chains of Custody for GHG accounting are further explored in the joint publication by VCI and ISEAL, Physical traceability in Greenhouse Gas accounting.

Curious to learn more about Scope 3 accounting?

Download the full guidance below for more insights on base year recalculations, substitution, removals, and traceability in the Food and Agriculture sector.