This is my first post in Indigo’s series on the implications of the GHG Protocol’s (GHGP) Land Sector and Removals Standard (LSRS) for companies with land-based emissions and removals.
For food and agriculture companies, the LSRS is one of the most consequential updates to GHG accounting guidance in years. Published in January 2026, it establishes the first dedicated GHGP standard for land-sector emissions and removals. I’ve talked a bit about the implications of the new standard already.
In this post, I want to go into depth about the first point in my infographic below - how the LSRS brings much more clarity to traceability requirements. That matters because, in the Scope 3 context, traceability rules determine when outcomes from upstream activities (e.g., regenerative agriculture programs like the ones we support at Indigo) can be included in a company’s physical inventory.
For years, there was confusion around how companies should be allowed to claim outcomes from upstream supply chain interventions. Could those outcomes be reflected in inventory accounting through contractual rights or right to report arrangements? Or did they need to be physically connected to the company’s actual supply chain?
LSRS finally definitively says - in the Scope 3 physical inventory, claims must be backed by physical traceability. This is a significant clarification around how programs need to be designed, with important implications for companies who care about making claims within their GHG aligned inventory, for example, to support SBTi claims.
LSRS traceability guidance has a simple requirement: if a company wants to use a sourcing region-, farm-, or field-level emission factor, it needs to be able to demonstrate physical traceability at that same level.
This matters for companies trying to move beyond default global- or country-level emission factors to take a more active role in managing emissions within their value chains. Sourcing region-, farm-, and field-level emission factors can support identification of supplier-specific hotspots and reduction opportunities, and can help companies to track progress from upstream investments by preserving the impact of farm- and region-level outcomes.
The LSRS makes clear that in order to use these more granular EFs, companies must demonstrate physical traceability. For example, if a company can only trace supply to the sourcing region, it needs to use an emission factor that reflects the average emissions profile of that sourcing region. It does not get to use a farm-specific factor just because it happens to be working directly with a subset of farms through a sustainability program.1
Under the LSRS, companies are required to demonstrate physical traceability through chain of custody models. The standard recognizes four models: identity preservation, segregation, controlled blending, and certain forms of mass balance.
That allowance of mass balance is especially important for the food and ag sector.
Earlier guidance effectively left companies with two basic paths: either keep goods physically separate, such as under identity preservation or segregation, or allow mixing but require proportional attribution across all outputs, as in controlled blending. Those approaches do a good job of preserving the physical link between a company and the
emissions it reports. But in agricultural supply chains, they can be very hard to apply in practice. Agricultural commodities are routinely aggregated, mixed, and processed as they move through elevators, processors, and manufacturers. Requiring goods with specific characteristics to remain physically separated through that system can be costly, cumbersome, and difficult to scale.
Controlled blending allows for mixing, but creates a different problem. Because specified characteristics have to be distributed evenly across all outputs of a mixed system, the impact of targeted upstream investments (e.g., a regenerative agriculture program producing low carbon wheat) can get diluted across a broader pool of goods. In supply chains where commodities are mixed repeatedly, that can make it much harder for companies to capture outcomes of investments in their inventory.
Mass balance offers a more workable middle ground. It preserves the principle of physical connectivity, but applies it in a way that better reflects how agricultural supply chains actually function. Rather than requiring every unit of product to remain physically segregated, it allows specified characteristics to be attributed through a mixed system, so long as claims remain tied to the underlying physical supply and volumes are reconciled.
A simple example helps illustrate the difference. Imagine Company A finances a program that produces 100 tonnes of low-carbon soy. That soy is then mixed at an elevator with 100 tonnes of conventional soy, and Company A purchases 100 tonnes of soy from the elevator. Under controlled blending, Company A would need to use an EF reflecting the average emissions profile of the full 200-tonne mixed volume. Under an eligible mass-balance approach, by contrast, the low-carbon attributes associated with 100 tonnes can be attributed to Company A’s purchase, provided no other buyer claims those same attributes and total volumes are reconciled across the system.
Mass balance systems therefore give companies a more practical way to preserve the outcomes of upstream investment while keeping claims tied to business-relevant emissions in the physical supply chain.
The next challenge: making traceability work in practice
The LSRS provides clarity on when physical traceability is required, and which chain of custody (CoC) models are allowed. What it does not yet clarify is what it actually takes to stand up a GHGP-aligned CoC system in practice.
For now, that answer remains fuzzy. The LSRS points companies to traceability systems, such as certification programs or audited internal systems, and references ISEAL and ISO for underlying CoC definitions. But it does not yet spell out the practical requirements in detail: what documentation is needed, what systems and controls must be in place, whether all supply chain actors need to be engaged, or what level of auditability and verification will ultimately be expected.
If GHGP ultimately expects something close to a full ISEAL- or ISO-aligned CoC system across all relevant supply-chain actors (as many stakeholders expect it will), most agricultural value chains are going to struggle. These systems require the documented transfer of materials and associated information across each stage of the supply chain, which in practice can imply significant coordination, controls, and recordkeeping across actors that many agricultural value chains simply are not built to support today.
As GHGP develops its forthcoming Land Sector and Removals Guidance, expected in Q2 2026, it has an opportunity to find a balance between rigor and practicality. The goal should be to preserve the principles that make mass balance credible - physical connectivity, volume reconciliation, non-proportional attribution within a reconciled system, and protections against double counting - without requiring a level of end-to-end supply chain control that most agricultural value chains cannot realistically support.
Recognizing mass balance in the LSRS is an improvement, but it is only half the battle. What companies need now is an implementation path that is stringent enough to preserve physical connectivity, but workable to use in the real world.
GHGP’s final decisions on chain of custody requirements will matter enormously for what can be counted in the GHGP-aligned physical inventory. Companies may struggle to improve Scope 3 inventories, and the incentive to invest upstream may weaken if the outcomes of those investments cannot be preserved in inventory accounting.
But companies should not read that uncertainty as a reason to wait for a perfect chain-of-custody system before investing in supply-chain decarbonization.
In fact, partly in response to uncertainty around GHGP traceability requirements, the broader landscape is increasingly moving toward multi-statement reporting frameworks that create credible pathways for reporting outcomes that fall outside the strict boundaries of the physical inventory. TCAT, the AIM Platform, and GHGP's own Actions and Market Instrument's working group are among the frameworks developing structured approaches for disclosing supply chain investment outcomes, including where full physical traceability is not achievable. These will be important to watch as the landscape matures.
For companies, the takeaway is to pursue full traceability where it makes sense. But where it is not yet feasible, do not stop investing in interventions tied to the emissions your company is responsible for. Instead, design those programs so they can remain credible as multi-statement reporting continues to evolve.
The LSRS makes clear how pivotal traceability is for GHGP-aligned reporting. And because downstream frameworks such as SBTi still anchor on GHGP inventories, getting traceability right matters well beyond the inventory itself.
For companies investing in agricultural supply chains, the level of traceability they can actually build will increasingly shape what they can credibly count. That means traceability needs to be considered much earlier, alongside supplier engagement, data systems, and intervention design, not treated as a downstream compliance exercise.
Mass balance is a meaningful step in the right direction. It gives agriculture a more workable path to preserve physical connectivity without forcing commodity systems into unrealistic models of segregation. But the next big question is where GHGP will land on chain-of-custody implementation in the forthcoming Guidance, expected soon (Q2 2026).
At the same time, companies should not let strict physical traceability become the only lens through which they view supply-chain climate action. Some outcomes may ultimately belong in the physical inventory. Others may need to be reported elsewhere. The key is to design programs now so they remain credible across that evolving landscape.
No company has all the answers yet, and the policy landscape will keep moving. But that is not a reason to stand still. Now is the time to understand what is already possible, map practical paths forward, and work toward solutions that balance physical traceability with the realities of scale. We cannot let policy complexity stand in the way of climate action.
[1] This stands in contrast to carbon markets and project-based accounting, where outcomes may be linked to companies through mechanisms such as additionality, contractual rights, or market instruments.