Palm Oil's "90% Emissions" Problem

There’s a new development that should be on every palm oil company’s radar: the GHG Protocol’s long-awaited Land Sector and Removals Guidance (LSRG).

With an aim to standardize how corporations account for land-related emissions, the forthcoming LSRG will be the most significant reset in carbon accounting for companies working with palm oil. It will be mandatory under the GHG Protocol for all companies with land-sector exposure, regardless of size, sector, or place in the value chain. And it will also apply to any company reporting carbon removals.

For palm oil producers, land use change is the elephant in the room for any carbon accounting.

In my experience, LUC can account for over 90% of the palm oil commodity’s emissions for some producers. While sources like fertilizer and wastewater matter, their impact pales in comparison to the carbon released from deforestation, peatland degradation, and soil disturbance. These activities each contribute heavily to overall emissions associated with palm oil production.

Despite their magnitude, land use change emissions remain the most inconsistently measured part of the inventory. 

Why? 

Because it’s technically demanding.

Companies must account for multiple carbon pools - above ground biomass, below ground biomass, soil carbon, and peat. With so many carbon pools, emissions calculations can vary wildly based on the previous land type, climate zone, and even whether the land was cleared using fire. The level of precision required for accurate measurement can overwhelm even massive teams of seasoned analysts.

Why Land Use Change Emissions Are Hard to Measure

This challenge is compounded by two main factors:  

1. Data fragmentation: Many producers still rely on manually updated spreadsheets, making the inventory process prone to errors and gaps. Few organizations have clarity on which data sources to trust, whether it's IPCC defaults or national data.
2. The peatland problem: Peatlands built up over millennia present a unique challenge. Unlike a one-time LUC event, draining peatland for cultivation triggers continuous emissions that can persist for decades. Under the LSRG, these ongoing emissions must be accounted for annually as a land management activity, creating a long-term carbon liability.
   

The Land Sector & Removals Guidance Will Reshape Carbon Accounting

If anything, the forthcoming LSRG will make precise, defensible measurement non-negotiable. What this looks like for palm oil producers is future-proof and fit-for-purpose accounting.  

• “Future-proof” because I’ve found current Excel-based methods to be highly manual. This involves clunky formulas and cross-referencing that is error-prone. It also involves annual emission factor database revisions to keep data relevant and accurate.
• “Fit-for-purpose” because existing tools that are built for product-level carbon footprinting often exclude corporate-level emissions, such as worker housing or secondary land impacts, and therefore are unsuitable for corporate accounting. Some tools also fall short in handling removals, which now require companies to monitor sequestration over time. If you lose visibility into your land or sell the rights, companies are required to reverse any claimed removals, lest they run the risk of undercounting their actual emissions according to the new rules.

This level of scrutiny is designed to close loopholes and prevent greenwashing. It will raise the bar for third-party assurance, investor trust, and supply chain credibility. 

What Palm Oil Companies Must Do Now

Customers ask me what to do in circumstances like this.

1. First, don’t wait. Building credible emissions inventories takes time - especially when it comes to internal data governance, supplier education, and systems integration. Companies that identify their data gaps early will be better positioned to comply and avoid last-minute panic.
2. Second, review the tools and methodologies being used in your inventories. Find out whether they are aligned with the more recent LSRG drafts released for public consultation and whether they support year-on-year monitoring of removals and emissions persistence.
3. Finally, adopt a platform-based approach to emissions accounting. Manual methods won’t scale. Companies need automation, audit trails, and the ability to manage large datasets without risk of data loss or error.

The transition to LSRG compliance will be a significant undertaking, but it is an unavoidable one. Starting now is the only way to navigate it confidently.

 If you are a palm oil company and you are worried whether your accounting is compliant with the LSRG, Terrascope is offering a series of complimentary one-to-one workshops that’ll dive straight into the complexities of measurement. In this 1:1 session, we’ll walk you through what matters, how it impacts your business, and how to prepare confidently.

Liu Xinlu
Principal Decarbonization Specialist,
Terrascope