July 17, 2026

What new SBTi and GHG Protocol guidance means for low-carbon supply chains

Insight : The numbers behind supply chain visibility

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Written by

Jean-André Bonnardel

The release of SBTi’s Corporate Net-Zero Standard V2.0 and the GHG Protocol Land Sector and Removals Guidance marks an important shift for companies working on Scope 3 decarbonisation in agricultural and land-based supply chains.

Many suppliers face a simple challenge: if lower-carbon production exists somewhere in the supply chain, how much of that reduction can be reported, transferred and sold to a customer?

The solution increasingly depends on the level of traceability behind the claim. A reduction connected to real physical supply, supported by documented flows and allocation rules, carries a different level of credibility from a reduction that is allocated through a looser market mechanism. This creates a hierarchy between carbon reductions, based not only on the size of the reduction, but on the strength of the evidence behind it.

Mass balance remains one of the most practical ways to connect lower-carbon production with customer demand when full physical segregation is not feasible. Mass balance is a chain-of-custody method that lets lower-carbon and conventional materials mix physically, while tracking the lower-carbon attributes in a ledger so they can be allocated credibly to specific customer volumes. There is a shift in guidance meaning that the conditions around its use are becoming more operational.

It is no longer sufficient to calculate a lower emission factor, pass it through an online form and say the reduction has been transferred. The reporting value of a low-carbon attribute depends on how well it has been preserved, allocated and documented throughout the supply chain.

Physical traceability is becoming the reference point

Both SBTi and GHG Protocol are moving towards a clearer distinction between carbon reductions that are linked to physical supply and market-based mechanisms that are allocated more independently.

Physical traceability follows real product flows through the value chain. Market mechanisms, including certain certificate-based models, can still play a role, but they are treated differently because they are not always connected to the physical inventory of the buyer.

This distinction gives companies a clearer way to understand the reporting value of different reductions. A low-carbon attribute supported by physical traceability, mass balance records and documented allocation can be used with a higher level of confidence than an attribute with a weaker link to the underlying product flow.

Mass balance sits in the middle of this discussion by allowing low-carbon and conventional volumes to mix, while maintaining a ledger of the attributes entering and leaving a defined system. That flexibility is valuable, but it only works if the system prevents over-allocation, double counting and unsupported claims.

Have co-products been allocated proportionally?

SBTi C27.4 puts attribute preservation into practical terms. If a low-emission agricultural input is processed into several outputs, the emissions attribute cannot simply be assigned to the output with the highest commercial value.

A dairy processor, for example, may turn milk into cream, skimmed milk and other products. A sugar supply chain may create sugar, molasses and other co-products. In each case, the low-carbon attribute needs to follow the physical transformation of the input through processing.

That means applying proportional allocation between co-products. It also means using conversion ratios that reflect real production. A conversion ratio answers a simple but critical question: how much input becomes how much output at each stage?

This is also what makes the final emission factor meaningful. The emission factor presented to a customer should not appear at the end of the process as an isolated number. It should be the result of a documented chain of inputs, outputs, conversions and allocations that shows how the low-carbon attribute moved through the supply chain.

Without that logic, a supplier risks over-selling the low-carbon benefit. A customer may receive a claim that looks attractive commercially but does not reflect what physically occurred in the supply chain.

Are low-carbon inputs and outputs documented at every stage?

The next issue is documentation. In a mass balance system, credibility depends on knowing what enters the system, what leaves it and how the attribute has been transformed or allocated along the way.

That requires records of low-carbon inputs and outputs at each stage of the supply chain. It also requires a clear balancing period, defined system boundaries and a method for reconciling volumes.

This is where many manual approaches begin to struggle. A spreadsheet may be workable for a narrow pilot with one supplier, one product and one customer. Once the model includes multiple sites, co-products, buyers and transactions, the risk of errors increases quickly.

If the pathway from input to claim is not documented clearly, the final emission factor becomes harder to defend. Due diligence, procurement review and assurance depend on the ability to show not only the number, but the system behind the number.

How are inventory and transactions tracked?

The commercial transaction, and where value is transferred, is when a supplier sells a low-carbon offer to a customer. At that point, the claim becomes a transaction. The system needs to show what has been sold, to whom, against which volume, with which attribute and under which chain-of-custody model.

This is where inventory management and transaction ledgers become essential. If a supplier has 10,000 tonnes of low-carbon input available, it needs to know how much has already been allocated, how much remains, and which customers can credibly receive which claims.

Without that infrastructure, the same reduction can be sold twice, applied to the wrong output, or blended into a claim that is difficult to audit. Even where mistakes happen in good faith, they weaken customer confidence.

Strong inventory and transaction records both protect against error and they help suppliers understand the commercial value of their low-carbon supply, allocating it to the customers who need it most, or who are paying the highest green premium.

What this changes for monetising low-carbon offers

These developments push Scope 3 decarbonisation away from static carbon data and towards operational systems. The value of a low-carbon offer increasingly depends on the quality of the traceability infrastructure behind it.

This creates a practical route to market for suppliers. Decarbonisation work can be turned into a differentiated offer, provided the attribute can be preserved, allocated and documented properly. For buyers, it creates more confidence that the reductions they purchase are linked to real supply chain activity. When they face scrutiny, the claim and the supply chain behind it are easier to defend.

It also changes the sales conversation. Procurement teams need to know what is available, what claim is attached and what the commercial terms are. Sustainability teams need the methodology, audit trail and supporting data. A credible low-carbon offer has to serve both.

That is why suppliers need more than an emission factor. A mass balance ledger needs to track low-carbon inputs and outputs through the supply chain, including the conversion ratios used during processing. An inventory management layer gives suppliers a clear view of available low-carbon volumes and associated attributes, while a transaction ledger records transfers between suppliers and customers.

Together, these systems make low carbon offers commercially usable. They give suppliers a way to turn sustainability into a revenue centre while also meeting the higher expectations now emerging from SBTi and GHG Protocol. The commercial opportunity and the standards requirement are increasingly pointing in the same direction: better traceability, better documentation and more robust allocation.

From compliance pressure to commercial infrastructure

The updated standards are making one thing clear: carbon reductions need to be credible at the point of sale, not only at the point of calculation.

That means the next stage of Scope 3 decarbonisation will depend on systems that connect carbon data, physical flows, conversion ratios, inventory and transactions. Companies that can do this well will be better placed to turn decarbonisation into a customer-ready low-carbon offering.

Segmos helps suppliers build that infrastructure. By linking mass balance, physical traceability and commercial workflows, we help make low-carbon supply easier to verify, easier to sell and easier for customers to use.

If you are exploring how to turn lower-carbon production into a credible commercial offer, we can help you design the system that makes it practical. Contact us.