How Do We Measure Greenhouse Gas Emissions, and Why It's More Important Than Ever for Growers

As we work to counter the effects of global climate change, carbon accounting—the ways we measure greenhouse gas emissions and reduction—is becoming more important than ever. In this new field, carbon dioxide, methane and nitrous oxide gas emissions from fertilizer use present a problem, not only at the field level, but up through the supply chain to the companies that sell goods produced from the crops that farmers grow. So making sure that these impacts are being measured accurately is so important, the Securities and Exchange Commission is even considering regulating the emerging carbon marketplace. And growers have a vested interest in making sure that new regulations don't sap productivity at a field level in pursuit of on-size-fits-all, silver-bullet solutions. In this episode, Tom and Sally discuss what growers need to know about this increasingly important conversation, and why it's imperative for growers to stay involved in the discussion so they can continue to feed a growing population in the most efficient, environmentally-sound manner possible.

Episode Transcript

Tom Daniel:

Most people are using carbon today to more or less gauge how we as companies are engaging around our climate goals. Sally, when we think about ESG, which is environmental, social, and governance, is that reporting piece that's been set up today that compares my company to your company to determine how we're dealing with environmental claims and issues around environmental, social, and governance pieces.

Dusty Weis:

Welcome to The Future. Faster. A sustainable agriculture podcast by Nutrien Ag Solutions, with our very own Tom Daniel, Director North America Retail and Grower Sustainable Ag, and Dr. Sally Flis, Senior Manager North America Sustainable Ag and Carbon. This is your opportunity to learn about the next horizon in sustainable agriculture for growers, for partners, for the planet. To us, it's not about changing what's always worked, it's about continuing to do the little things that make a big impact. As we work to counter the effects of global climate change, carbon accounting, the ways that we measure greenhouse gas emissions and reduction, is becoming more important than ever.

In this episode, Tom and Sally are going to discuss how carbon dioxide, methane, and nitrous oxide gas emissions from fertilizer use present a problem not only at a field level, but up through the supply chain to the companies that sell goods produced from the crops that farmers grow and why it's imperative for growers to stay involved in this discussion so they can continue to feed a growing population in the most efficient environmentally sound manner possible. But if you haven't yet, make sure you're subscribed to this podcast in your favorite app. Also, make sure you follow Nutrien Ag Solutions on Facebook and Instagram.

I'm Dusty Weis, and it's time once again to introduce Tom Daniel and Sally Flis. Tom and Sally, you guys spend a lot of time talking about carbon. You talk about carbon to a lot of different people, and carbon means different things to different people. Some people obviously see it as a problem, other people look at it and they see an opportunity there, still, others they see carbon and, well, they see a conspiracy theory. But when we're talking about carbon in the context of ESG, Tom, what are we talking about there and how do we talk about that with those different audiences?

Tom Daniel:

Well, most people are using carbon today to more or less gauge how we as companies are engaging around our climate goals. What are we doing that's addressing carbon? Carbon is kind of that measurement piece that everybody is using to compare companies one over another. Sally, when we think about ESG, which is environmental, social, and governance, is that reporting piece that's been set up today that compares my company to your company to determine whether or not within our same category of business how we're dealing with environmental claims and issues around environmental, social, and governance pieces.

These things are being driven by investment groups for the most part. We're watching investment groups that are guiding their green investment money into companies that have that better ESG report. Sally, this has become a bigger and bigger issue, especially with the Security and Exchange Commission starting to have regulations potentially around how these things are measured.

Sally Flis:

Yeah, it's getting to be quite a confusing landscape, and it's simple at some level. We call it all carbon, but the other piece is it's really not all carbon. We're really calculating everything to be in a carbon equivalent as we look at these carbon footprints across companies. And then one of the things as I've gotten into this more and more found out or kind of talked through some people with is you hear a company announce that they're carbon neutral or they're going to get to carbon neutral by a certain year. When we look at the things that we're addressing in agriculture, it really isn't even part of that yet because that's really just touching on their Scope 1 and Scope 2 emissions.

Those are the emissions that they either have control over directly so they can go in. Nutrien is doing this too with our fertilizer production facilities of let's go in and make these production facilities as low emission as possible so that there's better efficiency in the production system and we've got a lower footprint. And then the second one that you have some control over is that Scope 2 category is the emissions from the energy that you buy. You can see shifts in where people can place businesses. You can select to have a different source of electricity.

One of our partners and part of our businesses in Canada have a big advantage because so much of the power in Canada is hydroelectric. They're operating off a renewable source with little or no greenhouse gas emissions associated with it.

Tom Daniel:

Sally, let me ask a question because what you just said I think we need to reiterate that, it makes a difference where I buy my electricity from?

Sally Flis:

Yup. Probably on your electric bill if you still get a paper electric bill, I don't. I just pay whatever number they send to me. I'm really terrible in my financial management like that. But if you look closely on your electric bill, there's probably a place for you to check off, do you want a certain portion of your electricity to be coming from a renewable source? There's a different rate that you're going to pay for that renewable energy. The other reason it's probably not on my electric bill is I live in Western New York. All my power is coming from Niagara Falls. I'm already getting some pretty good renewable energy with low impact.

But if you're in places like California where they've put in all these manure digesters to reduce methane emissions and reduce the impact of the dairy operations, you can select do you want to have some of your power come from cow power.

Tom Daniel:

Wow! I have not heard of cow power before, Dusty.

Dusty Weis:

Believe me. You walk down the aisle and you'll hear cow power.

Tom Daniel:

What you're telling me is, and something you and I deal with every day, is there is a difference in carbon. As companies look at their carbon footprint as we describe their measurements around all the different aspects of their business, each one of those fit into a category of either a Scope 1, Scope 2, or Scope 3. Let's break these down just a little bit. This is more for education than anything else, Dusty. When we think about Scope 1, Sally, we're looking at really the manufacturing side of the business, right?

Sally Flis:

Correct. Anything emissions directly associated with the production of something. One of the things that comes up that your average consumer or even a grower or a crop consultant handling fertilizer is probably not going to think of, there was a study published four or five years ago where a company had attached a sensor, same way you would with the Google Maps cars, and started driving it around fertilizer production facilities in the United States to measure as they were driving around those fertilizer production facilities the gases that might be escaping from pipelines underground, from the emissions coming out of the fertilizer plant to establish those emission numbers for us.

That's the kind of stuff that is happening out there and getting published in research is this is what other people are deciding our baselines are going to be, or deciding our emissions are going to be, or trying to find a problem with how things are being produced, whether it's fertilizer or oil or mining. There's always somebody looking for, “where is something escaping from that system.” That's where that Scope 1 lets us take a little control back and report and say, "This is how efficient, and this is what we've corrected, and this is how we're getting better year over year."

Tom Daniel:

Wow. We've got one, two, and three. Let's go to Scope 2. That goes back to your previous discussion around where does the power come from that operates the equipment and the facilities that we have.

Sally Flis:

Correct. Not just manufacturing has got a Scope 2 footprint, you and I and everybody who uses electricity in their home has got a Scope 2 footprint. There's something that we can all do. I mean, I think that's a big part of sustainability and carbon overall is what are the little things that we can all do to help build to that bigger impact? Because nobody's going to make the change that's going to save us all from carbon emissions by themselves.

Tom Daniel:

When we're thinking of companies like Amazon and some of the bigger CPGs today that have made environmental claims of carbon neutrality or net zero carbon, you're saying that it is a Scope 1, Scope 2 that they're addressing?

Sally Flis:

Correct. And even us as a manufacturer, we have a pretty good way to know and calculate our Scope 1 and Scope 2. Especially a company like Amazon is super unique there and has some of the same Scope 3 challenges that we'll get into later, that Amazon doesn't make anything. Their Scope 1 is transportation, it's moving things, and it's the buildings they have. And then they have Scope 2, which is the energy they use to run warehouses. Scope 1 and Scope 2 are reasonably easier to calculate as a company and find the things that you can change.

Some of the early webcasts that Walmart did when they announced their Gigaton challenge were now they report on how many light bulbs they've replaced to the most high efficiency light bulbs they can in every single facility they own. Those are really tangible, easy things to account for and measure versus the messy space we get into as we work on Scope 3.

Dusty Weis:

Well, and that seems like a perfect place to take a break and take a breather here. Because as you said, Scope 1 and Scope 2 are tangible and measurable. It's Scope 3 then when things start getting a little bit more esoteric. We're going to get into exactly what that means in the second segment here. But first, we're going to step away for a quick break. More coming up in a moment here on The Future. Faster.

This is The Future. Faster. A sustainable agriculture podcast by Nutrien Ag Solutions. I'm Dusty Weis, along with Tom Daniel and Sally Flis, and we're talking about carbon today, specifically Scope 1, Scope 2, and Scope 3. In the first part here, we talked about Scope 1 and Scope 2, and those are all pretty measurable and common sense things. But once we get into the Scope 3 carbon impact, Tom, what sorts of things are we considering here?

Tom Daniel:

Well, the first thing, and it's really in Scope 1, Scope 2 also, but Scope 3 is where there's a lot of impacts from different gases that we're measuring. The key ones that we talk about in the agriculture side would be carbon dioxide, methane, and nitrous oxide. Those are the three that have the most measurement. Sally, when we're looking at these different gases and these measurements for gases, I'm assuming we're using some type of goal that we're aiming toward. I hear a lot of discussion about science-based targets and those type things. What is really the goal that we're shooting for for measuring against these greenhouse gas emissions?

Sally Flis:

The goals are set by the results that come out of meetings like the Paris Accord meetings and groups like the United Nations, because it's really a global goal. And that's where this gets to be, again, another challenge in the system is we're trying to meet the goal of not increasing global temperature on average by more than 1.5 degrees by 2050. I can barely measure the temperature in my backyard accurately most days. How do we conquer a goal or work towards a goal like global emissions that are going to impact an average global temperature?

It's kind of mind boggling to think about the scale of the endeavor that we're going on. Again, we bring up every time, Tom, the volume of data that we're going to need to be able to show we're directionally going to a better place than we could be based on the estimates that are coming out of some of these international groups.

Tom Daniel:

Sally, I think the thing that drives me crazy too is there's still a tremendous amount of debate. Nothing's been decided on some of this yet.

Sally Flis:

We talk about this all the time when we talk about trying to find a solution for an individual field. There's so many factors that play into whether or not that's going to be successful. The weather being the biggest one. We can't control that at this point in time, and we probably never will control the weather. We can just hopefully be able to predict better and better so we can all put things in places that make more sense. But these aren't just singular decisions.

I think one of the things you and I both get frustrated with in the field all the time is the groups that want to propose a single change in a grower's practices, in lifestyle in order to meet these emissions and don't think about all the unintended consequences or all the other things that play into that. A friend of mine just keeps saying to me, "What is somebody who owns an electric car do in Florida right now?"

Dusty Weis:

They don't drive anywhere. That's for sure.

Sally Flis:

Right. When we do the same thing in agriculture, we get these initiatives of, well, if everybody in the country just uses cover crops, we're going to solve our problems.

Tom Daniel:

No, that's not going to happen.

Sally Flis:

We get into these spaces where it's just we try and come up with an easy solution because, like we were talking about earlier in Scope 1 and Scope 2, it's pretty easy to say, "I have put high efficiency light bulbs in every fixture in every piece of property that I own, and here is the impact because it's subtraction of my environmental footprint with good light bulbs versus my environmental footprint with bad light bulbs." They want that same solution for Scope 3, and it just doesn't exist when we get to the field level.

Tom Daniel:

Look, and it goes back to this too, we talk about energy in general, an electric car doesn't solve everything unless the grid is set up to handle the electric car.

Dusty Weis:

Well, that's just it. Parts of the Midwest, when you've got a power grid that's powered 80-85% to buy coal-based power, you're not doing a whole lot by driving an electric car.

Tom Daniel:

It's a dirty source of electricity as we view it today. But I want to get into a discussion, Sally, around the Scope 3 piece because that's the one to me that's still got the most work to be done on measuring and how we measure and what we're doing. I know there's multiple companies out here right now that are trying to get to where they can understand and measure their Scope 3 footprint. When we use the term Scope 3, and I'm just reading the definition here, it says it's all other indirect emissions that are in the value chain. I'm going to stop there real quick. Can you describe to me what the term value chain means?

Sally Flis:

Well, they've tried to describe it through 14 different categories that have been established by some of the reporting bodies and by groups like the Greenhouse Gas Protocol to try and bucket different things that are kind of related together in different parts of the production. It goes from what happens in the field, how are things transported to the field, how are they manufactured, how are they sold, how are they then transported to consumers, all the way through, what is the end of life treatment of that final sold product?

In our case, if we think about the containers that we might distribute some products in, we've got to account for from the time we take ownership of that container through the end of life of that container. How are we handling it? Is it going into a recycling program? Or how could we improve that as part of what we're doing? There's parts of all 14 of those categories, and then you pile on investments as well, because that's an emerging sector. I listened to a very interesting story the other day where because oil investments are such a huge part of every bank that's out there still, because oil is still huge part of everything we do every day, right?

Companies that operate off of lots of investment funds, the largest part of their footprint is potentially actually the fact that they're using money from oil production in order to fund what they're doing. It's really the goal of Scope 3, while it seems like we're just trying to double count and put a lot of pressure on everybody, the goal of Scope 3 is to really get at those unintended consequences that we talk about even with field level practices of, if I choose to do this one thing at a systems level, am I really making a difference and lowering my impact environmentally, or have I just picked to do something that I can talk about something I've done nice, which goes back to your comments on the SEC.

These SEC requirements are coming out because a lot of companies have gone that route of let's just do something and talk about what it is that's nice, but maybe just ignore those unintended consequences that might come along with that.

Tom Daniel:

Just like, as I said a minute ago, counting on electrical vehicles in a situation of making my deliveries, but not accounting for where the fuel comes from that powers those electric batteries. There's multiple consequences that occur from all of this. Second part of this, it talks about the value chain. It talks about upstream and downstream emissions in the value chain. I'm going to use Nutrien today as an example. Give me an example of the value chain that Nutrien would participate in as we look at the production of crops in the marketplace today.

Sally Flis:

We're going to have two downstream positions there, Tom. Our first downstream position is the fertilizer manufacturing, then we're going to have the distribution of that fertilizer to our retail, to other retail, direct to growers, and then we're going to have the impact of at that retail level, what happens with it next? Because we have our production side and our retail side, it's almost like we're touching two places in that Scope 3 chain, but it's almost like we could have two separate Scope 3s, right?

There's the Scope 3 associated with the production of that fertilizer, but then there's the Scope 3 associated with when we sell that fertilizer as a retailer to a grower and the emissions that then happen in the field because of the use of fertilizer, we are using it in a biological system, there's going to always be some losses. But how do we get to these practices with growers to limit those environmental impacts of use in the field?

Tom Daniel:

I know, Sally, that Scope 3 really is aimed at a commodity, right? We're really looking at the life cycle of a particular commodity. Let's just use one as an example. Let's just use corn. Nutrien would participate in what would be called the sale shed within the way we account for it. We are the ones that are selling inputs to a grower. We would be considered in that case a category 11. But if you move down the scale, what are some other categories that suddenly would become involved in that commodity corn crop through its life cycle until it's actually consumed in the marketplace?

Sally Flis:

The biggest one is going to be category one. What you end up with in category 1 is a splitting of what happens to that product. Anybody who deals with that crop after it's harvested from the field is going to fall into category 1. The official title for category 1 is purchase goods and services. That really takes the crop from the time the grower delivers it or the time the co-op that they've sold it to or the grain holding facility that they've sold it to, takes it to the mill. And then the mill has a Scope 3 impact that has to be traced all the way back to nitrogen fertilizer used in the field and the emissions associated with growing that crop.

But then as they process that and put it into... If we're looking at corn, you could have a distillers' grain, you could have an ethanol product, you could have just straight cornmeal and then the byproducts that go with that. But as we process that product, then we start to split up that Scope 3 impact. If we're working with a grower and we work with them on improved nitrogen management and generate we're just going to say for sake of me doing easy math while I'm trying to talk one ton of carbon emission reductions from better nitrogen fertilizer management in that field. We then get it to the mill.

The mill gets to take account for that whole one ton because they're consuming that whole corn grain product. But if we're going to process that into ethanol and distillers' grain, then we're going to split that one ton based on the percentage of the volume of that product that's left when we get to distillers' grain versus ethanol, and then that's going to follow the supply chain to the next step. In the case of ethanol, we may calculate something different like a carbon intensity score because we're taking that ethanol into a low carbon fuel system, like that of California.

We want to calculate the right number about what is the carbon intensity of producing that ethanol in that plant with that specific corn versus the carbon intensity of grower standard practice in the field. That's going to follow into that fuel standard, and we're going to get to be able to find some value for growers and back down through the supply chain from those low carbon fuel standard systems. On distillers' grain side, that feed is going to go into most likely a dairy cow or a beef cow, and then we can follow it through that beef side of the supply chain or the dairy side of the supply chain.

How are we contributing to having a lower impact feed ration go into those animals that then goes into the methane and other metrics that are being calculated for the production of beef or dairy?

Tom Daniel:

Sally, when we think about it, there's been life cycle analysis done on most crops that are being produced today, and we have an idea at least what the footprint piece for some of those crops are. These are just estimates and calculations that have been done. I'm sure there's more to be learned about these things. But a particular corn crop, for instance, an acre of corn today would produce roughly a half a ton of carbon. To get to a net zero on that corn crop, we've got to figure out ways to reduce that carbon footprint from a half a ton down to zero so that the corn growing cycle basically is a net zero cycle. How do we do some of this?

Sally Flis:

I think the answer is, Tom, we're never going to get to zero, right? It's a biological system. There's always going to be something impacting nitrous oxide emissions. It's how do we continue to get more and more efficient? Because the bigger environmental impact is if we get less efficient on every acre because we're trying to reduce nitrous oxide emissions from fertilizer use, we're going to have to go back to farming acres that are sensitive and we took out of production or have maybe never been in production in order to meet nutrition needs around the globe.

The answer is never going to be to get to zero emissions from one field. Because if we get there, we're going to be back to these unintended consequences of in order to meet the food production we need, we're going to need to take acres back into production that probably shouldn't be in production.

Tom Daniel:

Right, and I would totally agree with that. Once again, we have to holistically look at the system. Every action has an equal or opposite reaction in the marketplace. Are we going to create the type of reaction that we want? For instance, lowering nitrogen rates on the acre, we need to be concentrating on the nitrogen efficiency that's actually producing that bushel. You never want to take a situation that you are choosing to lower productivity just to meet an environmental goal.

Now, that's my opinion, okay? I'll say that up front. We want to make sure though, we as a company, I know we concentrate on feeding the world. We have that as part of our tagline. We have to be responsible to make sure that we're providing the food sources that can feed this world as it grows, and we all know it's growing to a much bigger number by 2050. We have to be concentrating on that.

Sally Flis:

Tom, you mentioned the actual numbers at a field level, and what's really interesting as we look at those emission numbers around nitrogen fertilizer use and in this Scope 3 space is that it transfers up and down the supply chain. If you look at pretty much any company that sells food, the biggest part of their Scope 3 footprint is nitrous oxide emissions from the fertilizer used to grow the food that they sell. If we don't bring solutions to these companies about how we're going to be able to be more efficient and reduce those nitrous oxide emissions, those companies are going to come up with solutions for us.

Tom Daniel:

I don't think we're looking for that. I think you saw the recent announcement still to be debated, but Canada has said they want to reduce their synthetic fertilizer use by 30%. We've even mentioned this on a podcast. Sri Lanka made the decision not to use synthetic fertilizers. They have people today, Dusty, that are starving in Sri Lanka. All of these are issues that we need to solve. We are the agriculture experts. We call ourselves leading the field. We need to be solving for solutions that are going to meet the demand for food, while at the same time maximizing and efficiently using the fertilizers and other products that drive productivity on the farm.

Dusty Weis:

They're big problems, big problems require big solutions, and those solutions have to be big picture and they've got to be data driven. That's what we say all the time on this podcast. Tom Daniel and Sally Flis, another great discussion. Thanks for having it with us here on The Future. Faster. That is going to conclude this edition of The Future. Faster. The pursuit of sustainable success with Nutrien Ag Solutions. New episodes arrive every other week, so make sure you subscribe in your favorite app and join us again soon. Visit futurefaster.com to learn more.

The Future. Faster. Podcast is brought to you by Nutrien Ag Solutions with executive producer Connor Erwin and editing by Larry Kilgore III. It's produced by Podcamp Media, a branded podcast production for businesses, PodcampMedia.com. For Nutrien Ag Solutions, thanks for listening. I'm Dusty Weis.