The AFOLU (Agriculture, Forestry, and Other Land Use) sector plays a dual role in global climate issues. On one hand, it is a major contributor to greenhouse gas emissions. According to IPCC AR6 (2023), AFOLU accounts for about 20–24% of total global emissions, making it the second-largest sector after energy.
Companies are therefore required to prepare sustainability reports that transparently integrate AFOLU aspects, align with global standards, and support national targets such as Net Zero Indonesia 2060, as emphasized by the Ministry of Environment and Forestry (KLHK).
On the other hand, AFOLU also offers mitigation solutions through reforestation, conservation, and sustainable agricultural practices. For Indonesia, this sector is highly significant as it is directly linked to major export commodities such as palm oil, coffee, cocoa, timber, and rubber.
Table of Content:
- The Importance of AFOLU Integration
- Key Considerations
- Essential AFOLU Parameters
- Challenges
- Strategic Opportunities
The Importance of AFOLU Integration
Integrating AFOLU into sustainability reports is not merely a formality but a strategic necessity. Reports must demonstrate the real impact of agricultural and forestry activities on emissions, land use, and community welfare.
International standards increasingly demand transparency. The ISSB IFRS S2 (2024) stresses that disclosures related to climate risks must be relevant to investor decision-making. This means agribusiness companies cannot rely solely on narrative but must present verifiable quantitative data.
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Carbon Footprint from Agriculture, Forestry, and Other Land Use (AFOLU)
Key Considerations
There are three main considerations for companies when integrating AFOLU into sustainability reports:
- Local and global context. Reports must show how AFOLU activities contribute to national targets. KLHK (2025) highlights AFOLU as a key sector in Indonesia’s Net Zero 2060 strategy, so companies need to align their reporting with national policy.
- Stakeholder involvement. Indonesia’s agribusiness supply chains are highly fragmented, involving smallholder farmers and local communities. Sustainability reports must reflect their participation, not just data from large corporations.
- Data credibility. WRI (2024) emphasizes the importance of MRV (Measurement, Reporting, Verification) systems based on TACCC principles (Transparency, Accuracy, Completeness, Consistency, Comparability). With MRV, emissions and conservation data can be independently verified, enhancing trust among investors and regulators.
Essential AFOLU Parameters
Several parameters must be included in sustainability reports.
Emissions and carbon sequestration are the first indicators. Companies should report total emissions from agricultural and forestry activities while also showing carbon sequestration contributions from reforestation or agroforestry. The IPCC underscores that AFOLU is not only a source of emissions but also a significant provider of mitigation solutions.
Land cover change is equally critical. Reports must present data on forest areas converted to production, areas restored, and geolocation evidence to support deforestation-free claims. This is increasingly relevant as the EU’s EUDR requires spatial data verification.
Sustainable agricultural practices such as water efficiency, reduced chemical fertilizer use, and crop diversification should also be reported. These practices reduce emissions while strengthening food security.
Finally, social and economic aspects must be included. Reports should cover working conditions for farmers and laborers, community welfare programs, and contributions to rural development. Integrating social aspects aligns with ISSB standards, which emphasize the link between sustainability and long-term economic value.
Challenges
Despite its importance, AFOLU integration faces challenges. Fragmented supply chains make verification difficult, especially among smallholders. Data limitations are also an issue, as many production areas are poorly documented.
Independent audit costs are high, posing burdens for medium and small enterprises. Moreover, management awareness remains low; some companies still view sustainability reporting as an administrative obligation rather than a strategic opportunity.
Strategic Opportunities
If these challenges can be overcome, AFOLU integration opens major opportunities. Companies that present IPCC-based data and adopt MRV systems recommended by WRI will gain higher credibility.
Compliance with ISSB standards strengthens export competitiveness, as global investors increasingly demand transparent climate disclosures. Furthermore, sustainability reports aligned with KLHK’s Net Zero strategy can attract green finance, open access to sustainable funding, and drive agribusiness transformation toward more ethical and environmentally friendly practices.
Conclusion
Integrating AFOLU into sustainability reports is not an optional add-on but a strategic foundation for sustainable trade. Indonesian companies must address essential parameters such as emissions, land cover change, sustainable farming practices, social aspects, and compliance with global regulations.
With sustainability reports grounded in standards from IPCC, ISSB, KLHK, and WRI, companies not only meet international market demands but also contribute to national and global climate mitigation targets. Ultimately, AFOLU-integrated sustainability reports are strategic documents that strengthen reputation, open access to premium markets, and support transformation toward a green economy.
Need to ensure your company is accurately Integrating AFOLU into the Sustainability Report: Essential Parameters and Key Considerations? Consult your sustainability reporting needs with Validerra’s expert team today!
Author: Nadhif
Editor: Lina
References
International Sustainability Standards Board (ISSB). (2024). IFRS S1 & S2: General Requirements and Climate-related Disclosures.
IPCC. (2023). AR6 Synthesis Report: AFOLU Sector and Global Emission Pathways.
Ministry of Environment and Forestry of the Republic of Indonesia (KLHK). (2025). Net Zero Indonesia 2060 Strategy. Jakarta: KLHK.