By Jennicca Gordon, Associate, Natural Climate Solutions Alliance
Businesses are increasingly aiming to incorporate Natural Climate Solutions (NCS) into their climate plans to fulfil their climate and nature commitments. But how can they ensure the integrity of the credits they purchase and communicate their efforts effectively?
Three climate leaders – Bruce Kennedy of BCG, Adele Cheli of GSK and Lydia Sheldrake of the Voluntary Carbon Market Integrity Initiative (VCMI) – shared their experiences and advice on procuring NCS carbon credits during a webinar organised by the Natural Climate Solutions Alliance (NCSA) and the We Mean Business Coalition(WMBC). They discussed making the business case, ensuring the integrity of the credits purchased and communicating to stakeholders.
Here are the key takeaways:
- Balanced Portfolios
“We purchase high-quality credits and in doing so, aim to send a demand signal to the market for best practise projects.” Bruce Kennedy, Senior Carbon Portfolio Manager, BCG
To help mitigate risks and maximize the opportunities associated with the different types of NCS carbon credits, buyers must adopt a balanced portfolio approach to carbon credit procurement. This includes diversifying portfolios, both geographically and in terms of the types of credits and ecosystems. Investing in early-stage projects that will deliver credits later in the decade is also important. Additionally, setting an internal carbon price and price floor can drive demand for high-quality carbon credits.
- Building a Business Case
“It is a journey, so we continue to engage internally across a range of business functions, and we continue to evolve our business case and our ways of working.” Adele Cheli, Sustainability Partnership & Strategy Director, GSK
Building a business case for investing in NCS requiresengaging staff across all levels of the business. It’s not just about winning over the CFO, but getting employees involved in procurement, for example by voting to select and shortlist projects. This also helps raise awareness of how individual behaviours impact emissions.
Demonstrating a big picture view of the costs and incentives needed for reducing emissions by aligning investment in NCS with achieving public targets on climate and nature is essential, and so is highlighting the responsibility of corporations to lead by example. Allocating enough time for procuring credits and ensuring you are flexible in deals is important, given the volatility of the market and the potential for projects to fall through.
Being clear on the purpose and priorities of the portfolio from the outset, aligning with business strategy or impact goals, is essential. Building trust and understanding within the business, particularly with legal, procurement, and risk teams, is necessary to enable quick decision-making when required. Finally, agility and long-term planning are necessary to navigate the fast-moving market.
- Transparency
Transparency emerged as a key consideration for communicating NCS investment efforts effectively in order to build trust with buyers, shareholders, customers and other stakeholders. This can be through publishing information about supported projects, including the number of credits and the expected annual yield. Learning from failures and being open about what doesn’t work is also critical for building trust. Not everything goes well on the first try, and sharing these experiences is essential for fostering a healthy market. Communication is not just about the positive, but also about being clear and intentional about why a particular project is being supported. Transparency is a useful tool for avoiding accusations of greenwashing and building trust with stakeholders.
- Common Rules
“The goal is to enable high integrity voluntary carbon markets which deliver for the 1.5C goal – by that we mean real and additional benefits to climate, people, and nature.” Lydia Sheldrake, Director of Policy and Partnerships, VCMI
For the market to thrive, it needs common rules for transparency and integrity from end to end, for both supply and demand. The standard the VCMI is working on aims to set specific criteria for the credible use of carbon credits and the claims that can be made about their use, with the aim to help and ensure that companies who are going above and beyond are getting recognized and rewarded for doing so. This also helps with the business case for buying carbon credits.
Investing in NCS not only helps companies achieve their climate targets, but also brings benefits to nature, climate, and people. By following these four key considerations – having a balanced portfolio approach, building a business case, being transparent and following common rules on integrity – companies can ensure that their efforts are effective and credible.
