Carbon credits won’t help companies hit their emissions reduction targets, but nature must be in every corporate climate plan
We Mean Business Coalition
How can companies maximise their efforts to tackle the climate crisis by investing in credible nature-based solutions for climate at the same time as cutting their emissions as fast as possible?
Recent investigative reporting has revealed some confusion about the role of nature investments in corporate climate action.
Investing in nature-based solutions can be used as a form of offsetting – to ‘offset’ or compensate for the emissions a company is producing. This practice has – understandably – gained a bad reputation, since it has been used by some companies as a way of claiming they have reached ‘net zero’ when in fact they are doing nothing to cut the emissions caused by their business activities.
This is why the Science Based Targets initiative (SBTi) makes clear that offsets should only be used in addition to the required actions for companies to meet their emissions reductions targets. SBTi specifically calls on all companies to invest beyond their value chain in nature-based solutions – either directly or through the carbon markets – at the same time as cutting emissions within their value chains.
In other words, investments in nature must be part of a company’s overall climate transition action plan, even when they cannot be counted towards science-based targets.
Cut emissions as fast as possible
65% of gross global emissions being pumped into the atmosphere come from fossil fuel use, and 35% from forestry, land use and agriculture (FLAG). To stay within the 1.5°C limit and avoid the worst impacts of global heating, we have to halve the emissions going into the atmosphere from all sources by 2030. In the same timeframe, emissions from land must reach net zero. Emissions from all sources must reach net zero by 2050 or earlier.
To do this, we advise all companies to follow the 4 A’s of Climate Leadership. This includes setting ambitious science-based targets and creating a climate transition action plan which pinpoints the near-term actions the company will take to achieve its goals.
For companies with FLAG in their value chains, investing in nature now is essential to meet their targets. For instance, 80% of the potential emissions cuts in the land sector lie within the global food system. Companies can cut these emissions through solutions such as regenerative farming.’ Every company with commodities such as beef, palm oil or soy in their supply chain must act to eliminate forest loss and land use change by 2025 at the latest.
Meanwhile, all companies must go full tilt to cut their emissions from fossil fuel use – through actions like switching to renewable power and electric vehicle fleets, increasing energy efficiency, and innovating to create new solutions and technologies to cut remaining emissions in their operations and supply chains.
However, even if they go as fast as they can to do this, and despite exciting developments in the hardest-to-decarbonize industries, the technology and solutions do not yet exist at the scale needed for companies to cut all their emissions right now.
What happens, therefore, to the emissions companies are continuing to produce? The answer is nothing – they will continue to gather in the atmosphere. Unless companies also invest to draw down some of those emissions by protecting and restoring nature.
Keep our carbon sinks intact
Alongside cutting the emissions being pumped out, we also need to draw down as much of the carbon already sitting in the atmosphere as possible, to give us the best chance of staying on the 1.5°C pathway. Forests, wetlands, mangroves and other natural ‘carbon sinks’ are the most effective form of carbon removal there is.
The climate models underpinning existing climate targets, including science-based corporate net zero targets, assume that these natural carbon sinks will remain intact and continue to absorb carbon. But we are experiencing a nature loss crisis – and only 3% of international climate finance is currently directed towards addressing it.
If we wait until 2030 – let alone 2040 or 2050 – to start protecting and restoring nature, there may not be much left to protect and restore. We need to get more finance flowing today, not in seven years’ time.
This is why, every year, companies need to simultaneously work towards reaching their science-based emissions reduction targets and make investments in nature-based solutions. Nature–based solutions for climate, as defined by the UN, reduce emissions and help communities adapt to potential climate impacts. They also bring benefits for biodiversity and human wellbeing by improving the health of ecosystems.
Netflix, for instance, states that its strategy for investing in nature is driven by the Intergovernmental Panel on Climate Change’s science showing that “emissions cuts today are more valuable than in 5 or 10 years.” Alongside a decarbonization roadmap to deliver on its 1.5°C-aligned targets – approved by SBTi – the company invests in carbon credit projects to both protect and restore nature. These include the Vida Manglar Blue Carbon Project to preserve mangroves in the Colombian Caribbean, and the Chyulu Hills REDD+ project to protect and restore forests and grasslands in South-eastern Kenya. Recognizing the carbon markets ‘aren’t perfect’, Netflix conducts five levels of due diligence on the credits it purchases.
Don’t abandon the carbon markets
For all their flaws, the carbon markets are one of the only mechanisms available today to mobilize the immense amounts of capital needed to protect and restore nature. Unquestionably, if companies buy high quality credits now, alongside taking action to decarbonize their value chains, it will have catalytic impacts.
To end nature loss by 2030 – in line with limiting global temperature rise to 1.5°C – requires $350 billion in finance per year by the end of the decade. If the world’s 1,700 biggest emitters, as they worked to cut their emissions in line with science, also compensated each year for 10% of the emissions they have not yet cut through investments in nature, it would reduce and remove nearly 30 gigatons of emissions and mobilize up to $1 trillion in climate finance by 2030.
Carbon markets have been under fire, but abandoning them is not an option – we must instead accelerate the work already underway to improve them. We urge companies to step up their due diligence and continue investing in the carbon markets.
To demonstrate true climate leadership means both cutting emissions and driving finance to protect and restore nature. That must be in every company’s climate plan.
For more guidance on company investments in nature, read We Mean Business Coalition’s Guiding Principles for Corporate Climate Leadership: The Role of Nature-based Solutions.