Unlocking Corporate Climate Investments: Beyond Value Chain Mitigation as a Key to Closing the Finance Gap
By Jordan Faires and Pedro Martins Barata
When the Science-Based Targets initiative (SBTi) talks, the C-Suite listens. Arguably the most influential voluntary corporate climate initiative in the world, SBTi effectively sets the climate agenda for global companies – including on the use of carbon credits.
That kind of influence is powerful—especially given that we are at a critical moment to close the global finance gap, halt tropical deforestation, and dramatically reduce greenhouse gas emissions. And carbon credits are a tool that can help us accomplish those urgent climate goals.
SBTi recently introduced long-awaited guidance on how companies can implement “beyond value chain mitigation” (or BVCM) – a term for investments in a range of climate solutions, including carbon credits, outside of a company’s own operations and supply chain – alongside science-based targets for their internal reductions.
SBTi’s new report on BVCM is a significant step forward in helping companies understand how and why beyond value chain investments are necessary—not a “nice to have”. Without BVCM, a science-based aligned target alone does not meet growing expectations for corporate contributions to global net zero efforts. Now, businesses need a clear, actionable, and high-impact approach to maximize, measure, and claim their BVCM investments as core elements of their climate strategy, backed up by strong external incentives for doing so.
Here are all the cues that businesses and investors should take—from SBTi and beyond—about beyond value chain mitigation:
- SBTi is clear: BVCM is a critical component of a company’s net zero journey, with a compelling business case for action.
The choice between internal decarbonization and purchasing carbon credits is often framed as an “either/or” approach. But SBTi guidance confirms that there is significant business value in a “yes/and” approach to investing in climate action beyond value chains.
Investing in BVCM presents a compelling business case for companies seeking to unlock various opportunities while mitigating future risks and safeguarding long-term value. Companies across sectors recognize BVCM can help differentiate their brand, enhance resilience across operations and supply chains, support nature and biodiversity, and scale the availability of nascent solutions like technological carbon dioxide removal.
SBTI’s endorsement of BVCM builds on industry surveys showing that companies pursuing ambitious and active BVCM credit portfolios are also more likely to have ambitious internal decarbonization strategies. I tegrity must remain at the center of BVCM approaches – companies must not use these investments to delay their own science-aligned decarbonization, and solutions like carbon credits must meet a high bar for environmental impact and social benefits.
- Capital is limited. Companies should prioritize actions that can credibly and quantifiably reduce emissions, while continuing essential policy advocacy efforts.
SBTi presents companies with a wide range of quantifiable and non-quantifiable options that can “count” as BVCM investments, including solutions like renewable energy infrastructure, policy advocacy, phase out of fossil fuels, and green hydrogen. While companies must consider their role in supporting these longer-term priorities and urgently align their advocacy efforts with the Paris Agreement, companies should focus their BVCM investments on solutions that drive the immediate, near-term climate impact we need on the path to halving emissions by 2030 – including high-integrity carbon credits.
High-integrity carbon credits are off-the-shelf, ready-made options for quantifiable and verifiable climate finance. Voluntary carbon markets have faced challenges – and not all carbon credits are created equal in terms of their social and environmental quality. However, there have been major moves to drive the market toward higher integrity, transparency and oversight. Carbon credits are far from the only vehicle to drive corporate finance for climate – and we must develop and deploy a range of other financing instruments – but they’re ready for action now.
- Companies should develop BVCM portfolios that prioritize investments in the most urgent, near-term climate priorities—like halting deforestation.
Companies must develop BVCM portfolios that maximize benefits for climate, nature and Indigenous Peoples and Local Communities, and align with near-term climate priorities. What does this look like? Ramping up investments in nature-based solutions, which have the potential to provide a significant portion of the emissions reductions required by 2030.
Conserving tropical forests at scale is one of our most urgent – and actionable – near-term priorities. Resources like the Tropical Forest Credit Integrity Guide detail how companies can shift their investments to support landscape-level solutions that fundamentally change policy and incentive structures through efforts to conserve tropical forests at national, subnational, or regional scales. In fact, SBTI’s BVCM report cites one of these solutions – jurisdictional REDD+ (or JREDD+) – as an example of high-impact BVCM investment. There’s more good news: JREDD+ is quickly moving from theory to reality, with increasing availability of these credits on the market.
And while carbon removal is a critical part of our long-term path to net zero, SBTi is also clear: emissions reductions outside value chains (like those from high-quality forest protection programs) can play a critical role in BVCM portfolios and supporting global climate action in the near-term.
- Companies need to consider the changing claims and disclosure landscape – including new regulations – in their BVCM approach.
Rules, regulations, and frameworks for how companies can credibly communicate their climate impact – including through solutions like carbon credits – are in flux. It is increasingly paramount for companies to understand high-integrity approaches to climate action clearly substantiate their goals, pledges, and claims about environmental performance, and to situate their communications strategy in the context of new regulations (like those in California, or forthcoming regulations in the European Union).
Validation of claims around BVCM can be a significant step toward building stakeholder trust and ensuring reputational benefits. While SBTi has clarified that it will not be validating claims (as it does with emissions targets), there are others in the voluntary climate landscape stepping up to fill this void. The Voluntary Carbon Markets Integrity Initiative (VCMI)’s Claims Code of Practice is the result of multiple years of stakeholder engagement, providing a widely accepted and high-integrity framework for making and validating claims around carbon credits. Just recently, Bain and Co. announced that they were the first company to validate their claims through VCMI – and others can follow.
Yet, to unlock the full potential of corporate action, we need a new paradigm for measuring, incentivizing, and recognizing corporate progress on decarbonization and BVCM. While VCMI is a strong approach, it has limitations, and it is unclear what traction the VCMI claims system will have among businesses. We need to push forward holistic and aligned climate standards that incentivize the investments we know are needed– including in BVCM. This includes clear guidance on interim targets, new strategies and robust market-based approaches for Scope 3 emissions, and additional clarity on the use and claims of carbon credits (both reductions and removals) on the pathway to net zero. Only then will the image become fully clear for companies on their path to decarbonization.
In truth, the only “wrong” approach to beyond value chain mitigation is no approach at all. Every company will face its own array of material issues, have a unique set of stakeholders, and approach the world with its own values and theory of change for environmental impact.
This, in turn, will influence how and where they deploy capital to support climate, nature, and social outcomes. With 1.5C thresholds dangerously close, we need every company to come off the sidelines and help close the global climate finance gap.
As companies strategize their path forward, let us recognize the companies striving to set and deliver on ambitious decarbonization and BVCM goals. And remind ourselves that for each company trying, and even perhaps honestly failing, to meet its self-imposed climate goals, there are still too many not engaging at all with the climate challenge. That must change.
