What are the business incentives for a company to undertake Beyond Value Chain Mitigaton?

This FAQ refers to Gold Standard's work with companies on Beyond Value Chain Mitigation 

What are the business incentives for a company to undertake Beyond Value Chain Mitigaton?

Just as there are many different companies which will need to take action if we are to reach a net zero world, there are many different business cases for BVCM. For the Science Based Targets Initiative’s report 'Above and Beyond' they engaged with over 200+ companies and identified key drivers for its adoption. These included:

USING BVCM AS A MECHANISM TO INCREASE RESILIENCE FOR COMPANIES RELIANT ON NATURAL CAPITAL

Companies face acute and chronic physical risks from climate change (e.g., rising temperatures, sea-level rise, extreme weather events, resource scarcity, ecosystem degradation), as well as systemic risks linked to climate tipping points and ecosystem collapse. Climate change and La Niña drove overall losses of USD 270 billion and insured losses of USD 120 billion in 2022. BVCM supports the mobilisation of mass amounts of climate finance to address these challenges.

BRAND DIFFERENTIATION IN A CHANGING MARKET

Companies face market risks due to shifts in supply and demand for products and services as a result of climate change. Recent analysis showed that 14% of consumers cite ESG as their top buying criteria and more than 70% of consumers are willing to pay a premium of 10–25% for sustainability. An implemented BVCM strategy will provide a point of differentiation for climate conscious companies.

POLICY

BVCM activities and investments act as a supplement to scope 1, 2 and 3 abatements. It therefore has the potential to further reduce policy and litigation risk where BVCM is aligned with the ‘polluter pays’ principle set out in the 1992 Rio Declaration, which signifies that those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment.

FINANCIAL MARKET OPPORTUNITIES

Concern about climate change has been cited as the most common reason for financial groups to exclude companies from their portfolios, according to research from a coalition of non-profit environmental and sustainability groups.

SOCIETAL EXPECTATIONS

Companies can erode the social license by failing to take externalities into account – even if they have committed to reducing their value chain emissions. Demonstrating a commitment to addressing the climate crisis through BVCM can help businesses avoid costs linked to loss of the social license to operate – for example, through the cost of replacing an employee (on average, 21% of their annual pay).

FACILITATING FUNDS FOR TECHNOLOGY ADVANCEMENT

BVCM is a mechanism by which companies can deploy funds beyond their sector and their value chains to realise opportunities linked to technology R&D and innovation. As such, BVCM activities that accelerate technological innovation brings opportunities to access new markets and for associated return on investment. The global climate tech market is expected to reach USD 182.5 billion at a compound annual growth rate of 24.5% between 2023 and 2033.