Use nature-based solutions as part of Net Zero action

Natural climate solutions (NCS) refer to nature-based solutions (NbS) addressing climate change. They include activities that conserve, restore or improve land management practices to increase carbon storage and/or avoid greenhouse gas (GHG) emissions across global forests, wetlands, grasslands and agricultural land (1). NCS can contribute to all three elements of a company’s journey to net zero, as shown in Figure 1:

• Within value chains, decarbonization in line with near-term Science Based Targets (SBT) can involve NCS, particularly for companies in the AFOLU sector (see blue region)

• Through ‘Beyond value chain mitigation’, NCS can offset emissions that have not yet been abated by a company on the journey towards net zero (see green region)

• Finally, when companies approach their net zero target year, NCS removals can be used to neutralize residual emissions (see purple region)

High quality NCS activities effectively address common climate action issues (e.g. permanence, additionality, leakage, double-counting and robust quantification) and go above and beyond the delivery of climate mitigation by providing positive impacts such as:

• Biodiversity gains and ecosystem integrity

• Substantive social and economic benefits for local communities and indigenous people

• Climate risk protection (e.g. by improving the resilience and adaptive capacity of landscapes)

Figure 1: Summary of NCS roles in Net Zero action (based on SBTi Net Zero Standard)

Source: WBCSD The role of Nature-based Solutions in strategies for Net Zero, Nature Positive and addressing Inequality

The use of natural climate solutions is rising, both for decarbonizing AFOLU sector value chains and for ambitious ‘Beyond value chain mitigation’ through the carbon market. Ecosystem Marketplace reports that the value of NCS credits traded on the carbon market has grown from approximately US$272 million in 2020 to around US$2 billion in 2022 (2). This is likely to gain further momentum as groups such as the Science Based Targets Initiative (SBTi) continue to advocate for more ambitious ‘Beyond value chain mitigation’, while increasing pressure to decarbonize leads more AFOLU sector companies to implement NCS within their value chains.

Decarbonization across a company’s Scope 1-3 emissions is the fundamental route to net zero. Many companies, particularly those in the AFOLU sector, depend on producing and processing natural resources. These activities (upstream or downstream) typically make up the majority of their emissions. Investing in NCS within their value chains therefore represents one of the highest potential decarbonization opportunities. NCS activities in this category focus on improving land management through changes in farm and forestry practices that can help to reduce GHG emissions or increase carbon sequestration. By rapidly scaling these solutions, the AFOLU sector can substantially contribute to decarbonizing the AFOLU sector and the global economy as a whole.

While only AFOLU sector companies can leverage NCS for value chain decarbonization, all companies can demonstrate the highest climate ambition by supporting mitigation beyond their value chains, while decarbonizing in line with net zero. Using NCS carbon credits to compensate for unabated emissions in this way enables a wide range of positive outcomes for climate, nature and people to be achieved. This investment in high quality NCS underpins the global transition to a 1.5-degree future by channeling finance to climate mitigation activities outside corporate value chains. Such activities currently face severe shortages of resources and climate finance at an international level, and contribute to reducing the global atmospheric carbon budget while also delivering environmental and social benefits.

We reiterate that internal decarbonization aligned with a science-based target is fundamental to reaching net zero. NCS credits should not disincentivize or replace these activities. For more information on how corporate organisations can identify and use high quality NCS credits, see the NCS Alliance publications Natural Climate Solutions for Corporates and Natural Climate Solutions and the Voluntary Carbon Market: A Guide for C-suite Executives.

In either case, the solution or set of solutions used must be high quality, delivering benefits to climate, nature and people by following guidelines defined by organizations such as the Integrity Council for the Voluntary Carbon Market (IC-VCM), the NCS Alliance, the International Carbon Reduction and Offsetting Alliance (ICROA) and the Tropical Forest Credit Integrity Guide. The latter was produced by eight major conservation NGOs and draws on the expertise of indigenous people and local communities.

Climate impact

Targeted emission sources

For companies in the AFOLU sector, Scope 1 and 3 emissions sources may be viable places to apply Natural Climate Solutions.

In addition to this, all sectors can contribute to NCS activities as part of their ‘Beyond value chain mitigation’, once they are decarbonizing in line with net zero.

Decarbonization impact

Outcomes expected:

While the specific outcomes of investments in natural climate solutions differ from company to company, they can help businesses to:

• Identify key regions within their value chains for emissions

• Deliver decarbonization in their value chains in certain instances (specifically within the AFOLU sector)

• Access removals that can be used for neutralization near or at the net zero target year (ideally within the AFOLU sector, as proposed by draft SBTi FLAG guidance)

Business impact

Benefits

The core benefits from NCS activities vary widely, and the approach taken can be modified to deliver greater benefits in particular areas of interest. Common benefits include:

• Increased climate resilience, including future-proofing supply chains and disaster risk reduction on vulnerable communities and infrastructure

• Improved productivity in AFOLU sector value chains, through impacts such as adaptation to changing climates and increased soil health

Costs

The cost of NCS activities depend on the role that the particular solution is to play with regard to climate impact and core benefits, as well as the location and type of approach selected. This may also be influenced by other factors, such as internal carbon prices and company budgets for this form of climate action (e.g. is investing in NCS for BVCM).

Indicative abatement cost

In absolute terms, the price of NCS activities, as noted by Griscom et al. (2017) (3), and seen on the voluntary carbon market, can range from <$1 US to over $100 US per tonne of carbon dioxide equivalent. Ecosystem Marketplace lists the 2021 overall average cost per tonne at approximately US$5.80 for forestry and land use credits, while agriculture credits cost around US$8.81 (4). It should be noted that many credits with very low price per tonne values are associated with poor quality control, and are not typically viewed as credible contributions to climate action.

Impact beyond climate and business

Co-benefits 

NCS activities can also support businesses to:

• Identify key regions within their value chains for biodiversity, deforestation concerns and other dependencies and impacts on natural ecosystems

• Align organization-wide strategies on climate with those on nature and equity action

• Contribute ‘Beyond value chain mitigation’ that delivers positive impact for nature and people

As net zero and nature positive efforts gain momentum, demand is growing rapidly for carbon projects such as high quality NCS that achieve both climate mitigation and clear benefits to communities and the wider environment. The capacity of NCS to deliver this is widely acknowledged. For example, the IPCC special reports on Land Use and Oceans and the Cryosphere state that:”[…] transformations to societal and economic processes on land and water systems can play an integral role in both climate mitigation and achieving the UN Sustainable Development Goals (SDGs)” (5), (6).

Many of the positive outcomes from NCS are highly interrelated, from the protection of biodiversity and ensuring resilience to transitioning to a more sustainable economy. NCS activities also deliver improved livelihoods for value chain partners, indigenous people and local communities through core benefits such as improved air and water quality, and additional revenue from carbon credits. When implementing NCS, it is important to work with and deliver positive impacts for these local communities, including indigenous peoples, whose participation and knowledge are key to the success of NCS activities.

Potential side effects 

Overemphasizing the climate impact of NCS activities can lead to negative impacts on nature and people, and vice versa. A balanced approach is therefore important for each NCS investment, combined with strong quality control on climate and core benefits aspects in each instance.

Typical business profile

As outlined in Figure 1, NCS can contribute to all three elements of a company’s journey to net zero:

• Within AFOLU sector value chains, decarbonization in line with near-term Science Based Targets (SBT) can involve NCS

• Through ‘Beyond value chain mitigation’, NCS can offset emissions that have not yet been abated by a company from any sector, while decarbonizing in line with net zero

• Finally, when companies approach their net zero target year, NCS removals can be used to neutralize residual emissions

Stakeholders involved

For companies looking to use NCS as part of AFOLU value chain decarbonization, the key internal stakeholders are procurement, sustainability team members working on climate, nature and inequality strategies, and value chain partners delivering the NCS activities.

For all companies investing in NCS as part of neutralization and/or ‘Beyond value chain mitigation’, the communities around the value chain (including and especially indigenous people and local communities) are also key stakeholders.

Approach

A wide range of NCS approaches is available, and the selection a company makes depends on the use case, category of NCS preferred, accounting approach, core benefits, location and scale, for example.

In general terms, for companies in the AFOLU sector looking to use NCS for decarbonization of their value chains:

• Assess and prioritize: review the company’s value chain, identifying where there are material dependencies and risks, as well as Scope 1 and Scope 3 emission sources. Prioritize certain regions and locations for targeted activities

• Commit: using the information gathered and prioritizations made, commit to action in line with standards such as the GHG Protocol and Science-based Targets Initiative (including their Forest, Land Use and Agriculture guidance)

• Act and transform: take action as outlined in the commitments made, seeking to deliver positive impacts on climate, nature and people, while transforming internal approaches and building an enabling environment for other companies and stakeholders to take similar action

• Evaluate and disclose: review the activities undertaken and outcomes achieved, disclosing all relevant information transparently in line with protocols such as CDP and the TCFD

For all companies, including in the AFOLU sector, once decarbonizing in line with net zero, companies can take the ambitious approach outlined in Natural Climate Solutions and the Voluntary Carbon Market: A Guide for C-suite Executives and implement ‘Beyond value chain mitigation’ through high quality NCS credits.

Stakeholders involved

For companies looking to use NCS as part of AFOLU value chain decarbonization, the key internal stakeholders are procurement, sustainability team members working on climate, nature and inequality strategies, and value chain partners delivering the NCS activities.

For all companies investing in NCS as part of neutralization and/or ‘Beyond value chain mitigation’, the communities around the value chain (including and especially indigenous people and local communities) are also key stakeholders.

Key parameters to consider

One additional and fundamental parameter is the need to review strategies for conserving nature and addressing inequality to ensure that the NCS approaches supported are also delivering against these objectives, rather than focusing solely on climate impact.

Implementation and operations tips