In the face of escalating biodiversity loss and ecological degradation, innovative financial mechanisms such as biodiversity credits have emerged as pivotal tools in the quest for business sustainability.
They offer a means to incentivise biodiversity conservation efforts, providing a crucial link between economic development and ecological preservation. Keep reading as we delve into the multifaceted world of biodiversity credits and how they can be harnessed to contribute positively to the global ecosystem.
What are biodiversity credits?
Biodiversity credits are a quantifiable, verifiable, and tradeable financial instrument which rewards positive biodiversity and nature outcomes through the creation and sale of either ocean or land-based biodiversity units over a fixed period.
When positioned around principles of high integrity, inclusion, transparency, and equity, these mechanisms can generate advantages for local communities and indigenous people. These people are the ultimate stewards and custodians of nature, which have safeguarded it for generations.
At the same time, these credits can create positive business value by limiting exposure to physical nature risks. Through biodiversity credits, businesses can support positive nature outcomes aligned with consumer preferences, keep pace with regulatory changes, and secure access to competitive finance.
These credits can help bridge the existing financing gap by mobilising additional capital for biodiversity restoration and conservation projects. According to KPMG, over 50 percent of the world’s GDP is moderately or highly dependent on nature and its services. The current biodiversity financing gap sits at $711 billion.
Legal and regulatory frameworks governing the use of these mechanisms
Legal and regulatory frameworks for biodiversity credits are developed to mitigate environmental impacts through conservation and restoration activities. These frameworks can vary significantly by country and region, but below are some general frameworks and specific examples that illustrate how these kinds of credits are governed.
National biodiversity strategies
Many countries have implemented national strategies or plans that include mechanisms for biodiversity credits. These strategies often align with international agreements like the Convention on Biological Diversity (CBD).
Environmental Impact Assessments (EIA)
Environmental Impact Assessments often require developers to address biodiversity loss. In some cases, this can involve purchasing biodiversity credits to offset the impacts of development, ensuring that any loss of biodiversity is compensated for by conservation efforts elsewhere.
Specific biodiversity credit schemes
There are also specific biodiversity credit schemes. Some of these include Australia’s Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), the United States’ Conservation Banking, and Brazil’s Native Vegetation Protection Law (Forest Code).
Voluntary market standards
Apart from governmental regulations, there are also voluntary biodiversity credits market standards that provide frameworks for biodiversity credits. These include the Business and Biodiversity Offsets Programme (BBOP) and the Verified Carbon Standard (VCS).
Regional and local government regulations
Local governments may also have their own regulations and programmes for biodiversity credits, tailored to address specific local environmental concerns. These can involve specific zoning laws, local conservation programmes, and regional policies that support biodiversity banking systems.
International agreements and protocols
There are also international agreements and protocols, such as the Nagoya Protocol on Access and Benefit-sharing. Part of the CBD, this international agreement provides a framework for sharing the benefits arising from the utilisation of genetic resources. This can include biodiversity credits related to natural resource use.
Challenges of biodiversity credits
Biodiversity credits, part of the broader concept of environmental or ecological offsets, aim to balance biodiversity loss from development projects through conservation efforts elsewhere. This mechanism faces various challenges, which can shape its effectiveness and acceptance in environmental management and policy.
Quantifying biodiversity
Biodiversity is complex, involving various species, ecosystems, and ecological functions, making it difficult to quantify impacts and required offsets accurately.
Consistency in valuation
Establishing consistent valuation methods for biodiversity credits can be challenging, as ecological values are inherently variable and context-specific.
Permanence
Long-term conservation outcomes are necessary for effective biodiversity credits. Ensuring permanence, given potential future changes in land use or climate conditions, poses a significant challenge.
Leakage
Mitigating the risk that protecting biodiversity in one area leads to increased pressure and degradation in another (leakage) is a critical concern.
Regulatory oversight
Establishing and maintaining robust regulatory frameworks to manage and monitor biodiversity credit systems is complex and resource-intensive.
Opportunities from biodiversity credits
Similarly, biodiversity credits can also pave the way for an array of opportunities.
Conservation financing
They can provide a significant funding source for conservation projects, especially in ecologically rich but economically poorer regions.
Private sector engagement
This mechanism can effectively engage the private sector in biodiversity conservation, leveraging private investment for ecological restoration and protection.
Innovation in conservation
The need for effective offsets can drive innovation in conservation strategies, including the development of new technologies for monitoring and enhancing biodiversity.
Habitat restoration
These credits often fund the restoration of degraded ecosystems, which can lead to improved ecological functions and enhanced services such as water purification, soil stabilisation, and carbon sequestration.
Scalability and flexibility
Biodiversity credit schemes can be adapted and scaled to various ecological and geographical contexts, offering a flexible tool for integrating economic development with environmental conservation.
How to integrate biodiversity credits into a sustainability strategy
Implementing biodiversity credits into corporate sustainability strategies offers a practical way for companies to address their environmental impacts while contributing to broader conservation goals. Below is a guide on how businesses can integrate these credits effectively.
Assess biodiversity impact
Businesses should start by thoroughly assessing the biodiversity impacts of their operations. This includes understanding the ecological value of the areas they affect through development or day-to-day operations.
Set clear environmental goals
Integrate biodiversity credits into the broader sustainability and Corporate Social Responsibility (CSR) goals, ensuring they complement efforts in emissions reduction, water conservation, and waste management.
Use scientifically informed targets to guide the purchase and use of these credits, ensuring that the credits purchased are meaningful and contribute to real ecological benefits.
Choose the right biodiversity credit scheme
Understand different biodiversity credit schemes available, including their ecological focus, geographic relevance, and the robustness of their certification standards.
Ensure that the credits contribute to conservation efforts that are additional to what would have happened otherwise and are maintained over the long term.
Integrate with supply chain management
Understand different biodiversity credit schemes available, including their ecological focus, geographic relevance, and the robustness of their certification standards.
Ensure that the credits contribute to conservation efforts that are additional to what would have happened otherwise and are maintained over the long term.
Implement through partnerships
Partner with environmental organisations, NGOs, and local communities to ensure that biodiversity credit projects are ecologically sound and socially equitable.
Ensure that local communities are involved in and benefit from these credit projects, enhancing social license to operate and ensuring the long-term success of conservation efforts.
Monitor and report progress
Regularly report on how biodiversity net gain credits are used and the outcomes of related conservation efforts. Transparency builds trust with stakeholders and supports the credibility of the business’s sustainability initiatives.
Educate and advocate
Educate employees about the importance of biodiversity and how these credits contribute to sustainability goals, increasing internal engagement and support. Our Diploma in Business Sustainability Course features an entire module on the relationship between business and nature.
In addition, advocate for robust biodiversity credit schemes and regulations that support effective conservation efforts, enhancing the overall credibility and impact of these mechanisms.
Key takeaways
Biodiversity credits represent a significant advancement in environmental conservation, blending ecological responsibility with economic incentives. As the world continues to grapple with biodiversity loss, biodiversity net gain credits serve as a vital tool in the repertoire of solutions, offering a pathway to restore and conserve our planet’s vital ecosystems for future generations.
