Business has been identified by the UN as key to the successful realization of the Sustainable Development Goals (SDGs). Whether a small company or a large multinational, the products, services, and values of businesses can help address many of the global issues the Goals set to address.
A recent survey by PwC found that SDG awareness is on the rise in the business community and is at a much higher level (92 per cent) compared to the general population (33 per cent). Additionally, the survey noted that 71 per cent of businesses are already planning how they will respond to the SDGs.
As noted by Paul Polman, CEO of Unilever, “it is not possible to have a strong, functioning business in a world of increasing inequality, poverty and climate change. The private sector has a unique opportunity to embrace the Global Goals agenda and recognise it as a driver of sustainable business strategies, innovation and investment decisions.”
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We believe that businesses can use carbon finance to deliver additional value through alignment with the SDGs, enabling the voluntary carbon market to extend beyond emission reductions, and play a vital role in driving low carbon sustainable development throughout the world.
And herein lies the challenge: how can a business respond to and align with the SDGs? Some businesses have core competencies that fit well with one or more of the SDGs.
For example, a healthcare company clearly has positive impacts on human health, so its main business is naturally aligned with SDG 3. But what about companies whose activities may not directly support the SDGs, but which want to contribute to sustainable development and more closely align with the Goals?
Using climate finance to reduce emissions and support the SDGs
One of the many ways companies are looking to address the SDGs, is by aligning climate action with the Goals through the use of carbon finance. Carbon finance refers to the mechanism whereby project developers create and sell verified emissions reductions as an additional revenue stream for their projects, enabling companies to support projects which deliver low carbon sustainable development around the world.
Increasing importance is now being placed on projects that deliver multiple co-benefits beyond the emissions reductions. This sub-Saharan Africa cookstove project, for example, helps to reduce indoor air pollution leading to improved health (SDG 3), reduces the time women and children spend collecting fuel wood contributing to gender equality (SDG 5), and consequently alleviates pressure on local woodlands which helps to conserve life on land (SDG 15).
Reduced emissions from deforestation and degradation (REDD) projects, for example this one in Indonesian Borneo, also frequently impact several of the SDGs. REDD projects clearly conserve forest habitat and wildlife (SDG 15), and often they implement community-based activities that can improve food security (SDG 2), create jobs (SDG 8), and improve local infrastructure (SDG 9).
Microsoft is one of the major corporations which recognizes the different dimensions of value that carbon finance offers: “Our portfolio of projects is tailored to our specific business interests and goals, and creates long term sustainable development through energy access, conservation of biodiversity and improving health and well-being, while delivering crucial emissions reductions,” says TJ Di Caprio, Senior Director, Environmental Sustainability, Microsoft.
While we’re seeing a growing interest in articulating these co-benefits, transparent and accurate communication of a project’s SDG impacts presents a new challenge that is leading to developments in the voluntary carbon market.
Assessing project-specific SDG impacts
Although a project’s activities may appear to directly align with the SDGs, it is critical to understand how to measure these impacts in a robust and transparent way. Within each Goal is a set of targets that provide specific direction for addressing that SDG. Carbon finance projects must work out ways to gather data and monitor results against the relevant SDG targets.
The UN established a list of 230 indicators to help measure progress against the Goals and their targets. Most of the indicators are macro-level and assess changes on a large scale, although some are very specific, such as Indicator 1.1.1: “the proportion of the population below the international poverty line,” defined as people earning less than $1.25/day, which is further broken down by sex, age, employment status and geographical location. Others are quite broad, like Target 15.2.1: “progress towards sustainable forest management.”
Aligning carbon finance markets with the SDGs is being addressed in several ways. Firstly, several carbon offset standards such as the Gold Standard and the Verified Carbon Standard are adapting their frameworks and requirements to better define a project’s impacts beyond carbon reductions, and in some cases this may lead to the creation of other tradeable instruments in addition to carbon credits.
Another way to assess project alignment with the SDGs is to conduct a thorough analysis of the data currently being monitored and verified at the project level, to determine whether there are additional metrics that can be tracked for SDG reporting purposes.
An evolving market
At Natural Capital Partners we’re seeing an evolution in the way our clients think about carbon finance and the additional impacts their carbon investments can have. The SDGs have helped to frame and accelerate this transition by providing meaningful targets to unite countries, businesses, and other entities around the world towards common goals for widespread positive impacts on communities and the environment. The voluntary carbon market is adapting to these changes through ongoing improvements to carbon standards and enhanced tracking and communication of project co-benefits.
These changes are providing additional value as they better enable businesses to articulate the benefits of their carbon project investments beyond the verified emission reduction.
We believe that businesses can use carbon finance to deliver additional value through alignment with the SDGs, enabling the voluntary carbon market to extend beyond emission reductions, and play a vital role in driving low carbon sustainable development throughout the world.
Ben Massie is Sourcing Manager for Natural Capital Partners. This article is republished from the Corporate Citizenship blog.
