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Biodiversity conservation is essential, but the question of how companies should manage their impact on nature remains a contention. One of the options discussed is the purchase and sale of certificates, so-called biodiversity credits, similar to the voluntary carbon credits market. These credits promise companies the opportunity to compensate for their negative impact on ecosystems by contributing to nature conservation elsewhere. At the end of last month, it was reported that somewhere between $325,000 and $1.87 million worth of these credits have already been sold. But to what extent is this a legitimate strategy, and what does it mean for the reliability of sustainability claims?
Passing the buck by buying up
The Global Biodiversity Framework (GBF), as part of the Kunming-Montreal Agreement, cites biodiversity credits as one mechanism to trigger private financial flows. As a concept, it sounds attractive, but there are fundamental challenges that should not be overlooked. First, the market for biodiversity credits is still developing and relatively unregulated. This carries the risk that companies will shirk their responsibility by simply buying credits without changing their activities to minimise their impact.
Not comparable
Also, remember that not all ecosystems are the same. For example, destroying part of the Amazon – a “biodiversity hotspot” – is not effectively compensated for by planting trees elsewhere. Finally, there is a well-known problem: land grabbing. When land is purchased or leased, this often happens without the consent or notification of the local communities that depend on that land for their livelihoods. Try buying that off with a few credits.
Financial compensation is a band-aid solution
So, a robust biodiversity strategy requires a lot more than just buying credits. As set out by the International Finance Corporation (IFC), the mitigation hierarchy provides a clear framework for companies: avoid harmful activities first, minimise unavoidable impacts, restore where possible, and use compensation (such as biodiversity credits) only as a last resort.
From passive to proactive
The focus should therefore be on proactively reducing the impact on biodiversity. Not on sticking plasters through passive, financial compensation. If companies really want to do something, they have to roll up their sleeves. Many will eventually have to, because of their own great dependence on biodiversity. They can’t get out of that by buying some credits.
This article was previously published on Financial Investigator (in Dutch).
