With another World Water Day upon us, it is a good time to examine how we can accelerate progress in solving wicked water problems, including achieving United Nations Sustainable Development Goal 6, ensuring the availability and sustainable management of water and sanitation for all.I come back to the belief that …
As CEO of Ecolab since 2004, Doug Baker has infused sustainability and purpose into the company’s operations and the work it does around the world to help customers achieve their own sustainability goals.
In a packed plenary session at GreenBiz 20 conference, Baker shared his vision about how businesses can and should drive change that matters by delivering both economic and environmental benefits. Here’s his advice.
1. Link your core business to the impacts you target
Ecolab is a global leader in water, hygiene and energy technologies and services. To date, the company has helped customers save 801.7 billion gallons of water, equivalent to the drinking water needs of 2.7 billion people.
Baker noted the importance of connecting a company’s work to advancing the global agenda as defined by the United Nations Sustainable Development Goals (SDGs). In Ecolab’s case, this means prioritizing the focus on SDG 6, which ensures access to clean water and sanitation for all.
Ecolab is working on a new water initiative that aims to improve people’s access to clean water. Baker highlighted projections of a 40 percent mismatch between supply of and demand for fresh water by 2030, noting that one in nine people around the world already doesn’t have reliable access to water.
“If climate change is a shark, water is the teeth, and it’s the first thing you’re going to feel,” Baker said, arguing that water needs equal footing with carbon emissions reductions in global climate efforts.
Ecolab is working with the U.N. Global Compact’s CEO Water Mandate to reduce and eventually eliminate water stress around the world.
A number of big companies already have signed up for what Baker described as “a coalition of the willing, an accelerant for what needs to happen.” The signatories, in turn, are working with individual watersheds and local coalitions. Part of their efforts include education to get the word out on water, and thus to enlist more people to the cause.
3. You can’t give with one hand and take with the other
For Ecolab, sustainability has become inherent in what the company does. Businesses have to make social and environmental wellbeing a priority, Baker noted. It’s not enough just to wish it so.
“We’re not doing evil during the day and ESG at night,” he emphasized. “What a cruddy way to live!”
People often tell Baker that sustainability is natural for a company such as Ecolab, suggesting that it’s a heavier lift for businesses in other industries or lines of service. Baker retorts that it wasn’t natural before Ecolab did it.
“Ecolab’s journey as a company,” he mused, “has been to work to understand our process and impact, mostly around the economy but also around sustainability, which are related.”
4. Sustainability is no longer optional
As recently as two years ago, Baker would get questions at conferences asking if sustainability was even a relevant consideration for business. That, he said, has changed radically, and business leaders have come to realize that taking environmental impact into account is a requirement. Moreover, a growing number of fund managers are including ESG considerations in their analysis.
Baker clarified that businesses still have to perform financially, which creates a virtuous cycle. “The more we grow, the better impact we’re going to have,” he said.
5. Be transparent, and develop a diverse board
“You have to resist resistance to disclosure,” Baker urged, explaining that transparency is a necessary element of an effective strategy to improve social and environmental impact.
One way to overcome that resistance is to cultivate a diverse board of directors. Ecolab’s board has evolved significantly over the years, Baker said, and is critically instrumental in the company’s impact agenda. He said other business leaders consistently tell him that increased diversity on their own boards likewise has improved their performance.
Ecolab uses data to reveal opportunities for improved behavior and performance in its customers’ facilities. For example, when it comes to water usage in steel and paper mills, Ecolab has a very good view on best and worst performance thanks to its monitoring technologies.
Businesses across the economy have made a huge investment in digital technologies over the last five years and will continue doing so.
“Use the data you collect to drive efficiencies,” Baker advised.
7. Get CEOs out of their silos
Leaders who hope to persuade their CEOs and C-suites to infuse social and environmental purpose into their business strategies will need to help crack their CEOs out of their own, tiny silos.
“CEOs mostly talk to other CEOs,” Baker observed, which can insulate them in counterproductive ways. It’s important to provide good ideas to leadership, and to be aggressive.
“This is a historic time, and a huge transformation is required over the next 10 to 20 years,” Baker concluded. “If big business doesn’t drive the change we need, it won’t happen.”
Oceans and coastal plant species such as mangroves and seagrasses cover only a small fraction of the earth, but are responsible for sequestering over half of all the carbon captured by living organisms. However, despite being some of the most efficient known carbon sinks, they are also among the ecosystems most threatened by climate change. Threats such as rising sea levels and temperatures, offshore drilling, erosion, and pollution have resulted in the rapid deterioration of coastal and marine areas.
The concept of forest carbon, or the sequestration and storing of carbon by forests, is well known and utilized by voluntary carbon markets and payments through the global Reducing Emissions from Deforestation and Forest Degradation (REDD+) program. However, the critical contribution of marine and coastal ecosystems in carbon sequestration, or “blue carbon,” has only recently begun to gain traction in market-based ecosystem management discussions. These ecosystems are often biodiversity hotspots, and provide essential services such as food security, water quality, shoreline protection, and the provision of livelihoods to coastal communities. They are therefore ideal ecosystems for conservation efforts worldwide.
However, mobilizing capital investments for conservation remains one of the primary obstacles in managing coastal and marine ecosystems. Therefore, blue carbon could be crucial in facilitating both private and public capital investment in these dynamic ecosystems. The blue carbon market is, at present, still nascent. Governments and international institutions are revising methods of monitoring carbon to include blue carbon and develop structures to encourage private investment in blue carbon offsets. This article explores these efforts to facilitate the generation and trade of blue carbon credits.
How is blue carbon different?
Blue carbon is sequestered and stored in coastal and marine ecosystems that include mangroves, tidal marshes and seagrass meadows. In terrestrial ecosystems, carbon credits reflect the storage and sequestration from forests, grasslands, soil and other sources of biomass. However, the carbon stored in coastal ecosystems differs in that biomass accumulates not only from sources like fallen leaves and twigs, but also from organic matter being washed up by the tide. Additionally, this organic matter is covered in saltwater, which inhibits breakdown of the material.
A 2017 study found that this improved preservation of organic material not only allows coasts to keep up with a certain degree of sea level rise through organic matter build-up, but also means that layers of coastal organic matter can be up to six meters deep or more. Terrestrial soil organic matters typically reaches up to 30 centimeter in depth. Because of these deeper organic horizons, per capita carbon stocks in coastal ecosystems are significantly higher.
According to the Blue Carbon Initiative, ecosystems such as mangroves, tidal marshes and seagrass meadows cover only 2-6 percent of the surface area covered by terrestrial forests, but sequester carbon dioxide (CO2) at much higher rates. In fact, it is estimated that mangroves can store up to 1,030 megagrams (Mg) of CO2 equivalent per hectare, and tidal marshes and seagrass meadows can store 920 and 520 Mg of CO2 equivalent per hectare respectively. The degradation or conversion of these ecosystems has led to a subsequent release of an average of 0.15–1.02 billion tons of CO2 annually.
Jennifer Howard, coordinator of the Blue Carbon Policy Working Group run by Conservation International and the International Union for the Conservation of Nature, explained in an interview that when it comes to blue carbon crediting, managers have to account for a much deeper organic horizon. In terrestrial ecosystems, cutting trees means losing the previously sequestered carbon stock that was stored in the trees.
Emission of stored carbon in the trees only occurs if they are cleared and then burned. In coastal ecosystems, ecosystem degradation through cutting down mangroves or draining wetlands leads not only to the loss of previously sequestered carbon, but also active re-emission of the carbon that was trapped in the soil by the saltwater regardless of how the cleared biomass is utilized or disposed.
“Terrestrially, you lose carbon with degradation,” Howard said. “But on the coast, you lose carbon and then become an active emitter.”
Is there a market?
By virtue of being measurable and standardized, blue carbon has the potential to be adopted into regulatory carbon markets across the world. However, blue carbon is still a relatively new concept. At present, existing methods of measuring and monitoring carbon offsets are geared towards terrestrial ecosystems, and do not account for the carbon stored in coastal, marine or wetland soils and biomass. Current efforts are therefore working towards including wetlands in regulatory and monitoring mechanisms so as to create a framework that allows for better methods to account for and trade blue carbon credits.
While some companies, such as Apple and coastal restoration group Blue Ventures, are investing in voluntary markets for blue carbon, the market for private investment is still new. Carbon accounting frameworks need to be modified to facilitate the widespread uptake of blue carbon into the voluntary offset market. Reports suggest that a majority of voluntary corporate carbon offset buyers look for credits that fit with their broader mission as a company, as well as lead to co-benefits such as greater biodiversity and improved community livelihoods.
This suggests that carbon credit buyers from industries such as tourism, oil and gas, and shipping could benefit from blue carbon projects in coastal and marine ecosystems.
Expanding carbon crediting frameworks
There are a number of mechanisms in place to facilitate investment in terrestrial carbon through regulatory markets which could be adapted to include blue carbon.
Traditionally, a majority of the nationally determined contributions (NDCs) at the core of the Paris Agreement on climate change have been through the REDD+ program, which monitors forest degradation and carbon restoration efforts. The revision of NDCs every few years gives regulatory markets the opportunity to improve their methods of monitoring and accounting for carbon emissions, thereby facilitating the trade of these credits. While these mechanisms have historically been focused on forest standards, a report published by the Nicholas Institute of Environmental Policy Solutions lays out the opportunities for integrating wetlands and mangroves into programs like REDD+ as an extension of forest carbon monitoring, an idea that organizations such as the Blue Carbon Initiative and Conservation International are now working towards implementing.
Another avenue for the integration of blue carbon into the NDCs is through the greenhouse gas inventories that monitor the quantity and sources of emissions from each country. An effort led by Stephen Crooks of the Blue Carbon Initiative is now working with the U.S. Environmental Protection Agency (EPA) to include wetlands into the inventories for the United States. The “once in never out” nature of greenhouse gas inventories means that the inclusion of wetlands will ensure that these emissions will at least be monitored consistently over time, which can provide crucial data for the inclusion of blue carbon into regulatory trading markets.
Aiming to assist with this implementation around the world is the International Partnership for Blue Carbon, a group of countries that have partnered with NGOs and academic institutions to provide technical support to countries looking to integrate blue-carbon ecosystems into national monitoring and trading policies.
Blue Ventures’ efforts, for example, could benefit from the integration of blue carbon accounting and trading methods into national policies in Madagascar. Blue Ventures is exploring the use of blue carbon as a long-term financial mechanism for community-based mangrove management in Madagascar. Since 2011, the project has conducted stakeholder consultations and community-developed coastal ecosystem restoration projects, and estimated carbon stocks that could be credited to finance restoration work. Efforts such as these would benefit from nationally recognized carbon accounting methods that include blue carbon in their methodology and account for the carbon that is stored both above and below ground in coastal ecosystems.
According to Howard, blue carbon’s novel nature makes it challenging for a smooth uptake into the market, as many countries and national agencies do not have sufficient experience with carbon project development in coastal and marine ecosystems and lack regional carbon storage and sequestration data.
While blue carbon is beginning to gain recognition by federal agencies such as the United States Fish and Wildlife Service and the EPA, many other agencies around the world still lack the capacity and expertise required to incorporate blue carbon into federal and state policies and regulations. This is where technical support from organizations such as the Blue Carbon Initiative can help address knowledge gaps and assist with the adoption of blue carbon markets.
Addressing investment risks
One concern about investing in blue carbon is that coastal ecosystems are particularly vulnerable to climate change and may be degrading at higher rates than terrestrial ecosystems due to rising sea levels, varying temperatures and coastal land reclamation. However, blue carbon crediting methods are within the Verra verified carbon standards, and therefore include a 15 percent risk-reduction buffer in the amount of credits calculated for a given ecosystem. This 15 percent typically accounts for credits lost to storms, illegal activities and sea level rise. Of course, this buffer may change as models for climate predictions change, but it ensures that blue carbon projects account for the risks associated with climate change in determining their carbon credit value. So while blue carbon markets are yet to mature, existing frameworks for blue carbon accounting can allow for trading and addressing risk.
Another risk when it comes to investing in blue carbon is that in some cases, the cost of conservation and restoration of coastal ecosystems can be higher than the potential income that can be generated from the credits they provide. Blue carbon ecosystems are mostly found close to coastlines and therefore it is hard to reach a scale cost-effective for conservation or restoration projects.
Additionally, if the income from alternative land uses, such as tourism, is higher than the projected income from selling blue carbon credits, the credits by themselves will not be sufficient to justify conservation.
In these cases, blended finance steps in as one potential solution for addressing the risks of participating in blue carbon credit markets. In a project run by Apple and Conservation International in Colombia, for example, credits generated from blue carbon ecosystems are added to a centralized fund, according to Howard. The fund includes contributions from government-allocated funds for development or conservation in the area, as well as other financial streams.
“We’re still figuring out what those [additional streams] are,” Howard said. “They could be from ecotourism and/or fisheries, depending on what industry they want to build around there. So, for instance, that could be a dollar added to every night at the hotel and that dollar then is allocated to the fund.”
The way forward
In May 2019, the Blended Finance Task Force’s investor roundtable agreed that blue carbon could be a crucial pathway for increasing private investment in coastal and marine conservation projects, as it provides a standardized and measurable tool. To make these investments viable, blue carbon revenue streams could be combined with projects such as sustainable fisheries, ecotourism and coastal infrastructure.
While mitigating risk is still a big challenge for coastal projects, collaborations such as the Blue Carbon Initiative, Blue Carbon Policy Working Group, and the International Partnership for Blue Carbon, among others, are working to make this market scalable and expand blue carbon investments beyond their current niche.