What is beyond value chain mitigation (BVCM)?
Beyond value chain mitigation (BVCM) was first defined in the Corporate Net-Zero Standard of the Science Based Targets initiative (SBTi). The term refers to mitigation action or investments that fall outside companies’ value chains. This includes activities such as financing climate projects that avoid or reduce greenhouse gas emissions or that remove and store greenhouse gases from the atmosphere. The SBTi recommends that companies make investments outside their value chains to mitigate greenhouse gas emissions, in addition to setting near- and long-term science-based targets to reduce emissions within their own supply chains.
The goal of BVCM is to deliver additional near-term mitigation outcomes in order to achieve a peak of global emissions in the mid-2020s, and then to halve these emissions by 2030. BVCM also aims to provide additional finance to enable the scale-up of nascent climate solutions and new technologies, to make the net zero transformation possible.
Purpose of beyond value chain mitigation
Climate change is a threat that requires urgent action. As major emitters of greenhouse gas emissions, companies can play a crucial role in the transition to net zero and help reach the Paris Agreement goal of limiting global warming to 1.5 °C.
Despite all global efforts, the world is not in line with the 1.5 °C goal. According to the latest predictions of the IPCC, with the policies implemented today, we are currently heading for temperature rises between 2.2 °C and 3.5 °C. This is partly because many countries lack the policies or funding to achieve their emissions reduction targets, known as Nationally Determined Contributions (NDCs). In addition, the current NDCs are not ambitious enough to stay on the 1.5 °C pathway.
Companies supporting BVCM activities can help tackle these problems. By financing activities included in a host country’s NDC, companies can support the country in achieving its emissions reduction targets. Or, by financing climate projects outside of the scope of a host country’s NDC, companies can achieve benefits beyond meeting national targets and set more ambitious goals.
With BVCM activities, companies can accelerate the global net zero transition by helping other economic, governmental, and social actors to reduce and/or remove greenhouse gas emissions.
Beyond value chain mitigation in the mitigation hierarchy
The mitigation hierarchy describes what role BVCM plays within a company’s climate action strategy. According to the SBTi, it should be a first-order priority for companies to set near- and long-term science-based targets to reduce emissions in their value chains, and to implement corresponding strategies to meet these targets.
The SBTi further recommends that companies invest in activities to mitigate emissions outside their value chains. In the near term, it is important to support climate projects that avoid, reduce, or remove emissions from the atmosphere. REDD+ is an example of avoidance projects, while reduction projects include improved cookstoves, clean drinking water, and renewable energy. Removal projects remove carbon from the atmosphere, through technologies like direct air capture and storage. In the long term, it is recommended for companies to focus support on removal projects to neutralise their residual emissions.
Beyond value chain mitigation examples and measures
When deciding on which BVCM activities to support, the SBTi suggests four principles:
- Maximise mitigation outcomes: Deliver the maximum mitigation impact possible with the given resources.
- Focus on underfinanced mitigation: Prioritise funding for BVCM activities that need the support of the private sector.
- Support the UN’s Sustainable Development Goals: Aim to support activities that have co-benefits beyond carbon mitigation, such as a positive impact on livelihoods, water security, or biodiversity.
- Address inequality: Fund BVCM activities in lower-income countries, which are the least responsible for climate change and yet the most vulnerable to it.
When it comes to determining the scale of a BVCM pledge, there are three main approaches.
Ton-for-ton
This approach is linked to a company’s carbon footprint. Following this approach, a company makes a contribution to BVCM activities proportional to its corporate carbon footprint over a defined period (e.g. in a given year). The amount of money deployed towards BVCM is determined by the price that a company pays for each tonne of carbon that is reduced, avoided, or removed. In the case of Verified Emission Reductions (VERs), this would be determined by the current market price on the voluntary carbon market.
Money-for-ton
Following this approach, a company finances BVCM activities based on a predefined reference price of the unabated emissions of that company over a defined period. The amount of money deployed towards BVCM is determined by the chosen cost of carbon, such as by setting an internal carbon price. Using this method, companies have the flexibility to channel some portion of finance towards activities with more future-oriented or unquantifiable mitigation outcomes. This includes financing climate projects in early stages, nature conservation projects that do not issue VERs, or supporting the research and development of new climate technologies.
Money-for-money
With this approach, companies allocate a share of revenue or profit towards funding BVCM activities. The amount of money deployed towards BVCM is determined by the chosen factor (e.g. profit or revenue) and the chosen percentage. Just like the money-for-ton approach, here too, companies can channel some portion of finance to activities with more future-oriented or unquantifiable mitigation outcomes
Find out more about approaches to financing beyond value chain mitigation in the whitepaper from ClimatePartner Impact.