The corporate race to net-zero has kicked off; the carbon offsetting playing field is gaining more interest. In an attempt of many to shape the nascent impact and carbon market, we see more dispersion and fragmentation.
Many are looking to push their impact & carbon standards in the market along with many other existing standards — whereas the solution, as you might have guessed lies in the interconnection and convergence..
The European Union is proving to be expanding its ambition for the carbon market. The European Union emission trading system includes previously left sectors, and the EU Green Deal shows commitment to reach carbon neutrality by 2050.
There is clear evidence of increased awareness and action. However, growth in this market is being challenged by the lack of trust. Carbon offsetting is still being criticized as “buying a clean conscience” or “allowing corporates to buy the right to pollute” — touching on reality but only because the market principles of scarcity guide the way the solution has been created.
Playing by this narrow vision of value leaves us to circulate in an extraction-based mentality, and it provides a temporary solution, BUT it is certainly not a systemic change. As the well-known quote of Arnold Einstein says, ‘’you can’t solve a problem on the same level it was created’’, and yet that is exactly what is happening.
Creating markets structures for the buying and selling of carbon based on the scarcity principles — meaning we value investing in carbon only if there is a lack of clean air and biodiversity. Achieving and maintaining net-zero will not be successful by following this line of thought — to truly transform — we must consider the valuation of nature as part of the solution, and the mechanism in how we preserve this value is through the buying and selling of carbon credits to PRESERVE the environment as part of the solution we are building.
Extractive markets thrive on scarcity; regenerative markets thrive on regeneration, meaning, you pay or regenerate what you have used. Shifting the perspective in which we create our solutions is imperative. By shifting towards incentivization of impact, we move towards building an economy based on rewarding sustainable actions. Actions that focus on enabling our market to operate for the ecosystem instead of the benefit of a few in the short-term. Our market rewards the risk-takers, but it does not account for the risks created to the larger environment and is therefore unbalanced.
To enable non-financial value to obtain a level-playing field in the way markets operate, we need to integrate solutions and incentives that operate with a system and stakeholder by design.
SmartB provides the governance structures for these incentive structures — allowing a simplified transition to a more sustainable economy by not forcing change but by placing a value on what is already here and creating an incentive structure around it. The old-age adage of innovation has been based on creative destruction — known as the Schumpeter’s gale. This is certainly necessary, our natural world is creative destruction that is reborn or recreated.
However our market economy has served many goals.. it now has to integrate sustainable value, which is incompatible with principal market design.
Required transformation is not dependent on perfect measurement frameworks; transformation can occur by guiding, designing, and redesigning solutions to build and replace. You can’t force or control entire systems — there are too many interconnected variables that are exponentially growing.
We can’t control it, but we can guide, design, and redesign it.
Achieving the global goal of reducing carbon emissions requires a systemic approach and more than a commitment. In fact, we need to link our livelihoods and market mechanisms to start this change process.
Even with all the technological advancements such as IoT devices, blockchain applications, and AI, we will never be able to track everything, there are too many variables in systems dependent on each other which we aren’t aware of, and even if we are, do we really want to track everything?
However, what we can track and provide evidence for is the positive action. Combining this with accountability, stakeholder ownership, and existing guidelines allows us to redesign transparent incentive structures to track the action and understand who and what receives the benefits.
Carbone4 has outlined an interesting view on achieving net-zero within their white paper; as a response to this, I have outlined how the SmartB blockchain solution is helping with the reduction of carbon emissions beyond focusing on current economic incentives and carbon offsetting, but by building a system that enables the incentivization of positive action leading to carbon emission reduction. Instead of creating other solutions that will disrupt our entire economy — let us focus on how we can make it better and listen to the value already here.
The bridge towards transformative change, how can we respect the Carbone4 outline by utilizing the SmartB network?
On the first ax: mobilizing companies with the tools to influence their value-chain
The Financial Times published that; Big businesses are not the largest polluters, their value-chains however, are responsible for more than 5.5 times the emissions. This doesn’t come as a surprise, since production and procurement are often part of the corporate value chain that is outsourced.
Corporates choose their suppliers for various reasons, and often this involves some form of cost reduction. We need to enable these organizations to make decisions that are more responsible and aware of their impact, by incentivizing and rewarding choosing environmentally responsible suppliers, even if it involves incurring more cost and time.
Colis.activ is an example of a sustainability transformation project, to incentivize organizations to work with local and sustainable delivery services. Local organizations gain a competitive advantage as the sustainability of delivery is added as value.
On the second ax: Incentivizing your direct environment to make changes
While cities like Paris are targetting a decrease in the number of vehicles in circulation. Also, redesigning the city to be more accessible for bicycles. Without a doubt, reducing cars within cities is an excellent way to improve life quality, reduce pollution, and get more people to adopt healthier habits.
By linking all these benefits with an incentive system that will incorporate the organizations, and reward the citizens with benefits for contributing to this positive action is a way to approach the second ax of achieving net-zero. Invariably, it involves enabling organizations to inspire change in their direct environment — in this case, their employees.
Take for example the project we launched with Paris&co; Mobilite.eco.
Lastly, the third ax: Enabling the natural capital markets through evidence and stakeholder inclusion.
By shifting the perspective on carbon offsetting — from buying carbon credits to making up for pollution, corporates with credits valued on the carbon absorption abilities of forests to preserve nature and biodiversity. By focusing on preservation, we enable benefit-sharing and empower local communities to create economies based on the value of carbon absorption using a transparent self-verification process through communities, satellite pictures, and other field data.
A perfect example of this is our work with Axess Impact, enabling a trusted natural capital market with the 3M process, Measure, Monitor, and Monetize. Allowing organizations to be investors in the preservation of nature.
Isn’t it about time to link incentive systems directly to improve the wellbeing of the planet, businesses, and people? By placing a value on non-financial value such as the health of ourselves or the planet, we can integrate and transform to the paradigm where; doing good is good business!
Want to know how we can help you to (truly) transform and reach net-zero? Contact me at hania.othman@smartb.city
