Rethinking the Demand Side for Environmental Stewardship Credits
This is the last part of a three-part series describing the Environmental Stewardship initiative at Regen Network. In the first part, we describe and contrast the initiative with conventional payment for ecosystem services approaches. The second part highlighted the first methodology and project developed as part of the Environmental Stewardship initiative. This third and final part focuses on our early thinking about stimulating this initiative’s demand side. More questions are raised than are answered since this is the beginning of a process.
Introduction
Our venture into selling Environmental Stewardship credits at Regen Network started in October 2023 with a pilot project on sheep grazing and has brought a crucial insight to light: understanding the demand side is imperative. Despite our innovative strides, the reality is stark — we sold 30 credits in five months. The resources expended in marketing these credits have surpassed their generated revenue, revealing a significant imbalance.
Our current marketing approach, grounded in traditional methods of following leads and conducting extensive one-on-one sales discussions, has forged connections with the corporate world. However, this method has shown limitations in effectively selling credits and poses a challenge for future scalability. The need for a novel marketing and sales strategy becomes increasingly evident as we aim to expand our range with diverse, meaningful projects. We aim to develop a strategy that aligns with our innovative vision and can adapt to the dynamic landscape of environmental credit markets.
Rethinking Demand-Side Assumptions
Conventional methodologies for credit-based ecosystem service payments are predominantly demand-driven, often treating credits as commodities or assets where simplicity is prized. While convenient for transactional purposes, this perspective overlooks the intrinsic complexity and true purpose of Environmental Stewardship credits. These credits are not just transactions but tools for supporting ecosystem regeneration by inherently acknowledging and embracing the complexity of ecosystems.
Much of the existing literature and discourse encourages the supply side to align with the buyers’ needs, simplifying the landscape of credits to meet these demands. However, this approach can sometimes lead to a fundamental misalignment between supply and demand. Instead of conforming to this simplified view, there is a compelling need for the supply side to play an educational role. We must challenge the prevailing assumptions about what makes credits attractive to buyers and advocate for a deeper understanding of their true value.
In the traditional model, appealing to buyers has often meant reducing the outcomes of nature and ecosystem services to standardized, easily comparable units. While it may offer straightforward metrics, this process can be costly and, more critically, distort the true value of healthy ecosystems. By overly simplifying these complex systems, we risk undervaluing their comprehensive contributions and undermining the principles of environmental stewardship.
More of the Same in Biodiversity Markets
The emerging biodiversity market is experiencing dynamics similar to those in the broader payment for ecosystem services sphere. With growing interest in establishing a biodiversity credit market, there’s a noticeable push towards simplifying the concept of biodiversity into a singular, commodifiable unit. This trend, however, is meeting resistance, particularly from scientists and indigenous communities, which caution against oversimplification. Despite this, the drive for simplicity continues, often under the belief that a flourishing market necessitates adherence to conventional commodity and offset market frameworks.
Focusing on market growth often neglects the intricate nature and complexities unique to biodiversity credits. In Environmental Stewardship, credits require a nuanced approach beyond conventional market mechanisms to respect and embrace the complexity inherent in ecosystems and a holistic approach to regeneration. This novel approach should be central to developing and deepening relationships between the supply and demand sides. Would fostering supply and demand side relationships be more constructive than perceiving these credits merely as commodities on a balance sheet?
Utilizing data science tools and methodologies would allow us to understand better and bolster these critical relationships.
By viewing the issue through this data-driven perspective, we acknowledge the inherent complexity of the credits and their markets and emphasize the importance of fostering robust, ongoing interactions between the providers and purchasers of these environmental assets.
Embracing Complexity
The complexity of project outcomes can be represented in two ways: explicitly, through direct measurement, and implicitly, by understanding the relationships between actions and outcomes. While positive outcomes are crucial, it is important to recognize that these can be directly measured or inferred from a well-grounded understanding of the links between activities and outcomes. It is vital to avoid penalizing stewards who are taking the right actions but may not meet specific outcome metrics. Such an approach could lead to unintended consequences like gaming the system, managing resources primarily to maximize profit from credits, or abandoning environmentally beneficial practices. Ironically, entities responsible for environmental degradation often rely on models rather than direct measurements of their impact, yet they frequently demand precise measurements from those on the supply side.
Rather than striving to simplify nature’s intricate systems for commodification, a more fruitful approach might be to focus on effectively aligning the diverse values of credits with the varied perspectives of buyers. This shift requires moving away from creating methodologies based on buyer demands. Instead, the focus should be aiding buyers in navigating the complex terrain of regenerative projects, helping them find those that align with their specific environmental goals and bioregional presence. Embracing this complexity is essential for effective stewardship of the Earth.
To achieve this, we can develop tools that simplify selecting projects, ensuring they resonate with individuals’ or companies’ unique values and perspectives. This approach helps buyers understand and value nature’s complexity and fosters deeper relationships and mutual comprehension between buyers and credit creators. These tools would need to serve a range of buyers, including individuals, businesses, and philanthropic organizations.
Finding the “Right” Credits
For buyers in the environmental credit market, two fundamental questions arise: “How many credits should I purchase?” and “What types of credits are most aligned with my objectives?” Addressing these questions begins with guiding buyers toward the “right” credits that meet their needs and goals.
A pivotal acknowledgment in this process is that the complexities of ecosystem regeneration and biodiversity cannot be adequately captured by a single unit of measure, such as how carbon is often quantified. Ecosystems are inherently complex and multifaceted. Regardless of their sophistication, metrics used to assess biodiversity and ecosystem health tend to focus on a single aspect or, at best, offer a condensed representation of multiple dimensions. While these metrics are valuable for specific studies, they fail to convey the full spectrum of an ecosystem’s intricacies.
A more effective approach lies in embracing this inherent complexity within individual methodologies and across the spectrum of available credits. To facilitate this, developing tools to aid buyers in navigating this complexity becomes essential. Such tools should not only help buyers understand the diverse range of credits but also enable them to identify those projects that align with their investment goals and environmental values. By doing so, we can ensure that buyers are not just purchasing credits. They also make informed decisions, meaningfully contributing to ecosystem regeneration and biodiversity enhancement.
Developing New Tools
Some Earth stewards we collaborate with are reluctant to allocate their limited resources towards extensive research and converting their expected outcomes into a machine-readable format. A viable alternative to this rigorous scientific documentation could be capturing and documenting their practices enriched with narrative storytelling. Utilizing AI workflows, we can extract significant features from these narratives and ascertain expected outcomes based on peer-reviewed literature and documented evidence of the impacts of specific practices. This approach would enable the development of a comprehensive supply-side model, encompassing data from thousands of projects, each derived from a unique methodology.
On the demand side, we can employ algorithms to analyze interviews and stories from potential buyers, identifying their specific interests and motivations in supporting ecosystem regeneration. This method mirrors the evolution seen in social matching, such as in dating apps. Initially, friend networks or newspaper ads were the primary methods of finding matches. As Internet technology advanced, online platforms started using tags and filters to aid this process. Today, sophisticated machine learning and AI algorithms analyze a plethora of data, including online behaviors, social connections, and narrative elements, to find more nuanced and compatible matches. The results from any of these methods are leads, and those leads would need to be followed up with due diligence to ensure the match is as good as predicted.
In ecocredits, this evolution suggests a pathway toward more effective and nuanced matches between credit originators and buyers. By integrating these AI-driven methodologies during the development phase of ecocredit systems, we can engage a broader range of stakeholders in creating new methodologies. Such a system could revolutionize the distribution of funds to diverse projects, particularly in the growing ecosystem regeneration field, encompassing compliance and regulatory markets. More automated approaches could be developed gradually as more methodologies and projects are instantiated.
Rethinking Contributions from the Demand Side
A critical decision for companies and individuals in the environmental credit market is which credits to buy and how many. While budget considerations play a role, there’s often a deeper driver: the need to offset environmental impacts, be it from direct emissions or supply chain-related activities. Traditionally, ecocredits have been viewed as a means to offset these environmental footprints, a perspective that, while prevalent, merits reconsideration.
The current offsetting paradigm, grounded in balancing the credit and debt of natural resources like carbon, forms the basis of net-zero and no-net-loss strategies. However, the effectiveness of these strategies is increasingly under scrutiny. This raises the question:
Can we redefine offsets in monetary terms rather than purely natural resource metrics?
Environmental economists are becoming progressively adept at assigning financial values to environmental impacts. Could this financial valuation be the new metric for offsets?
Imagine valuing offsets in monetary terms: the environmental cost of actions, like CO2 emissions, would be quantified financially. This cost becomes the ‘debit’ side of the equation. On the ‘credit’ side, rather than attempting to equate natural resources directly, we could have ecocredits priced based on the cost of implementing regenerative projects. Such an approach shifts the paradigm from a simple one-to-one natural resource balance (e.g., one ton of carbon emitted versus one ton sequestered) to a financial equation. For instance, the $100 required to mitigate the impact of one ton of CO2 emissions could be offset by spending the same amount on supporting regenerative practices.
This reimagined offsetting approach could transform how large sums of money are distributed from governmental and institutional sources. It offers a more tangible and potentially impactful way of addressing environmental degradation, aligning financial expenditure with ecological restoration and conservation efforts.
Conclusion and Call to Action
Your insights and participation are invaluable as we navigate these uncharted waters. We invite you to join us in redefining the demand for Environmental Stewardship credits. Share your thoughts, join our discussions, and help shape the future of sustainable ecosystem management. The Environmental Stewardship Hylo group is a good place to discuss ideas. If you haven’t joined the Hylo group already, you can use this link to join.
