How To Spot Benefit Sharing and Social Impact in Nature-based Solutions

Key Insights

• Benefit sharing and creating real social impact should be the standard in the Voluntary Carbon Market. Companies and investors must evaluate potential investments and purchases of carbon credits with social benefits in mind.
• There is no standard benefit sharing mechanism in Nature-based Solutions. Therefore, companies and investors must learn to spot the differences between the levels of social impact achievable.
• goodcarbon endorses the highest level of benefit sharing. We encourage companies and investors to support our mission of increasing the integrity and quality of the Voluntary Carbon Market by supporting projects that recognize the importance of local and Indigenous inclusion in NbS projects.

If Nature-based Solutions (NbS) are well-designed, they do not only restore nature and sequester carbon, but also improve the livelihoods of local communities. Such social benefits have become more important to buyers in the Voluntary Carbon Market (VCM) over the past years, which is a positive development that goodcarbon highly supports.

However, due to this focus on social impact almost every NbS project will now claim to offer benefits to communities, but it is barely demonstrated how this is the case. There is a lack of transparency on what those social impacts are and a lack of clarity on how they are measured and monitored.

There are large differences between the kinds of benefit sharing projects provide. Therefore, to really ensure local communities benefit from the VCM, buyers and other stakeholders need to able to spot the differences when looking at a project. This ensures that carbon credit prices are truly reflective of benefit sharing levels, which is certainly not the case at the moment.

We would like the stakeholders of the VCM to understand the many different levels of benefits for local communities, to make educated decisions on which projects to support, and to make sure that the projects that do achieve the highest impact for the people on the ground are well-funded and receive a much higher price on the market.

Why is Benefit Sharing and Social Impact Important?

We know that the communities which bear the impact of the climate crisis the heaviest and thus face the largest loss of their land are predominantly located in the global south. At the same time, ecosystems in these regions have the highest potential to contribute to climate change mitigation and adaptation when well conserved and restored. Many of these ecosystems belong to or at least play a central role in the life of Indigenous people. Therefore, acknowledging the role of local and Indigenous communities is imperative to the success, permanence, and scalability of NbS. Unfortunately, in the past too many projects have failed to include local communities in the development process. Ultimately, this harms local people by failing to recognize their needs and cultural ties to their lands.

This needs to change drastically. NbS need to be used to their full potential and be centered around benefiting the most vulnerable and poor communities. Understanding the best practices and methods of developing inclusive, impactful projects will allow us to uplift the communities who will carry our climate strategies and solutions forward.

The Levels of Benefit Sharing and How We Measure Social Impact

Employment Benefits

A lot of projects create job opportunities as a social impact. This is a good impact and can, of course, be life changing for individuals.

However, there are large differences to be aware of. For instance, some projects create five jobs and others, hundreds of jobs. Jobs should include members of local communities and not only people from other cities who move to the project’s site to manage the project. Training and capacity building for communities should be included – also for management positions – to allow long-lasting positive change.

Most importantly, the jobs should be permanent and should not only last for the first 2-3 years of the project (for example during tree planting phases). That means that real employment benefits are jobs that are permanent, such as the continuous maintenance of a mangrove forest or agricultural activities that are made possible through the project.

Fair pay and social securities are, of course, a must have that need to be made transparent.

Other Monetization Benefits

Other monetization benefits of well-designed projects can be achieved through creating further income streams for the local communities. For example, through forest products (such as the harvesting of fruits, nuts, or other by products from planted trees) that are fostered through the projects’ activities, or when local farmers find an increase in crop yields & stock through the implementation of regenerative agriculture methods.

If a project is designed in a way that creates permanent monetary benefits to local communities, besides job creation, it usually has very high potential on permanence.

In our view all projects should be designed with a special focus on these further monetization benefits.

Participation in Carbon Revenues

A very high level of community benefits is the participation in carbon revenues. That means that money earned through the sales of carbon credits will be given to the communities or will be used to improve their standard of living. For example, this could be via building new infrastructure such as a school or a health facility.

The impact level, however, depends on the percentage of the revenues that is being shared, and an important detail is whether the revenues are shared before or after deducting the project’s costs. Numerous projects, unfortunately, do not specify how much of the revenue will be shared and do not commit to specific percentages from the beginning of the project.

Moreover, there are differences on how autonomously the local communities can decide on how to use these shared revenues. In many project set ups the project owner will decide what the money will be used for. There should be, at least, a joint committee of project owner and community members that takes these decisions. Well-designed projects leave it up to the community members themselves to manage the shared revenues. Some even offer capacity building to develop the required management skills and ensure long-lasting change.

Ownership of Carbon Credits

The highest level of benefit sharing is where local and Indigenous communities are the actual owners of the carbon credits. In these instances, locals are not just employed or paid by the project but own a portion of the project and thus receive a portion of the profits from the sales of carbon credits. Of course, there are large differences between the share of the project that belongs to the community that needs to be understood, to deduce the quality and level of social impact. An important aspect of this kind of benefit sharing is that this gives locals the ability to partake in the decision-making processes both around project design and future sales. This set up, inevitably, positively influences capacity, responsibility, dignity, and structure within the communities, and furthermore reinforces the permanence of the project.

This is the fairest and highest integrity model of benefit sharing. 

Climate Resilience Building

Even though it is not directly benefit sharing, we would like to mention climate resilience building in this context. This is because it’s an urgently required element of NbS projects based in the global South in regions that are highly affected by climate change. Climate resilience is achieved, for example, by introducing sustainable methods of farming and managing land or by establishing flood barriers through marine ecosystems like mangroves, thus enabling communities to stay on their land and have shelter and food. goodcarbon highly supports the inclusion of climate change adaptation measures in projects and would like to encourage all stakeholders to look out for and promote these projects.

Next Steps and goodcarbon’s Role

Our aim at goodcarbon to increase the quality of Nature-based Solutions and to scale high impact and high integrity approaches. Centering NbS around the needs of local communities and implementing the highest possible level of benefit sharing is a great part of it.

At goodcarbon we strive to achieve this highest integrity of social and community benefits, thus inducing real change, with the projects that we partner with and help to develop. But this isn’t enough and we would like to inspire change that goes beyond simply our own reach.

First of all, we need to raise the awareness of the differences in social impacts and motivate stakeholders to look out for the details of the projects. Publications like this piece, webinars on quality, participations in conferences and discussions with many stakeholders are all part of our efforts.

The transparency of projects needs to be enhanced. While many projects (sometimes deliberately) do not state the details about the benefits to the communities, it is up to independent institutions like goodcarbon to clearly point out the great differences between projects.

We hope that other market participants will follow our lead.

We also believe that the pricing of projects that achieve high levels of benefit sharing should reflect this distinction – which is not currently the case in the VCM. Our opinion at goodcarbon is that very high levels of benefit sharing (such as ownership of credits or participation of revenues) should achieve a much higher price on the market – not only a raise by 1 or 2 USD, but a raise of 50% or even more. This would take the burden of integrity off the project owners and developers and in a positive reflection will, hopefully, draw more project developers to follow suit. In this way, buyers will actively support the increase of integrity and quality in the VCM.

Real and tangible benefit sharing should be a given for NbS projects if we are to make a real positive impact on climate, biodiversity, and social issues. Therefore, we encourage all project developers to develop their projects with communities first, and companies to support, invest, and compensate only with projects that do so. We hope that by learning the distinctions between the types of benefit sharing, companies can navigate the VCM with a deeper knowledge of the impact that can be achieved and learn to spot the best projects to support and invest in.