Understanding the Nature Restoration ambition gap

In 2022, Carbon Gap released the report Bridging the Ambition Gap: A framework for scaling corporate funds for carbon removal and wider climate action. The report provides a detailed account of the gap between companies' ability to pay for their emissions and their demonstrated willingness to do so. It also highlights the important role relatively low-emitting industries can play in funding external climate projects that help society reach global climate targets. The report highlights a critical insight: low-emitting industries, which generate the majority of global profits, can pay the full cost of mitigating their emissions without severely impacting their profits. Realizing this potential financial resource for climate action can be done in many ways, including through companies voluntarily implementing a high internal carbon fee or government intervention through pricing emissions. 

Milkywire has been pioneering the development of guidelines to support companies to implement an internal carbon fee, to financially quantify their responsibility and generate money for external climate projects that contribute to global net zero. The approach is promoted by leading frameworks such as the WWF/BCG Blueprint for corporate climate action, as well as by the SBTi. This endorsement, coupled with its adoption by numerous forward-thinking companies, underscores its effectiveness and potential for widespread impact. Looking beyond greenhouse gas emissions, there are many similarities to the state of corporate nature financing and analogies can be drawn from the Ambition Gap report.

How to set an Internal Nature Fee

In a recent article, One Earth suggests that in parallel with developing robust assessments of the companies nature impact and dependencies, it’s time for companies to put an Internal Price on Nature to generate and drive financing for crucial nature restoration and protection efforts. Recognizing the complexities involved in measuring these impacts without a universal unit like CO2, One Earth suggests that companies should start with a straightforward “Earth fee” linked to revenue, to ensure urgent action is not delayed. We couldn’t agree more. It is a practicable and actionable way for companies, especially in the low nature dependency sectors, to quantify a financial commitment to invest in nature's recovery. 

Implementing an Internal Fee on Nature is a vital step toward corporate environmental stewardship. A framework for how to determine a credible contribution is important because it provides a structured, transparent method for companies to quantify their financial responsibility. This move signifies a shift from the philanthropic "do good" approach to recognizing that the global economy is embedded in nature and that we are not currently paying for the resources we use. Supporting high quality nature restoration projects are no-regrets actions. However, such actions should not delay or undermine the efforts and resources needed for mapping and measuring their value chain impact, conducting double materiality assessments and developing their strategies to reduce negative impact. This is the non-negotiable starting point for transforming the current unsustainable practices that dominate the market and drive nature degradation. 

Milkywire’s current advice for companies on how to determine a credible contribution size for external nature restoration projects also centers around linking the contribution to a suitable financial metric (such as 1% of sales), often referred to as a “money-for-money” approach. This method ensures that as a company grows its revenues, the positive environmental contributions increase proportionally. The logic behind such an approach is that growth is often linked to larger resource use and a greater financial capacity. Decoupling the financial contribution from the measured negative environmental impact has the benefits of being actionable for most companies now.

In practice this could mean a company implements an ambitious internal carbon fee to take full responsibility for its greenhouse gas emissions, and adds a financial mechanism to finance nature restoration beyond climate. This is what Klarna has done. They both have an internal carbon fee of up to 200 USD per tonne (differentiated for different scopes), and have put aside 1% of all equity rounds since 2021 for nature, in addition to the carbon fee.    

Leading the way in Nature Restoration

Just like with emissions we believe companies with low environmental impacts, particularly in industries such as finance and technology have a unique and pivotal role to play. These companies often have significant financial resources which positions them to lead by example in the movement toward internal nature pricing. By adopting and promoting these practices, they can not only derive business value but also drive broader industry standards and influence their supply chains and peers. 

Milkywire recently launched our new Nature Transformation Fund, based on our learnings from supporting Klarna to invest money generated from this fee in meaningful action for nature restoration beyond their value chain. If you are curious to learn more, tune into our webinar How can businesses lead the way for biodiversity action? 

Based on our conversations with companies from a range of sectors, we echo One Earth's perspective on the complex challenges businesses encounter. However, navigating these complexities is impacting the willingness of companies to take parallel action which will hinder our ability to meet biodiversity goals by 2030. We believe that taking a first step, even if imperfect, is far better than delaying action.

Companies should increase their ambitions and engage in nature restoration already today, even if we still lack perfect strategies and standards. The actions should  start now with manageable steps, scaling up their efforts over time. We need more bold and ambitious companies that take the lead on nature restoration. Milkywire will continue to explore credible nature contribution approaches together with our partners to accelerate action toward global biodiversity goals.