Abstract
Few Payments for Ecosystem Services (PES) schemes are financed voluntarily by corporations. This is perhaps unsurprising, given that limited literature on the theory and practice of PES has a dedicated focus on businesses. This article unifies the PES and business literatures in order to address the awareness and management challenges that corporations face in engaging in PES. First, it shows how corporations fit into the economic theory that underpins PES, demonstrating that corporate-financed PES schemes can exhibit a diversity and hybridity of Coasean and Pigouvian characteristics. Second, it shows how PES fits into corporate sustainability theory, demonstrating how PES can help companies achieve synergies across the economic, environmental, and social tenets of the triple bottom line; for example, by helping gain social license to operate from adjacent communities, or by using PES to meet sustainability reporting requirements related to emissions and water management. Third, it shows the different PES options available to firms based on their industrial sector, operating practices, and business strategies. The options with higher potential are maintenance and enhancement of production inputs across the supply chain, and carbon offsetting and insetting to help meet climate change mitigation regulations and avoid fines. Fourth, it identifies lessons learned when transitioning from theory to practice by synthesising the latest empirical research on corporate-financed PES schemes—considering exactly what these ‘should’ or ‘could’ resemble, for example, in terms of their additionality, conditionality, permanence, co-benefits, budgeting, and bargaining. Examples are drawn from corporate-financed schemes in forests and watersheds across Africa, Asia, Europe, Latin America, and North America. The article concludes that these schemes remain small in number and size, but have significant potential to increase—and this can be aided by future research on corporate motives, understandings, and actions on PES.
Highlights
Greater business support for the natural environment is urgently required [1,2]
While this goes against Payments for Ecosystem Services (PES) theory it may be the only way that some PES schemes can get off the ground—assuming the company is content with social outcomes and indirect economic outcomes through increased reputation and sales [18]
(1) ascertain how corporations fit into the economic theory that underpins PES; (2) demonstrate how PES fits into corporate sustainability theory; (3) elucidate the different options for integrating PES based on different business profiles and strategies; and (4) identify lessons learned for moving from theory to practice, by synthesising empirical research on corporate-financed PES
Summary
Greater business support for the natural environment is urgently required [1,2]. In particular, there is a need for corporations to move beyond energy efficiency and recycling efforts performed internally [3] to supporting ex situ environmental management activities [4,5]. It is emerging that some firms misconstrue PES as a philanthropic gesture or a means of gaining a social license to operate from landowners located proximal to their operation sites [4] While this goes against PES theory (since PES is about payments being made as part of a transaction in which corporations receive important ecosystem services in return) it may be the only way that some PES schemes can get off the ground—assuming the company is content with social outcomes and indirect economic outcomes through increased reputation and sales [18]. The objectives are to (1) ascertain how corporations fit into the economic theory that underpins PES; (2) demonstrate how PES fits into corporate sustainability theory; (3) elucidate the different options for integrating PES based on different business profiles and strategies; and (4) identify lessons learned for moving from theory to practice, by synthesising empirical research on corporate-financed PES In addressing these objectives, the manuscript makes several novel contributions and fills the critical knowledge gaps articulated above. The findings are relevant to PES scholars and business scholars, while practically they are valuable for corporations interested in participating in PES and proponents seeking to develop corporate-financed PES schemes
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