Act for positive impact: Two penguins deep in the peat

Vast oceans, gushing rivers and calm lakes, heavy rain, even dripping taps: water is all around us, and all of life on Earth depends upon it. But why is water important in the context of climate?

The changing climate has already caused severe water-related natural disasters; too much water leads to devastating floods, whereas too little results in perilous droughts. As is often the case with nature, it's important to achieve equilibrium – but this balance is continuously being upset by human activity, with grave consequences.

Some of the most vulnerable communities in the world have been severely affected, even in wealthy countries, where many feel immune to the climate crisis. Corporates, similarly, are exposed to risks such as drowned assets, production stops and disruptions in the supply chain. To put it simply, water is climate and climate is water.

Understanding the connection between water and climate has allowed actors to address both issues while fostering sustainable development. Forward-looking companies have been developing new products and processes, and proactively managing supply chains and operations that are reliant on land use and water. How are they doing this? By employing new monitoring methods that work with nature.

At South Pole, we've been working extensively with our clients on this nature-based approach – helping them achieve environmental targets by investing in nature-based solutions to minimise water risks, improve agricultural productivity, adapt to climate change, sequester emissions for net-zero claims, and create positive benefits.

'Nature-based solutions' are defined by the International Union for Conservation of Nature (IUCN) as "actions to protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits". Solutions such as the reforestation of riparian zones and rewetting of peatlands can also help corporates implement international standards, such as the Alliance for Water Stewardship (AWS) Standard. This is because water stewardship in particular is about understanding water use and impacts, and working collaboratively and transparently within a catchment context.

Collaboration and transparency are the way to both make these initiatives known and implement them at scale.

South Pole is excited to showcase some examples where we put theory into practice, using nature-based solutions to address key elements of our client's water-stewardship strategies.

The business case for Nature-Based Solutions

Because of their holistic nature, nature-based solutions come with upfront costs regarding input material and labour (capex) while maintenance costs are typically low (opex). Moreover, given the scope of their positive impacts (such as carbon sequestration and improved soil water retention or water filtration), nature-based solutions are in fact a more cost-efficient solution than engineered-only solutions (such as expensive water treatment plants). It's a matter of bridging the initial years of investments before amortisation and benefits (and their monetisation, e.g. through carbon credits) come in.

South Pole, Rare and a global luxury group support cotton farmers in China in a catchment context of high water scarcity and high soil erosion. Through increasing soil organic matter, not only soil health, but also water retention improves, which allows for sequestering carbon in the ground. The main activities include switching from chemical to compost fertilising and planting wind and erosion breaks. This protects the ground water and enables the production of low-carbon and organic cotton. The initial costs, before composting can really begin, are higher than conventional practices, which is why it is key to bridge this investment (e.g. through price premiums) and showcase farmers how these costs are amortised after four years.

Employing nature-based solutions can also offer direct financial benefits for corporate partners. Take the following example, for instance: an internationally renowned cosmetics company combines climate change adaptation with water stewardship by working on peatland restoration within their concession area in Indonesia.

This solution not only allows for higher water tables and improved access to irrigation for communities, but also reduces the risk of climate change-induced phenomena, such as fire in El Niño and flooding in La Niña cycles. At the same time, using nature-based solutions helps to mitigate climate change by creating carbon sinks – sequestering carbon in the soil. Such an "insetting" project – where emission reductions happen along the supply chain – can attract climate finance through the sale of verified emission reductions, thus creating new co-financing streams.

From transaction to collective action

Water stewardship requires collective action outside of the manufacturing site to solve root causes of risks, address shared water challenges and achieve impact. Often, catchment challenges are centred around (un)sustainable land use. Based on a solid understanding of how catchment systems properly work, natural interventions can not only serve multiple outcomes, but also bring together multi-stakeholders both up- and downstream – they have the potential for true collective action.

We have worked with a supermarket chain which, beyond engaging in best practices on-farm, (like effluent treatment through wetlands), takes nature-based solutions to the watershed.

Safer drinking water and hygiene for all

Nature-based solutions protect water and the climate, but they can also have direct positive effects on human health. Another example: a consumer-goods client sources from an area in Argentina where a third of farmers do not have access to fresh water in their homes. Instead, the farmers fetch their water from natural springs, of which around 90% are unprotected and mostly located within cattle fields.

Due to the heavy rainfall washing manure into the ponds, farmers run the risk of contaminated drinking water, even if the source is protected by a lid in a small concrete reservoir. Therefore, in addition to such grey infrastructure by working with nature, e.g. planning a vegetation buffer zone, which keeps cattle away, it is possible to protect the source and avoid contamination.

Working together to scale impact

South Pole is proud to support our clients on their journey to water and climate leadership. Adopting nature-based solutions is undoubtedly a highlight along this path – but we shouldn't stop at single initiatives! What we need is a comprehensive system transformation and impact at scale. This cannot happen without collective action and knowledge-exchange, or innovative financing models.

Nature-based solutions also present a co-financing opportunity for corporates: they can be linked to carbon credits and benefit from public funding as well as the pooling of funds due to growing demand from other corporates. These solutions can also inspire innovative business models that lead to real cash flows and, thus, attract return-seeking capital. Our work with such funds and platforms helps to identify and implement such bankable projects.

South Pole leverages these links through two initiatives:

  1. We coordinate the Coalition For Private Investment in Conservation (CPIC) platform, a financing network which aims to scale up private-sector investment in conservation.
  2. Second, in order to achieve real scalability and the international growth of nature-based solutions, we work on specific financing vehicles that aim to scale conservation-based business models and source return-seeking capital for growth finance. Such a fund would create a pipeline of bankable projects embedded in a sustainable-landscape approach.

Climate is water; water is climate. Nature-based solutions both protect and contribute to sustainable development, while still benefiting corporate bottom-lines.

If the main challenge and opportunity is finance, then let's act – together and now!