How to Define Your Budget for Climate Action Beyond Your Value Chain (Beyond Value Chain Mitigation)?

In the global race toward carbon neutrality, companies are increasingly called upon to adopt a comprehensive climate strategy. According to leading scientific organizations, such as the Science Based Targets initiative (SBTi), achieving Net-Zero objectives requires a dual approach: drastically reducing internal emissions while simultaneously contributing financially to climate action beyond the company’s value chain.

The three pillars of the SBTo Net-Zero Standard

According to the SBTi’s Net-Zero Standard, three key steps must be addressed:

1. Reduce emissions within the value chain: This first pillar involves a reduction strategy across the entire value chain. The initial step is to measure and calculate the carbon footprint, with the recommendation to use the GHG Protocol (Scopes 1, 2, and 3), and to set both short- and long-term reduction targets.
2. Contribute to climate action beyond the value chain (Beyond Value Chain Mitigation – BVCM): In parallel with reduction efforts, it is strongly recommended to create an immediate positive climate impact. This is achieved through financial support for carbon projects that avoid or sequester CO₂ within the Voluntary Carbon Market (VCM).
3. Neutralization: Neutralization of emissions occurs only after achieving a 90% reduction in emissions. It corresponds to offsetting the remaining unavoidable residual emissions (through sequestration) in order to claim global Net-Zero.

See our communication guide for more details. 

The essential role of BVCM

BVCM actions are essential. Far from being a substitute for decarbonization, they act in parallel to generate an immediate positive impact on the climate. The Ecosystem Marketplace confirms that companies investing in these credits are often decarbonization leaders, more likely to set science-based targets and to actively reduce their emissions.

The central question then becomes: how to determine the amount to allocate to these BVCM contributions?

The portfolio approach: A strategic advantage

Before setting a budget, the approach should be qualitative. To maximize the effectiveness of BVCM contributions, the portfolio approach stands out as the most strategic method. This strategy allows you to:

• Target investments geographically to ensure relevant impacts aligned with the group’s strategy.
• Maximize impact by simultaneously supporting both avoidance and carbon sequestration actions through different project typologies.
• Prioritize projects that generate measurable co-benefits and advance the Sustainable Development Goals (SDGs) beyond carbon reduction alone.

Reduce risks by diversifying supported projects. Note that ClimateSeed follows a rigorous project selection process, contact an expert to learn more.

In addition to these strategic benefits, the portfolio approach also offers a budgetary advantage. It allows for supporting multiple ambitious projects with varied impacts while staying within a defined budget. Additionally, it requires defining an annual and/or multi-year budget to support both immediate action and ideally long-term investment in these solutions. 

The three BVCM budgeting approaches according to the SBTi 

To translate this strategic intent into numbers, the SBTi recognizes three main approaches for determining BVCM financial commitment. Each offers advantages and drawbacks depending on the company’s climate maturity and financial capacity:

1. Tonne-for-Tonne

   This method is the simplest in terms of calculation. It consists of matching each tonne of CO₂ emitted with a tonne of CO₂ reduced or sequestered through the purchase of carbon credits. The main advantage is maximum climate credibility. However, it excludes non-carbon data and reduces climate action to a purely quantitative figure. Moreover, it is very costly for companies with high residual (unreduced) emissions, as the budget is directly linked to residual emissions rather than a fixed amount. For example, 100 tonnes of residual emissions imply the purchase of 100 credits. This often pushes organizations to favor lower-priced projects, which may (though not necessarily) lack quality and limit support for more innovative, higher-priced projects.

2. Money-for-Tonne

   This approach defines a fixed cost to allocate per tonne of CO₂ emitted (for example, €10 per tCO₂e). The company spends an amount based on its emission level, applying a predefined unit price. The main advantage lies in budget predictability. Moreover, this is a preferred approach, as it aligns more closely with the concept of climate contribution rather than simple compensation. It often enables the purchase of higher-quality (and more expensive) credits without being constrained by the exact volume of emissions. However, it can lead to underfunding if credit prices, especially for high-quality projects, increase.

3. Money-for-Money

   This is the most flexible method: the company sets aside a fixed amount of money, often defined as a percentage of revenue, profits, or investment costs. The financial commitment is disconnected from emission volumes. This approach is scalable and flexible, ideal for companies seeking a stable, easily integrated financial commitment. However, it requires ensuring that the impact of the chosen amount remains meaningful. Since there is no direct alignment with actual emissions, it can slow the company’s decarbonization progress within its value chain.

At ClimateSeed, we recommend the portfolio approach, ideally combined with the Money-for-Tonne method. This strategic combination offers several advantages: it allows the company to set a spending amount based on its emission levels while maintaining budget predictability. The portfolio approach ensures diversification of supported projects in terms of impact, typology, and geography—all within the defined budget envelope. 

Indeed, diversification helps balance unit costs. Supporting a biochar project in Europe, for instance, where the unit cost may exceed €150, can be balanced by supporting a clean cooking project in Africa, where the cost per tonne of CO₂ equivalent is closer to €7.

Conclusion

Climate action beyond the value chain is no longer optional, it is a fundamental pillar of any Net-Zero strategy. The choice of budgeting method—Tonne-for-Tonne, Money-for-Tonne, or Money-for-Money—will depend on the balance sought between budget predictability and climate credibility.

Sources:

1. Science Based Targets

2.  

   GHG Protocol

3. Science Based Targets - Net Zero Standard