THEORY OF CHANGE
As currently conceptualized, companies are motivated to improve sustainability practices as a result of pressure from non-governmental organizations (NGOs) and the public; values-driven decision-making; and/or financial or business incentives.
These levers can motivate action through several pathways of change, including: finance sector strategies, such as encouraging disclosure of conservation-related risks, finance institution commitments, and impact investing; corporate sustainability commitments; and standards, certification, and eco-labeling initiatives that aim to secure conservation outcomes such as healthy ecosystems, reduced greenhouse gas emissions, and biodiversity preservation.
Various types of financial institutions can leverage business incentives toward sustainability and conservation outcomes by influencing available capital for sustainable business practices. Interventions can include altering borrowing conditions, divestment (or threats of divestment), shareholder proposals and resolutions, direct engagement, diversification of investments, and/or impact investing to support companies with positive environmental practices.
Companies often make commitments to source sustainable products and specifically their raw materials. Producers are likely to adopt sustainable production practices if demand for sustainable products increases for all actors along the supply chain.
This shift has a two-pronged effect: first, a shift toward sustainability improves management practices and production efficiency, which reduces threats from unsustainable harvesting, land conversion, and harmful practices at the production location (farm, fishery, forest stand). Secondly, widespread adoption of sustainable actions increases the supply of sustainable products and strengthens the business case for additional sustainable actions.
Certification and standards represent one path for implementing sustainability commitments through encouraging producers to change their practices. As companies consider sustainable purchasing decisions, they may seek to purchase certified or labeled products that a third-party accredits as meeting environmental or other standards. These initiatives often have the tools, mechanisms, and support in place to encourage producers to change management practices toward those that support conservation outcomes. As with the implementation of corporate commitments, the implementation of certification and standards results in a reduction in threat that leads to desired conservation outcomes, such as healthy ecosystems, reduced greenhouse gas emissions, and biodiversity preservation.