Impact investments: Can companies contribute to environmental conservation?

Over the last few years, the Environmental, Social and Governance (ESG) criteria have set a new standard for the way in which investors, both private and institutional, allocate financial resources. Supporting projects that contribute to economic sustainability has become one of the major drivers of the paradigm shift that humankind has embarked upon in response to the climate emergency.

As a result of this shift, companies are focusing their efforts on aligning their strategies and economic objectives with general interests, many of which are aimed at ensuring a sustainable and habitable planet for future generations. For Sébastien Pellion, Glovo’s Director of Social Impact and Sustainability, environmental responsibility is fully compatible with business activities. “Sustainability programs not only help address environmental challenges but also offer a competitive advantage if they are integrated with business operations,” he states. In 2019, the technology company created an Impact and Sustainability team with the objective of integrating its business and sustainability objectives. “This approach enables the creation of projects that are beneficial to the company and its stakeholders, while also encouraging the different teams to adopt more effective business practices and improve their operational efficiency and resource management,” he explains.

Carbon credits

In this search for alignment between business and environmental goals, reducing a company’s carbon footprint is a key priority. This indicator measures the amount of greenhouse gases (GHG) – the main pollutant and cause of global warming – emitted by an individual organization as a direct or indirect result of its operations.

There are a number of strategies that contribute to achieving this goal, including those that are specifically designed to reduce emissions, for instance, switching to clean energy sources. In other cases, these measures are less obvious and take the form of more imaginative formulas that do not necessarily take place in factories, warehouses or workplaces. Instead, they occur on the trading floors of financial markets or even on the ground in forests, beaches and other natural environments.

This is the case of offsetting strategies, which involve investments in projects that are not directly related to the company’s core activities. However, they do have the capacity to generate solutions that improve the environment. These investments are designed to neutralize the harmful emissions that companies are unable to avoid as a result of their operations. Their ultimate goal is to help the company become carbon neutral, with a net-zero emissions balance.

One of the most prevalent compensation strategies in recent years has been the issuance of carbon credits. “Carbon credits are one of the three mechanisms proposed in the Kyoto Protocol (1997) for the reduction of greenhouse gases. They are designed for companies that generate more emissions than they otherwise should and consist of paying a fee – or buying credits – from another company that has excess capacity, or that is not using all its carbon allowance,” explains Alberto Andreu Pinillos, executive director of the master’s degree in Sustainability at the University of Navarra.

These bonds are issued by various organizations that run projects that either capture or prevent greenhouse gases from being emitted into the atmosphere. In order for these projects to become tradable carbon credits, they must first be certified by international standards, such as the Verified Carbon Standard (VCS), and undergo independent third-party auditing to ensure their validity, transparency and traceability.

How are carbon credits measured?

A carbon credit represents one metric ton of carbon dioxide avoided or removed. They are typically associated with projects operating in the fields of reforestation/forest conservation, renewable energy, energy efficiency or waste treatment and can be purchased by companies of all sectors and sizes as well as by individuals in an increasingly accessible and simple market. For instance, the band Coldplay supports reforestation projects and other sustainability measures to offset the carbon footprint of their tours.

“The voluntary carbon market was valued at $2 billion in 2021 and industry experts anticipate a fivefold increase to between $10 billion and $60 billion by 2030,” notes Professor Andreu. This expert also highlights a trend in the markets towards an increase in demand for more expensive and higher-quality carbon credits. “This suggests that companies are willing to pay more to guarantee the integrity of the supply,” he says.

Some have expressed reservations about carbon credits on the grounds that companies may use them to greenwash data, without transforming their production models to effectively reduce emissions. In contrast, Alberto Andreu points out that recent research indicates the opposite. “According to a study conducted by Ecosystem Marketplace, the companies that use this instrument the most are reducing their own emissions faster than their peers, disclosing information more frequently and being more transparent in their reporting”.

Carbon credits are, however, just one of the many strategies that an organization can pursue to move closer to carbon neutrality. Sébastien Pellion, from Glovo, recommends that companies advance their commitment through a threefold strategy: “First, to assess their impact across different areas; second, once the sources of their emissions have been identified, to create a realistic and easily accountable roadmap to reduce them as much as possible; and finally, to use emissions offsetting as an additional tool for everything that a company cannot correct itself.”

In addition, carbon credits represent a category of investments designed to improve the environment. At Glovo, these impact investments are channeled through the Impact Fund, a unique initiative within the industry where a small percentage of the profit from each order is allocated to finance impact and sustainability projects. According to Pellion, the system “guarantees funding for our environmental and sustainability projects, thereby the more Glovo grows, the more positive impact we can make.”

Community projects

Since the creation of the Impact Fund in 2021, Glovo has invested over 5 million euros in impact and sustainability projects. “At present, our main objective is to invest in natural capital in the countries where we operate. We believe that the impact should be local to effectively address specific environmental and social issues within a city or region.”

When selecting investments to make, the company considers other criteria, including the potential impact and scalability of the projects. According to Pellion, “we want projects with the potential for growth, as they will have a greater impact.”

As part of these strategies, Glovo has partnered with Tierra Pura Foundation on an ambitious reforestation project in Pontevedra in the Galicia region in Spain to reforest an area that was devastated by a fire due to poor land management. This initiative will allow the regeneration of native ecosystems in an area that suffered one of the largest fires ever in Galicia. According to Glovo’s Director of Social Impact and Sustainability, one of the initiative’s key strengths is its active support of local communities. “It will be the residents themselves who will carry out a project that is committed to native reforestation as the most effective natural barrier against potential future fires,” he adds.

After offsetting its operational emissions in 2021 and throughout the value chain in 2022, Glovo took another step forward in its long-term sustainable strategy in 2023. The company has now decided not to purchase carbon credits associated with projects from previous years. Instead, the company will focus on current initiatives that will have a direct impact on the countries in which it operates. For instance, the Tierra Pura project is the first reforestation project in Spain that aims to have carbon credits validated by the international VCS. “This project will reforest an area of Galicia with native flora in collaboration with local communities. The forest will thrive for the next 45 years and reach sufficient maturity to be self-sufficient in the future, providing natural and economic protection for the area,” explains Sébastien Pellion.

Glovo’s carbon footprint

In 2019, Glovo began measuring its carbon footprint. That year, the company set clear and measurable emissions reduction targets for 2030. In 2021, these targets were validated by the Science Based Targets Initiative (SBTi), making Glovo the first company in the sector to outline them. They are as follows:

• Ensuring that 92% of orders are delivered in sustainable packaging.
• Delivering 67% of orders in emission-free vehicles.
• Reaching  30% of orders with multiple delivery points to optimize routing.
• Making sure that 10% of orders come from initiatives to promote food waste reduction and support charitable organizations.
• Transitioning to 100% renewable energy sources in the company’s facilities.

The achievement of these targets will result in a 42.12% reduction of the company’s total CO₂ emissions by 2030.