- Groundwork
- Market Engagement
- Groundwork
- Market Engagement
How should I identify and approach buyers for my outcomes?
During your initial project scoping, you may have identified potential buyers of the environmental outcomes you are planning to deliver. Now that you have a project plan and a robust baseline, you will be ready to approach and engage buyers more formally.
Buyers will vary in their expectations and requirements. This milestone will help you prepare for initial conversations with potential buyers to ensure you are empowered to ask the right questions and present a project that will attract a fair price. Your buyers may be within your own supply chain such as retailers and businesses, or organisations who benefit directly from your ecosystem services such as water companies or firms who seek to offset their own environmental impacts.
This milestone contains five subsets of considerations or ‘themes’ that farmers may want to explore at this stage. Click on each of these themes to the right in order to read more.
You can also read case studies of farmers that have successfully completed this milestone of development and view a summary of the common activities undertaken at this stage below.
Determining whether to work with a broker or sell directly
Many farmers work with a third-party to help them identify and contract with buyers. These parties are typically called ‘brokers’ and can help bring projects to market. This section will help farmers as they think through whether to use a broker or sell their ecosystem services directly to buyers.
In nature market deals, a broker facilitates trades between the seller of ecosystem services and the buyer. A broker could be your farmer facilitator if you are a member of a cluster group or aggregation model, or an external company who provides brokering services. A broker may also provide additional services such as project planning and management and ecological surveying. You can find a list of some of the primary brokers working in England on the CLA Natural Capital Business Directory.
Identifying, approaching and engaging with buyers can constitute a significant time commitment. If you are working as a collective, your facilitator is likely to act as your broker. For example, the Environmental Farmers Group works with Natural Capital Advisory for facilitation work and broker services. If you are working individually, you should consider how much time and resources you have available on top of implementing and maintaining your project to identify, approach and work with buyers. Brokers typically have existing relationships with potential buyers which can help speed up and streamline the process.
Using a broker can facilitate trades with buyers that you otherwise may not have access to. Many brokers also offer additional services such as help in developing a project plan, bespoke monitoring, reporting and verification, and aggregating projects to attract larger buyers.
The choice between selling directly or through a broker will depend on multiple factors such as the farmer’s resources, expertise, network, and comfort level with marketing and sales. Farmers who have experience in carbon credit trading and established relationships with buyers may prefer direct sales, while those seeking guidance and access to a broader market may opt for broker services.
Choosing a Broker
There are a variety of considerations to keep in mind when researching and engaging with potential brokers. The below points will guide you through potential questions to ask yourself and potential brokers to help ensure the one you choose is appropriate for your project and aligned with your ethics, budget and long term goals.
You may be approached by potential brokers offering their services. You will want to know how many successful deals they have brokered and their level of experience with your specific ecosystem service. You may also want to ask about their existing relationship with potential buyers.
If you have concerns on the ethical alignment of potential buyers (see below), you will want to assess with potential brokers whether they have systems in place to ensure buyers are high integrity. You can ask potential brokers if they have any stipulations on buyers of ecosystem services and if any potential buyers have ever been excluded and on what grounds. You can also discuss your own priorities for potential buyers if they go beyond what the broker would require themselves. Some methods for assessing buyer suitability are offered in the next section and you can use these to assess broker suitability as well.
Brokers will typically get paid by getting a portion of the sale price of your ecosystem services. You should have pricing discussions up front with brokers to see how payments will impact the profitability of your project. You may also want to ask if the broker uses a buffer pool themselves or if you will need to work that our yourself. A buffer pool is a pool of credits which have been held back from sale to insure against risk of project failure and uncertainty of measurement. The scale of the buffer required will also impact how much you will ultimately be paid for your credit. More information about planning for and mitigating risk can be found in Milestone 6.
The extent of your broker’s impact on your project mainly hinges on who that broker is. If you are working with other farmers in an aggregation model and your facilitator is acting as your broker, they will also likely have input into the project design, maintenance and monitoring. if you’re working with an external broker, their involvement can differ quite a bit, and it’s not always fixed in stone. It’s a good idea to chat with them upfront about what they expect and make sure you’re comfortable with how much they’ll be involved.
A company which offers broker services may have specific requirements for baselining, monitoring, reporting and verification. You will want to make sure that their expectations align with existing standards and any relevant codes. If you have already completed your baseline assessment, you will want to ensure the methodology aligns with the broker’s requirements as ongoing measurement will need to be done using the same methodology. If it does not, you may wish to ask for support in aligning your baseline with their standards as paying for an additional baseline assessment out of pocket will be a significant cost.
You may want to question companies which require you to conduct a new baseline using their own services. If you are certain that your baseline is robust and aligns with widely used standards, it should be sufficient to use to access buyers. Some companies may attempt to generate additional profit from you by encouraging you to use their own extra services.
Identifying Buyers
If you are choosing to identify and engage with buyers yourself (or if you are planning on being actively engaged in this process alongside a broker), consider the below points to help you identify different parties who may want to pay for your ecosystem services. This section will also touch on how you can ensure potential buyers are aligned ethically.
Buyers of your ecosystem services will be organisations, companies, government departments or other entities who benefit in some way from your ecosystems service(s). When identifying potential buyers you will want to think about who your project may have beneficial impacts on, either directly or indirectly. For example, buyers of Natural Flood Management tend to be companies within your catchment who are vulnerable to flooding (or whose supply chain may be impacted by flooding) or government departments such as Local Authorities which would be financially impacted by large scale flooding. Habitat improvement projects may benefit local developers who will need to demonstrate that their developments achieve a 10% biodiversity uplift through Biodiversity Net Gain.
In carbon markets, the beneficiaries may be less directly impacted by your project because the impacts of climate change are not as localised as with flooding and biodiversity. Buyers of carbon credits may be firms that want to offset their own emissions or demonstrate that their supply chain is ‘net zero’. Potential buyers can also be within your supply chain such as retailers you sell to or animal feed manufacturers.
Similarly to multiple farmers coming together to aggregate the supply of ecosystem services, multiple buyers can be brought together to aggregate demand. An example is Landscape Enterprise Networks (LENs), an initiative set up by environmental consultancy 3keel which brings farmers together to deliver environmental benefits which are sold on to multiple buyers.
Buyers will need assurance that they’re getting what they pay for. In some cases, this is relatively straightforward with the presence of a credible third party. For example, corporates purchasing units from the Woodland Carbon Code and Peatland Code can be confident that they can use these as part of their environmental reporting in the UK, as permitted under the UK Government’s Environmental Reporting Guidelines.
Where the project is relatively unprecedented, for example with the use of a new methodology for measurement and valuation, buyers will likely need to be involved early on to agree the methodology. They may need to take this modelling to their own key stakeholders, such as regulators or planning authorities, for consent on potential payments/investments. An example of this was with the Wyre River Natural Flood Management Project.
Typically, environmental markets rely on proxies for outcomes, such as the Woodland Carbon Code and Peatland Codes, which are both based on scientific consensus for the carbon performance of woodlands and restored peatlands respectively. In areas where codes are not yet established, more expensive technical proving is likely to be needed to attract buyers, unless the buyers are willing to accept perhaps a lower degree of confidence that the outcomes can/have been delivered.
Government entities may be interested in acting as a buyer, for example through purchasing the flood risk reduction for a catchment that has historically been severely impacted by flooding.
Thought should be given to the restrictions that government entities face, such as short term funding cycles that would prevent them from entering long term contracts, agreeing to a blended finance structure with private companies, or any restricted mandates in terms of their spending.
Although it is not strictly necessary to ensure ethical alignment with potential buyers, you may want to consider their integrity in terms of their wider sustainability track record, as this will ensure that the project is generating an environmental net gain and is not being used by the buyer as a licence to inflict damage elsewhere.
A well-known example is the sale of carbon offsets to companies in relation to their carbon mitigation hierarchy, where it is well-established in the market that entities should first avoid and reduce their own emissions and only use offsets for the ‘residual’ emissions’ that cannot be avoided.
There are emerging methods to support the assessment of buyer suitability, but you may consider some of the following factors as guidance:
- Does the buyer have a decarbonisation strategy that follows the carbon mitigation hierarchy? Is this strategy aligned with an established framework, such as the Net Zero Standard of the Science Based Targets initiative (SBTI)? Is this strategy robust under scrutiny? Note: if your buyer is a company in the food and agriculture industry they should align their decarbonisation strategy with the SBTI’s Forest, Land and Agriculture (FLAG) guidance.
- Does the buyer hold any certifications that demonstrate its business model’s existing level of sustainability, and are these labels robust under scrutiny?
- How is the sustainability agenda or strategy actioned within the buyer’s organisational structure? For example, is there a member on the executive committee, such as the Chief Financial Officer, who leads the strategy? Is there an individual or team within the organisation that focuses exclusively on the execution of this strategy?
- Does the buyer invest part of its profits into research and development of more sustainable processes to use in its business model?
- Is the buyer building a holistic picture of its impacts and dependencies on nature more widely, for instance by using the TNFD framework?
- Does the buyer engage in wider initiatives for sustainability, e.g. Finance for Biodiversity Pledge, Business for Nature, UK Business and Biodiversity Forum. What have been its own actions other than signing up?
Approaching Buyers
You should plan your initial contact with buyers carefully, including what information you can give on the project at this point and responses to the likely questions they will ask.
If you are choosing to approach buyers yourself, there are three main ways you might do this:
- Direct contact: You might have a specific buyer that you want to approach directly, in which case it is important to identify the relevant contact within the buyer’s organisation for the most effective initial contact. For example, these could include financial directors, sustainability officers, supply chain managers, risk officers or corporate social responsibility leads, depending on what you are selling and to whom.
- Profile raising and collecting ‘expressions of interest’: If you’re working with other farmers at a landscape scale and targeting a large group of buyers in a defined area, consider launching a communications campaign to raise the profile of your project. This might include attending local business forums and conferences, running social media campaigns, partnering with reputable charities, and then collecting Expressions of Interest (EoIs) before you reach out to buyers directly.
- ‘Passive’ presence on a platform or registry: As a less proactive approach, you might simply list your project on a registry or platform that connects relevant buyers and sellers, such as the UK Land Carbon Registry, Respira International, RegenNetwork or Kana. This may save your own time and resources but could increase the time it takes to find a buyer. You should become comfortable about the effectiveness of this option if it is the only buyer approach you are taking. Ask these platforms about how long it typically takes to secure a buyer and what you can do to improve your project’s attractiveness.
Buyers may ask you about the robustness and credibility of your project or interventions. You should be prepared to answer questions they may have and demonstrate that you’ve thought through the expected outcomes and relevant risks. Consider using the points below to help structure your answers:
- Quality of delivery – Who are the partners in the project that are key to its design and delivery, what are their credentials, what local knowledge do they have and are their core values aligned to those of the project? This would include ecologists, agronomists and baselining services you have engaged as well as any other parties that might be involved in the delivery of your project.
- Scientific measurement – What methodology have you chosen and why is it best suited to the project for baselining and estimating the ecosystem services? How does it show a clear causality between the interventions being used and the ecosystem services the project claims to be delivering?
- Independent verification – Is there an independent third party that can verify the outcomes of the project or its design, such as an ecologist, auditor, or government expert? This verification should align with the scientific methodology.
- Permanence – How are you contractually maintaining the project’s change in land use or interventions over the promised number of years? How are you managing or mitigating risks, such as severe flooding, fires or rising temperatures?
- ‘Do no significant harm’ – how can buyers be sure that the project is being designed to generate the best environmental outcomes, for example that habitat banks are being created with appropriate native vegetation. If there are any unintended costs, how are you minimising or compensating for these negative externalities?
- Additionality – What are the buyer’s payments being used for, how is this generating additional environmental outcomes alongside any use of public funds, such as through agri-environment schemes or projects that are already underway?
- Prevention of ‘double selling’ – What assurance can you provide that you’re not selling the same services or claims to the project to another buyer? E.g. is there a single registry that you can use to publicly list the project and the sale of the ecosystem service?
- Effective governance –This will be relevant for aggregation models (See Milestone 2). Buyers may want to know how the project or group is governed, who is in charge if multiple parties are working together and what system of controls are in place to make sure that it is running smoothly? Is there any independent oversight built in?
In initial discussions with potential buyers you will want to be prepared to explain your baseline assessment, your project plan and the expected outcomes of the changes you plan to make on your land. Any data that you can provide to help support your claims will be useful and where you don’t have data, you may want top use proxies or other indicators such as price points in other similar projects and up-front cost estimates.
You may even want to show the buyers this toolkit to demonstrate how your project planning has evolved and what the next steps of your project are.
Ultimately, the prices you are paid should be driven by the lifetime costs of the project. You should have a clear estimation of the expected ongoing costs of the project as well as any costs already incurred. You may also want to research similar projects to see what other farmers have been paid. For example, for Woodland Carbon Credits, companies are paying between £10 and £30 per unit (per tonne of CO2 equivalent). You can find information on recent deals in the UK Land Carbon Registry.
The extent to which you will be able to negotiate prices with buyers will depend on the type and scale of your project. For an individual farmer, it may be difficult to influence prices, however, if working through an aggregation model you may have more leverage to negotiate higher prices because the scale of your offering is larger. Either way, you should be prepared with the prices you expect, the average prices of similar projects and know what price would make you walk away from a deal.
Activities and the outcomes they deliver are two separate things that payments can be based on – e.g. hectares of new woodland planted vs the tonnes of sequestered carbon over the lifetime of that woodland. In order to ensure environmental outcomes, payments should ideally be conditional upon actual delivery of the ecosystem service(s).
However, this might present a time-delay between the costs of the activities and the income from the ecosystem service delivery, and in turn there may be a need for up-front investment that the project would need to service (see Milestone 7).
Alternatively, the total cost of measuring and verifying the delivery of the ecosystem services over the lifetime of the project, such as soil carbon sampling or biodiversity surveying, may be prohibitive and buyers might view it to be more efficient to simply pay for the activities up front with appropriate maintenance and monitoring in place to preserve the quality of the interventions.
In initial conversations with potential buyers, you should make certain that the ecosystem service(s) you are offering can be delivered in the quantity and timeframe required by the buyer.
For instance, that there are enough carbon credits being generated from a agroforestry project so the buyer can declare itself ‘Carbon Neutral’ by a certain year if that is their aim. In these initial conversations you will also want to begin discussing contingency plans for if the ecosystem services are not delivered within the expected timeframe. You can read more about managing risk in Milestone 6.
An NDA can be used if either yourself or the buyer wants some legal protections around confidentiality and sensitive information, though you should check this point with all existing stakeholders in the project.
In the event your project needs an NDA, the most convenient option is to ask the entity requiring the NDA (e.g. the buyer) to draft one, or there are standard template documents on the internet you can use free of charge. See here for Defra guidance on NDAs.
Working with Supply Chain Partners
Companies are under increasing pressure to demonstrate that their supply chains are sustainable. When engaging in nature projects your supply chain partners (food manufacturers and retailers) may be interested in playing a role. This section will introduce the concept of ‘insetting’ and introduce you to some key ways that engaging with nature markets might impact your relationship with your traditional agricultural buyers.
Companies downstream from you in food supply chains may be interested in acting as a buyer for your ecosystem services. Food processors and retailers may want to compensate for their own environmental impact (offsetting), improving their reputation through Corporate Social Responsibility (CSR) or achieving a net zero or nature positive supply chain through insetting (see below).
You can find out if your supply chain partners might be interested in being a buyer by engaging them early with your baseline measurements, a plan for your environmental improvements and data supporting the environmental benefits your project will achieve.
Retailers and food companies face growing pressure from governments and consumers to demonstrate sustainability in their operations and supply chains. In the near future, you may need to prove your sustainability efforts to support your supply chain partners’ compliance with government and international standards like TNFD or the UK Green Taxonomy. To prepare for this, many farmers in nature markets only sell ecosystem services beyond what offsets their own environmental impacts. For instance, they sell carbon credits generated in excess of what’s needed to balance their carbon footprint. It’s advisable for farmers to proactively assess their natural capital baseline and develop improvement plans in anticipation of potential heightened reporting requirements. By taking these steps, they can reduce the risk of falling behind if environmental sustainability becomes a prerequisite for selling their products.
Insetting refers to the financing of climate or nature protection activities within a company’s own supply chain. This differs from offsetting, which refers to financing activities which compensate for negative environmental impacts elsewhere. For example, a food retailer could pay farmers who supply them to implement regenerative farming practices such as planting cover crops. This would not be to compensate for harm elsewhere but rather to achieve a positive impact on the ecosystems within their value chain. If your buyer is insetting, this will not fundamentally change how you develop, monitor and maintain your project but it could impact your ability to enter into additional environmental agreements later on. When entering a nature markets deal, ensure a clear understanding of your delivery expectations and ongoing commitments so you understand how this will impact your ability to make future changes to your land or enter into other environmental agreements.
