The global REDD+ framework rewards countries that reduce deforestation and enhance forest carbon sinks. It includes a mechanism for results-based payments to national and sub-national governments, communities, and private investors. The architecture for providing these payments is complex and evolving. However, sub-national jurisdictional initiatives are a particularly promising focus for REDD+ investment and carbon credits because they combine government involvement and oversight with supply chain and community actions to stop deforestation and may generate payments for all these actors. For carbon finance investors, L/JIs may offer economies of scale relative to individual, site-specific projects within a jurisdiction, while also enabling private investment more readily than national-scale government programs.

Companies can invest in landscape/jurisdiction-scale carbon offsets in three ways, ranging from simple to complex:

• 1. Source carbon credits from an existing L/JI that has an established mechanism for carbon finance. This option is a relatively easy one for a company that wishes to support an L/JI and gain carbon credits, but does not seek to become directly involved in the initiative. It may also be a way for a company to become engaged in an L/JI as a first step that might lead to greater involvement over time.
• 2. Integrate carbon finance into an existing L/JI (as Touton is doing with cocoa suppliers in Western Ghana, see “Co-design jurisdictional goals, key performance indicators (KPIs), and implementation strategies”). This approach may be attractive to companies looking for additional long-term financing for an L/JI and can work with other stakeholders to link the initiative to public and private carbon markets to obtain credits. The company itself can be (but does not have to be) an investor in carbon offsets. It may be equally valuable to the company to have other investors financially supporting the L/JI in the form of carbon finance, so that the company can contain its costs in supporting the initiative.
• 3. Co-initiate and co-finance a carbon credit program at the scale of a landscape/jurisdiction. This option requires substantial company involvement and investment, generally with NGO and/or private partners with specialized expertise in REDD+ carbon finance. It may be an appropriate pathway for companies with substantial commitments to reducing carbon emissions, and equally substantial opportunities to work with suppliers and other stakeholders in a landscape/jurisdiction from which it sources commodities linked to deforestation. The REDD+ Environmental Excellence Standard (TREES) provides one vehicle for countries and eligible subnational jurisdictions to generate verified emissions reduction credits through actions to reduce deforestation and degradation.

For Options 2 and 3, a company must understand the carbon finance possibilities available to the L/JI, as well as the risks and price volatility associated with the carbon market. Companies should engage with the government and other stakeholders to identify current and potential sources of funding, and to discuss benefit sharing mechanisms and the carbon claims companies could make.

If REDD+ carbon finance is shown to be feasible to support an L/JI, companies can advocate for and/or support a REDD+ program that is in line with good practice for carbon offsets from land use projects.

Support suppliers to engage in L/JIs. Companies can support suppliers (farmers, local aggregators, processors, and traders) in many ways including by co-designing L/JI strategies, supporting training, or legalizing production. The goal is to help suppliers see how they can maintain and increase their incomes while reducing deforestation.

Contract incentives. Both upstream and downstream companies can integrate L/JI goals and targets into their contracting mechanisms. Companies can integrate preferences for commodities sourced from effective L/JIs into their overall sourcing policies (see “Use preferential sourcing to support L/JIs that are demonstrating progress”). They can also provide preferential contract terms (such as higher volume, longer term, price premium) for suppliers participating in L/JIs (see “Align corporate policy specifications and supplier contract terms with landscape/jurisdictional goals and targets”). In general, contract incentives should be conditioned on both the individual supplier’s performance and the overall progress of the L/JI. By linking incentives to objectives, companies motivate suppliers to support the initiative, engage with government, and collaborate with communities and suppliers to accelerate adoption of good production and protection practices across the landscape/jurisdiction.

Production-protection incentives/payment for environmental services. Companies can directly pay farmers who protect and restore forests (see “Support landscape restoration in line with L/JI objectives”)They can also ensure suppliers gain access to government, multilateral, and carbon market funds that provide payment for environmental services (see “Help develop jurisdictional scale offset programs for deforestation”). As with supply contract incentives, suppliers and communities should be rewarded for progress on protection and restoration both for which they are directly responsible and at the level of the landscape/jurisdiction.

Recognition and public visibility. Downstream companies with significant public visibility (brands, retailers) can motivate upstream participants in their supply chains to participate in L/JIs by giving them public recognition as partners in sustainable sourcing. By recognizing upstream supply partners, downstream companies also add credibility to their own sustainable sourcing commitments.

Adoption: Adopt clear and consistent criteria for preferential sourcing at the landscape/jurisdictional level. These criteria will define levels and types of preference in sourcing, and the conditions under which the company will reduce or discontinue sourcing from suppliers in a given landscape/jurisdiction.

• Criteria for measuring the quality of L/JIs should address their social, environmental, and economic goals; strategic plans; role of governance and policy; and M&E system. The Commodities/Jurisdiction Approach is one tool that provides predetermined criteria for assessing L/JIs.

Implementation: Seek new suppliers within landscapes/jurisdictions that meet selected criteria and/or expand sourcing from existing suppliers in these regions. For early stage L/JIs, companies may still need to assess and verify whether individual suppliers comply with social and envi-ronmental targets. As more advanced L/JIs can demonstrate a high level of effectiveness in stopping deforestation and exploitation, companies may be able to rely on monitoring done at landscape/jurisdictional scale to ensure suppliers meet their sourcing criteria. Companies should publicly specify their use of landscape/jurisdictional preferencing, criteria, and preferred sourcing regions. This sends a clear market signal that progress at that level of the landscape/jurisdiction strongly informs sourcing decisions.

• Link decisions to decrease purchases from jurisdictions struggling to meet sustainability criteria with ongoing dialogue and engagement with other purchasers, and with the government, suppliers, and other stakeholders in the region. This incentivizes improvement, rather than just letting these jurisdictions default to supplying purchasers with lower standards.

Growing support: Engage directly with L/JIs to help them achieve and maintain their qualifications for preferential sourcing. Brands and retailers with purchasing power can profoundly influence suppliers and governments within a landscape/jurisdiction and should coordinate on preferential sourcing approaches through industry platforms such as the Consumer Goods Forum. The combined influence of several major downstream purchasers can have far greater influence than when purchasers act alone.

Review the L/JI’s goals and targets. These vary by landscape/jurisdiction, but often include economic, environmental, and social components.

• In Mato Grosso, Brazil the “Produce, Conserve, Include” initiative has formulated a set of targets that nest within the three categories represented in the initiative’s name. ‘Produce’ targets include ambitions for grain, livestock, and timber yields and for land area under cultivation. ‘Conserve’ targets include land area covered with native vegetation, percentages in the Amazon and Cerrado biomes being converted, and the area of degraded land being restored. ‘Include’ targets include percentages of families receiving technical assistance and rural extension, proportion of smallholders with market access, and amount of credit available to family farms.

Translate the L/JI’s targets into a demand signal for suppliers. This can be accomplished in a few ways:

• Incorporate landscape/jurisdictional targets into the terms of supplier contracts to ensure that supply is produced in accordance with the targets. For example:
  • One of Mato Grosso’s targets is that 90% of rural properties be registered in the environmental rural registry. To support this target, a company could write supplier contracts to require that supply originate only from registered farms.
  • Mato Grosso is one of many L/JIs that include a target to reduce deforestation or conversion of other ecosystems. Companies can drive this target by aligning their own deforestation/conversion-free sourcing policies with Accountability Framework guidance, and linking the demand they make of suppliers for commodities produced without deforestation or conversion with the L/JI’s targets.
• Create positive incentives for suppliers by offering long-term contracts, price premiums, and/or additional payments for environmental services to suppliers who demonstrate they are meeting the L/JI’s goals by producing sustainably, restoring, and/or conserving forest areas.
• Incorporate jurisdictional targets into corporate policies to guide the company’s decisions within the landscape/jurisdiction. In Mato Grosso, for example, one target is to reduce conversion of the Cerrado biome by 95% below historical levels. A company could support this target by a principle ensuring its commodity sourcing does not originate from recently converted land in the Cerrado. That policy could then guide how supplier contracts are drafted, where investments are directed, and advocacy priorities with the government.

Ask suppliers what incentives they need to achieve landscape/jurisdictional objectives. Such outreach better ensures the desired outcomes and also creates a sense of shared commitment and ownership.

An L/JI’s targets may lack enough detail to easily or immediately incorporate them into company policies or contracts. In such cases, reach out to the government or entity leading the L/JI to clarify the target that the company should support.

Work together to set up jointly funded, independently operated, open source tracing systems for commodities produced within a landscape/jurisdiction. Under such a system:

• Land use maps and a traceability system are developed through, agreed to, and regularly updated by L/JI stakeholders.
• An independent third party gathers stakeholders’ information, including satellite imagery, locations from which companies make purchases, and the movements of commodities from farmgate to their exit from the jurisdiction.
• The company integrates this local system with its own tracking efforts from the landscape/jurisdiction further downstream.
• All stakeholders regularly update data to maintain the integrity of their joint traceability system.

If there is interest in expanding from joint traceability to a full certification system for the landscape/jurisdiction, collaborate with the government and third-party independent certifiers to create one. Key elements of this approach:

• A clear linkage of the certification effort to an L/JI ensures all partners in the initiative support certification as a contribution toward meeting the initiative’s goals.
• Established and credible standards, and direct engagement with international certifying bodies, enable the landscape/jurisdiction to develop its certification system.
• Certification bodies have capacity to educate producers and other supply chain partners on the value and the process for achieving certification at the landscape/jurisdictional level.
• Demonstrated value-add of certification for producers and other supply chain partners motivates and sustains their participation.

Determine whether the target landscape/jurisdiction has set a goal around legalizing commodity production. If so, companies should align their efforts with the L/JI’s goals and geographic priorities. Alignment could mean redirecting and/or expanding current legalization support or investing in programs delivered by others. Upstream companies with robust farmer outreach and hands-on training capacities may take on leading roles, while downstream companies are better positioned to provide funding and support legalization efforts from a distance.

Assess the legal issues related to land tenure and identify the most significant obstacles to sustainable production. Multi-stakeholder working groups can offer diverse expertise and experience, while companies can provide legal expertise to identify bottlenecks and regulatory challenges that hinder legalization of smallholder production.

Clarify how legalization will contribute to sustainable conservation and production goals:

• Inside forest reserves, recognize land claims of Indigenous Peoples.
• Outside forest reserves, customary land tenure may conflict with government titling, or private land titling may be incomplete. In either case, the lack of clear land rights can create an informal and insecure land market that undermines incentives for individuals, cooperatives, and small enterprises to invest in sustainable production. Clarifying and formalizing tenure can support the security and sustainability of commercial production.

Government agencies play a central role in galvanizing and legitimizing any multi-stakeholder legalization initiative. If agencies with authority over land rights are not already part of the multi-stakeholder group, participating agencies or companies with the right relationships can wrap them into the discussions.

To resolve legal issues, companies should prepare to do substantial outreach, support, and dialogue.

• To help resolve tenure conflicts, companies can provide funding for technical expertise, mediation, and other services.
• Where there is informal production, companies can incentivize farmers and local traders to register and become licensed by committing to purchase from them, and/or by offering other services and support.
• Companies can also advocate with government agencies to simplify administrative requirements for small-scale commercial production.

Determine whether the target landscape/jurisdiction has set a goal to promote additional or alternative livelihoods to those that drive forest loss or environmental degradation. If so, companies should align their efforts with the L/JI’s goals and geographic priorities. Alignment could mean redirecting and/or expanding current livelihoods support or investing in programs delivered by others. Upstream companies with robust community outreach capacities can take the lead in training for alterative livelihoods, backed by funding and incentives from downstream companies.

Companies can support additional/alternative livelihoods if they:

• Identify value-addition opportunities within the supply chain
• Support crop diversification through land assessment, farmer extension services, and long-term commodity purchasing programs
• Promote other viable business opportunities that generate non-farm employment in target communities (e.g. clean energy, clean water, education)
• Help farmers develop financial literacy, management, and entrepreneurship skills
• Invest seed capital into micro-finance for small and medium enterprise development (directly and with local, national, and international co-investors)

There are various strategies to unlock additional or alternative livelihoods:

• Support stakeholder mapping and analysis to identify who needs what outcomes, and why. Collaborate with an organization that has a track record supporting community economic development. Then help stakeholders establish governance structures, appropriate smallholder schemes, livelihood models, and mechanisms for monitoring and evaluation.
• Identify alternative livelihood opportunities in the company’s operations and supply chains that are consistent with the strategies of the L/JI. For example, companies could promote alternative crops in suitable locations, invest in shared processing plants, and expand economic opportunity to women.
• Open new alternative livelihood opportunities by contributing business planning expertise, funding the provision of relevant expertise, and encouraging and supporting the participation of relevant suppliers. Specific arenas for support include:
  • Business models: conduct market research on service industries and sustainable forest-based, agricultural, or non-natural resource products; product development; market testing; business plan development; legal entity establishment
  • Human resources: assess capacities and bridge gaps for village planning groups, community-based entrepreneurs, innovation hub managers, business expert rosters, and government economic development agencies and programs
  • Institutional and policy dynamics: assess how best to integrate new products and services into local and regional economic development plans and programs, as well as changes needed to regulatory frameworks to enable and incentivize community-based enterprises and regional industries
  • Investor communication and outreach: identify potential investors and engage them through a well-developed communications and marketing effort; present a compelling business opportunity, facilitate due diligence, and broker relationships
• Train and build the capacity of local communities to establish and run small businesses. Communities often need help promoting a savings culture to boost their financial management skills and credit worthiness. Companies should align support with the L/JI’s objectives, with an eye to helping today’s new businesses become future sustainable supply chain partners.
• Promote regular progress reports to the L/JI from beneficiaries trained in alternative livelihoods.

Determine whether the target landscape/jurisdiction has identified the extent and type of degradation, set a restoration goal, and mapped areas in need of restoration. If so, support restoration in one or more prioritized areas.

If restoration goals have not yet been set, work with other stakeholders in the landscape/jurisdiction to define them (see “Co-design jurisdictional goals, key performance indicators (KPIs), and implementation strategies”), knowing that long-term sustainability must mitigate the underlying causes of deforestation and degradation.

If restoration areas have yet to be prioritized, work through the L/JI with local experts (e.g. government agencies, NGOs, universities, naturalists) to determine where restoration would have the highest impact. Optimal locations maximize benefits for nature (e.g. habitat connectivity, water flows) and communities (e.g. non-timber forest products, poverty reduction, health) at the lowest cost.

Fund local partners to procure tree seedlings and cover the costs of planting them in prioritized areas. If nurseries can’t provide enough seedlings to match the scale of planned restoration work, consider funding their expansion and partnering with botanical gardens. Funds are also needed for maintenance and monitoring to ensure plantings survive.

As restoration includes not just direct costs (e.g. buying, planting, and weeding around seedlings) but also opportunity costs to landowners from not farming on restored land, companies should pay landowners and managers for environmental services generated when they reserve and maintain portions of their land toward restoration. Establishing a system for ongoing payments increase the odds of long-term success. Companies can offer premium crop prices to farmers undertaking restoration, make direct payments based on evidence of continuing restoration, or contribute to restoration funds at the community or landscape/jurisdictional level. To ensure that incentives to maintain restored areas endure, companies should position other entities to take on these payments over time.

Determine whether the target landscape/jurisdiction has set a goal around enhancing smallholder finance in support of sustainable production. If so, companies should align their efforts with the L/JI’s goals and geographic priorities. Alignment could mean adjusting their own existing efforts or investing in programs delivered by others. Upstream companies with capacity to engage smallholders should take the lead; downstream companies can provide funding to support financing programs.

Identify which smallholders need to participate to meet landscape/jurisdiction-level conservation and sustainable production goals, and determine what they need to succeed:

• If not already organized into groups, encourage smallholders to do so, with help from local civil society organizations.
• Identify the financial hurdles that prevent smallholders from earning a living in a way that protects forests and meets other conservation goals.
• Design interventions in a way that links financial access to forest protection and/or soil conservation, better cropping practices, etc.
• Ask smallholder participants to provide geo-coordinates (an effort eased by technical assistance) for their plots, thus enabling remote sensing to monitor performance and ensure compliance with forest conservation agreements.

Tailor the specific form of a company’s intervention should to the identified financial hurdles:

• If farmers lack capital to invest in sustainable practices, a company could provide long-term contracts to help them access loans with reasonable terms. That would enable smallholders to make the needed investments yet maintain their livelihoods for the loan’s duration.
• If farmers lack experience or comfort dealing with banks, a company could help train them to engage in the formal financial market. Smallholders could especially benefit from assistance in creating the formal business plans that lenders require before deciding to extend credit. A company could also foster relationships between smallholders and a microfinance, regional, or national financial program/institution. They are uniquely positioned to show the big picture of how access to finance can build financial security, and can help smallholders gain saving, borrowing, and repayment experience.
• If farmers can’t provide lenders with a loan guarantee, or collateral, a company could step in to guarantee loans on smallholders’ behalf. It could also negotiate long-term offtake agreements with smallholders for the commodities they produce, which could serve as collateral for their loans.
• If farmers are so small or remote, they can only access disadvantageous loan terms, a company can offer supply chain financing, extend other forms of credit, or offer small loans to these farmers directly. Such alternative loans should offer terms on par with traditional financial institutions, structured flexibly enough to account for the more challenging environments smallholders face. Alternatively, a company might advocate and work with government to create or improve a development fund designed to finance smallholders that have difficulty accessing credit from traditional lenders. In both cases, the company should streamline the loan process, for example by creating a way for smallholders to prequalify their business plans with potential funders.

Consider both up-front financing to support a transition to sustainable production, and results-based payments that reward smallholders and communities for maintaining forest cover and other valuable natural resources in the landscape. Results-based payments can take the form of: renewable offtake guarantees, where renewal is contingent on forest protection; periodic direct payments to households, cooperatives, and/or community funds for forest protection; and/or contributions to jurisdiction-level or national funds (for example, REDD+ funds) that are allocated to communities and smallholders by an L/JI in exchange for forest protection.

• Where local laws provide payment for environmental services, companies can connect smallholders with information about how to access these funding streams.

Understand the dynamics that farmers confront within a given L/JI. This ensures that chosen interventions fit the context. Most farmers want to manage land sustainably but may often lack knowledge, skills, or access to money and tools that could help them do so. By understanding baseline conditions and practices, companies can better identify specific gaps that prevent farmers from increasing productivity and avoiding deforestation, and thus result in better designed and targeted interventions.

• If these gaps have not yet been defined, consider funding local partners to collect baseline data on smallholder farmers, location and quality of forest and conservation areas, location and yield of commodity production areas, and the locally relevant government policies and programs that impact farmers.
• More advanced initiatives may have already specified these gaps in an action plan jointly developed by a multi-stakeholder body that includes farmer representation. If so, consider selecting and undertaking one or more interventions that align with the identified needs.
• The most advanced initiatives may have developed their own farmer training and/or agroforestry programs to disseminate best practices. Consider funding these programs to expand the number of farmers receiving training, support technical or equipment needs, or spread awareness about the programs among farmers.

Fund training and extension programs, to help farmers overcome gaps in knowledge or skills. Too often, cocoa farmers clear forest simply due to the misconception that sun-grown cocoa trees are more productive than those grown in the shade. Likewise, rubber tappers often do not know the proper cutting angle and depth to maximize latex yield from a rubber tree. Companies at all supply chain levels can fund training and extension programs run by government agencies, civil society experts, or private service providers. Producers, processers, and traders often employ in-house agricultural experts, who could directly teach and advise farmers, or augment public extension initiatives. Companies can run courses, support logistics for training sessions, provide equipment or educational materials, and distribute high-yielding seedlings and fertilizers.

• To expand the reach of training programs, companies could compensate farmers reluctant to take time off (and forgo income) so they can afford to attend trainings.

Upstream companies should ensure farmers have access to the best available technology. Smallholder oil palm growers, for instance, often rely on inferior germplasm with yields far below those on industrial plantations; with better plant materials, they could significantly increase their incomes without needing to expand their farms.

Incentivize best management practices. Rewarding uptake of good practice through preferential sourcing from performing framers, price premiums, or long-term purchase guarantees increases the likelihood that training and extension programs will create meaningful and lasting behavior change among recipient farmers.

Fund or provide staff for monitoring and evaluation (M&E). M&E should measure the degree to which trained farmers adopt best management practices, and the impacts adoption has toward sustainable outcomes. Assessment will determine how effective farmer trainings are, and where to modify and improve interventions.

Scale the improvement of management practices. Farmers throughout a landscape/jurisdiction will benefit from access to training and tools, but an individual company can only support so many by itself. To expand the impact, a company should:

• Share its accumulated knowledge and experience—both challenges and successes—and encourage peers to support other farmers.
• Directly train or indirectly fund the training of government extension officers so they can reach more farmers. To avoid any perception of improper influence, be sure that government support responds to needs raised through multi-stakeholder consensus and is transparently overseen by the initiative’s stakeholders.
• Advocate and engage with relevant government entities to embed improved management into rural development policies.