Corporate payments for ecosystem services in theory and practice: links to economics, business, and sustainability

Few Payments for Ecosystem Services (PES) schemes are financed voluntarily by corpora-tions. This is perhaps unsurprising, given that limited literature on the theory and practice of PES has a dedicated focus on businesses. This article unifies the PES and business literatures in order to address the awareness and management challenges that corporations face in engaging in PES. First, it shows how corporations fit into the economic theory that underpins PES, demonstrating that corporate-financed PES schemes can exhibit a diversity and hybridity of Coasean and Pigouvian characteristics. Second, it shows how PES fits into corporate sustainability theory, demonstrating how PES can help companies achieve synergies across the economic, environmental, and social tenets of the triple bottom line; for example, by helping gain social license to operate from adjacent communities, or by using PES to meet sustainability reporting requirements related to emissions and water management. Third, it shows the different PES options available to firms based on their industrial sector, operating practices, and business strategies. The options with higher potential are maintenance and enhancement of production inputs across the supply chain, and carbon offsetting and insetting to help meet climate change mitigation regulations and avoid fines. Fourth, it identifies lessons learned when transitioning from theory to practice by synthesising the latest empirical research on corporate-financed PES schemes—considering exactly what these ‘should’ or ‘could’ resemble, for example, in terms of their additionality, conditionality, permanence, co-benefits, budgeting, and bargaining. Examples are drawn from corporate-financed schemes in forests and watersheds across Africa, Asia, Europe, Latin America, and North America. The article concludes that these schemes remain small in number and size, but have significant potential to increase—and this can be aided by future research on corporate motives, understandings, and actions on PES.