Buyer

AI-driven enterprise cloud software business IFS partners with Patch

A partnership to facilitate a 5-year offtake purchase of high-integrity carbon credits
Problem

IFS wanted to guarantee the supply and price of high-integrity, externally verified carbon credits over the course of several years to balance residual emissions from operations and business travel following the delivery of absolute emissions reduction initiatives.

Solution

Patch’s climate strategy and solutions team worked with IFS to meet their stringent criteria for carbon credits and structured an offtake agreement that ensures access to high-integrity carbon credits from a portfolio of projects featuring a blend of nature-based removal and engineered removal and avoidance technologies over a five-year period

The IFS Sustainability Strategy

IFS has been driving sustainability initiatives in its own operations and with customers through its market-leading enterprise platform, IFS Cloud, for many years. In 2022 it released a new sustainability strategy set around three key pillars. 

Within the “Excellence in our own business” pillar, one of IFS’ key priorities is decarbonization, where the absolute reduction of emissions is delivered through reductions in energy usage, replacement of carbon-intensive energy with low-carbon sources, and engagement with customers and suppliers to drive the transition to a low carbon economy. For residual emissions that IFS cannot yet reduce, it balances a portion of these through investing in high-quality carbon credits.

Science Based Targets

IFS set 2030 Science Based Targets – in 2023 IFS had these SBTs  validated by the Science Based Target initiative, widely considered the ‘gold standard’ for GHG emission reduction targets, committing to:

  • Reduce absolute scope 1 and 2 GHG emissions 42% by 2030 from a 2022 base year
  • Reduce absolute scope 3 GHG emissions from purchased goods and services, business travel, and employee commuting 25% within the same timeframe. 

Partnership with Patch

IFS began looking into the voluntary carbon market (VCM) in order to balance residual emissions from operations and business travel that remained after the delivery of absolute emissions reduction initiatives. After conducting a rigorous due diligence process, IFS selected Patch as a carbon credit partner for a number of reasons.

Firstly, IFS wanted to obtain carbon credits of the highest quality available at a reasonable price point - Patch’s vetted list of projects met the stringent criteria for selection including a requirement for external verification. Their credentials as a leading network for credits added another layer of security to the due diligence process. Secondly, IFS wanted to guarantee the supply and price of the required credits over several years given the volatility of the VCM and the expected spike in demand for certain types of credit. Patch’s offtake solution offers a fixed-price, fixed-volume arrangement that helps businesses lock-in pricing and supply of credits in the years ahead. Thirdly, IFS wanted to have more control over their project portfolio, supporting a range of project types and technologies, and the opportunity to see the positive impacts of investment in each project, which was possible thanks to the extended timelines of the offtake agreement compared to traditional spot purchase agreements.

“For sustainability to be truly sustainable it must make business sense. We worked closely with the rest of the company, especially the CFO, to model our anticipated carbon footprint and consider the best approach to balancing residual emissions through the VCM. This means thinking about risk mitigation, reputation management, anticipating market regulation, stakeholder demands and general resilience. With Patch’s support we chose a multi-year contract, providing certainty not just to the business in terms of quality and spend on credits, but also importantly providing certainty to the suppliers of those carbon projects through the longer-term investment.”  Sophie Graham, Chief Sustainability Officer at IFS.

Seeking expert advice in the Voluntary Carbon Market

Patch is building the platform to accelerate climate solutions, including modern software that helps buyers discover, purchase, manage, and monitor their climate impact, plus advisory services to help navigate the market. Patch supports buyers like Workday, Oliver Wyman and Autodesk with a global project network comprising hundreds of vetted projects across 25 technology types. 

Patch was referred to IFS by its network of partners, with the company looking for an independent advisor with experience across both the buy and supply sides of the market. At a moment of inflection for the VCM, they were looking to lock in access and pricing. The upside of this long-term offtake approach is that it saves time and effort over the life of the contract, but it raises the stakes of getting it right. The right partners and deal structure were critical to IFS.

Patch’s Offtake offering works like a traditional offtake agreement. Climate project developers get committed forward revenue. Buyers guarantee access to high-demand carbon credits at a locked-in price for years to come. The process is as follows:

  1. The Patch climate strategy and solutions team works with each client to take into account your ESG commitments, timelines, and budgets, as well as the Oxford Glide Path* principles, to craft a portfolio that fits your needs.
  2. The buyer finalizes the multi-year contract and secures access to credit volumes locked in at pre-negotiated rates.
  3. Patch ensures delivery of these credits on a year-by-year basis per agreed-upon terms.

Patch Offtake provided IFS with access to a five-year offtake contract without having to manage these directly with each project developer. Patch handled the complexity and the risk of sourcing, vetting, and constructing portfolios of high-integrity nature-based and engineered carbon projects that align to the IFS requirements, including selecting projects based in regions where IFS has significant presence.

“Research shows that demand for high-quality carbon credits, particularly nature-based removals, is likely to quickly ramp up in the coming years as more buyers enter the market affecting both the availability and pricing of credits from this type of project,” said Michael Batstone, ESG Climate Lead at IFS. “We are pleased to partner with Patch to curate a diversified offtake portfolio with projects that meet our quality criteria and fit our specified price points over a defined period of time - in this case, five years. This lets us hedge against risk and meet our commitments in a cost-effective, reputable way.”

A diversified portfolio to maximize impact

IFS’ Offtake portfolio comprises a mix of technologies, primarily nature-based carbon removal solutions such as reforestation and blue carbon via restoring coastal ecosystems, as well as some engineered carbon avoidance and removal.

“We were impressed with the breadth and depth of Patch’s knowledge and market experience,” said Batstone. “They were able to conduct and share detailed project information on areas that are important for us, such as additionality, permanence, and leakage, as well as bring in third-party ratings to give us confidence in our portfolio of projects – this level of transparency is really important to IFS.”

All purchases through Patch are issued a digital certificate that provides insight into the retirement of credits, giving IFS the visibility to manage and monitor its contribution. In addition, Patch Offtake includes de-risking elements: in the event that any particular project developer is unable to meet their commitment, Patch will substitute equivalent credits from another developer.

For the project developers, this locked-in forward demand allows them to grow faster and more predictably. They can raise capital based on advance commitments to more rapidly scale up their solutions. This is particularly important for emerging technologies where demonstrating scalability is paramount.

Scaling climate impact

IFS continues to focus on building a more sustainable business — extending its learnings, resources, and capabilities to its own customers, suppliers, and partners. It’s infusing sustainability into its product and operations, including an ESG Steering Committee, sustainability representative on the Board, and network of Sustainability Business Partners who help embed sustainability into the business by providing cross-functional resource and support to sustainability initiatives.

Graham concludes, “By embedding sustainability into our core business practices and our day-to-day decision making, it helps us ‘walk the talk’ and makes sustainability a collaborative and fundamental effort for our business.”

* The Oxford Principles for Net Zero Aligned Carbon Offsetting from Oxford University is a universally referenced resource outlining different types of carbon credits, and the importance of the role each type can play in a climate action strategy. Credits are differentiated on two axes: (1) emission reductions vs removal, and (2) short- vs. long-lived storage. Storage (or “durability ”) is a critical consideration, as it is critical to consider not only whether emissions are avoided and removed, but also that those climate impacts are lasting

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