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Ensuring Integrity in Impact Markets: How to Align Purpose and Profit

The Integrity Gap Problem

At Digital Gaia, we're dedicated to bridging what we call the "integrity gap" in impact markets.

Impact markets are a key aspect of the efforts to regenerate our planet because they allow companies to purchase credits for various environmental or social impacts. However, the integrity gap poses a risk to the credibility and effectiveness of these markets.

There are two ways the integrity gap can occur:

A credit is issued despite the impact not existing. For example, if a credit is issued for capturing CO2 from a forest, but the forest has since burned down, the credit is no longer valid.

A credit is issued for an action that is not actually beneficial. For instance, if a credit is issued for planting trees, but the trees are invasive and harm native species, the credit should not be considered as valuable.

Closing the integrity gap is crucial because it ensures the credibility and effectiveness of impact markets. If there is a lack of integrity in the credits being issued, it's hard for companies to trust that their purchases are making a positive impact.

To learn more about our approach to using technology, practitioner wisdom, and collective intelligence to address the integrity gap, check out our

Impact Integrity Manifesto⁠

The Business Model Alignment Problem

In addition to building a network of experts, farmers, and funders to create high-integrity impact certificates on our platform, we at Digital Gaia also need to consider another integrity gap of sorts, what we call “the business model alignment problem”. A sustainable business model is necessary to fund the development of our product and technology, and to provide a return to our investors. However, it's important that this business model aligns with our goal of ensuring integrity.

Let's consider an example of a misaligned business model. Imagine a company called Valida that aims to solve the integrity gap in impact markets. Valida's approach is as follows:

Valida establishes standards for what is required to receive a certificate.

Valida charges a percentage of the value of the certificate as payment.

There are two predictable issues with this approach:

Valida has no incentive to evolve their standards. If Valida were to change their standards, it would raise questions about the value of certificates issued under the old standards.

Valida has an incentive to certify as many certificates as possible, even if they are not of high integrity, because their revenue is based on the number of certificates they issue.

At Digital Gaia, we want to avoid these problematic incentives in our business model. That's why we have a different approach to solving the integrity gap:

Digital Gaia issues certificates with scores that continuously change based on the collective intelligence of our network.

Digital Gaia sells information to clients such as seed and solution providers, carbon offtakers, and agro insurance companies.

This approach gives us the following incentives:

The Digital Gaia Network can constantly evolve our standards. If new information arises that changes our understanding of an impact, the score of the corresponding certificate will be adjusted accordingly.

Digital Gaia has an incentive to collect and provide accurate information, as this is what our customers are paying for.

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