The global climate crisis necessitates urgent action from various stakeholders, including private companies. Companies are increasingly adopting voluntary initiatives, such as investing in voluntary carbon offsets (VCOs), to reduce their carbon footprint and improve their environmental performance. Unlike mandatory compliance measures, VCO investments offer flexibility and broader participation. While previous research has examined the environmental integrity of VCO projects, there's a gap in understanding the motivations behind corporate participation. This study explores the driving factors behind corporate VCO investments and investigates how these motivations influence the prioritization of local co-benefits. The study's significance lies in its potential to inform corporate sustainability strategies and enhance the effectiveness of climate finance initiatives by understanding the interplay between corporate goals and project selection.

Existing literature has explored the use of VCO projects to achieve sustainable development benefits and reduce greenhouse gas emissions. Much of this research focused on the environmental integrity of projects, raising questions about their actual effectiveness. Other studies explored participation trends and perceptions of benefits, suggesting that social responsibility and climate change concerns are key drivers. However, these studies often lacked the data to provide conclusive insights into corporate motivations and decision-making regarding project selection and co-benefit prioritization. This study aims to address this gap by employing a mixed-methods approach combining corporate CSR reports and project-level data from the Carbon Disclosure Project (CDP).

This study employs a mixed-methods approach, combining qualitative and quantitative analyses to understand corporate motivations and co-benefit valuation in VCO investments. Qualitative data were obtained from corporate CSR reports (186 companies) and analyzed using content analysis to identify corporate motivations. A coding strategy was developed and refined through a pilot study, identifying three primary motivations: (1) Company Carbon Management and Efficiency, (2) Company Market Competitiveness, and (3) Company Values. Quantitative data from the Carbon Disclosure Project (CDP) on 534 offset projects purchased by the same 186 companies were used to analyze project characteristics, location, costs, and reported co-benefits. The datasets were linked using Nvivo 12, allowing the analysis of the relationship between corporate motivations and project characteristics. Statistical analyses, including t-tests, were conducted to examine the relationship between motivations, project types, and prices. The study also included a robustness check considering offset standards to ensure reliability of the findings. Data on company characteristics were sourced from Bloomberg.

The study identified three main corporate motivations for VCO investments: 1. **Company carbon management and efficiency:** Companies used offsets to meet emissions reduction goals cost-effectively (155 companies). 2. **Company market competitiveness:** Companies leveraged offsets for branding and public relations to enhance their market position (60 companies). 3. **Company values:** Companies invested in offsets to align with their sustainability and social responsibility goals (59 companies). The analysis revealed contrasting investment trends: * Companies driven by values and market competitiveness were more willing to invest in higher-cost projects with significant local co-benefits. * Companies focused on carbon management and efficiency preferred lower-cost projects, especially renewable energy projects. The study found that local co-benefits were a crucial factor influencing project selection. Companies explicitly mentioned benefiting local communities as a top criterion in their CSR reports, often selecting projects in low-income countries with a focus on community-based initiatives and improvements to quality of life. Investment flows were mapped, demonstrating alignment between corporate commitments in CSR reports and project locations. Analysis of project descriptions revealed a strong emphasis on local community engagement and the generation of various co-benefits (job creation, environmental improvements). Statistical analysis confirmed the hypotheses: companies motivated by emission reductions prioritized cost-effective projects, while those motivated by non-emissions related impacts were willing to pay premiums for projects generating co-benefits. Significant differences in project type preferences were found across the three motivation groups, particularly for higher-priced project types (household devices, forestry, and chemical processes), with the value and market-competitiveness motivated companies investing more in them. The analysis of offset standards revealed similar trends; companies motivated by values and market competitiveness invested in higher-priced standards with added co-benefits features while efficiency-focused companies preferred lower-priced standards.

This study's findings contribute significantly to the understanding of corporate motivations in the VCO market. It demonstrates a clear link between corporate goals (emissions reduction, market competitiveness, and company values) and the types of VCO projects selected, emphasizing the importance of local co-benefits. The identification of contrasting investment trends based on pricing signals sheds light on the heterogeneous preferences within the corporate sector. The study also addresses concerns about the lack of integration of co-benefits in VCO projects, highlighting the need for market mechanisms that appropriately value these social and environmental impacts. The results resonate with the broader discussion on the role of voluntary initiatives in addressing environmental challenges, suggesting that these initiatives can serve as catalysts for innovation and creative solutions. While the study primarily focused on corporate behavior, its implications extend to policymakers and stakeholders in the development of more effective climate finance strategies.

This study provides a comprehensive framework for understanding corporate motivations in voluntary carbon offset investments, highlighting the dual pursuit of financial and social returns. The findings confirm that corporate motivations significantly influence purchasing behavior, with companies prioritizing either cost-effectiveness or co-benefits depending on their primary goals. The study demonstrates the importance of local co-benefits in attracting investments and calls for market mechanisms that better integrate these values. Future research could focus on longitudinal studies to track changes in corporate behavior over time, explore companies without CSR disclosures, and develop more sophisticated choice models to refine understanding of decision-making processes.

The study has several limitations. The reliance on self-reported data from CSR reports may introduce biases. The analysis was limited to data from a single year (2017), and the lack of standardized CSR reporting formats could have influenced the coding process. The exclusion of companies that did not disclose offset investments limits the generalizability of the findings. Future research should incorporate more diverse data sources and address these limitations to obtain a more complete picture.