Investing in Nature for Economic Growth (Part I of II)
For many of us, the term “ecosystems” conjures up thoughts of environmental protection and restoration. While that is one part of the picture, this view misses the critical role that ecosystems also play in underpinning economies and the business sector. Ecosystem services—- the benefits that businesses and people derive from nature such as food, freshwater, pollination, and climate regulation— are the link between nature and economic development. This viewpoint enables governments and corporate leaders to move beyond a narrow mindset of protecting nature from economic development to focus on how to invest in nature for development.
Ecosystem services: the backbone of business
Resources underpin much of business activity, from product development and capital projects to operational resource needs. Most business sectors, from consumer products to agriculture to extractive industries, such as mining and oil and gas, depend on ecosystem services at some point in their value chain. Agriculture, for example, relies heavily on ecosystem services from requiring an adequate water supply, fertile soil, and pollination for nearly 75% of the world’s crop species. This reliance is especially pronounced in developing countries where agriculture contributes a larger share of economic wealth and where there is less social and economic resilience when ecosystems degrade or even collapse.
In 2005, the UN-led Millennium Ecosystem Assessment provided the first global snapshot of conditions and trends in ecosystem services. Involving nearly 1,400 experts from the private and public sectors, the Assessment made the startling finding that globally two-thirds of ecosystem services are already degraded due to a variety of human activities.
Since resource costs and constraints will likely continue to escalate along with growing ecosystem degradation, the world faces a critical need to improve resource efficiency. Several factors are adding urgency to this quest: a rapidly changing climate, a booming population which is headed to over 9 billion by 2050, and the growth of the global middle class. Together, these factors will further exacerbate pressure on ecosystems.
Emerging approaches to assessing the business risks
In response, governments, UN agencies, NGOs and businesses such as Syngenta, Dow, Mondi, and Akzo Nobel, have begun to factor in ecosystem service risks and opportunities.
At a recent event, hosted by the World Resources Institute, on corporate ecosystem valuation, Kyung-Ah Park, Managing Director of Goldman Sachs Center for Environmental Markets, underscored the business relevance of a world of depleting resources. “Almost all financial institutions are now concerned with this issue,” she said. “A healthy environment is the foundation for a strong and sustainable economy. A key challenge for us is to manage the competing human demands [on resources] without undermining crucial ecosystem functions.”
Such a message from a global financial services company is a sure sign that ecosystem services are rapidly becoming a mainstream business issue. So, too, is the recent decision of the International Finance Corporation to incorporate ecosystem services into their performance standards, which are adhered to by 70 other financial institutions that are signatories to the Equator Principles.
To help business address potential risks and opportunities, ecosystem service based decision-making tools are being developed. One such tool by the World Resources Institute, World Business Council for Sustainable Development and Meridian Institute, is the Corporate Ecosystem Services Review, used by over 200 companies to date, which provides guidelines for identifying risks and opportunities. Additional tools are being developed for product development and consumer product labeling to integrate life cycle assessment methodologies into ecosystem valuations.
Steps businesses can take to incorporate ecosystem services
Following are several key steps businesses may take to incorporate ecosystems services into their strategic planning:
- Assess ecosystem service dependencies and impacts (using tools if helpful) for operational needs, product offerings, and value chain considerations;
- Identify key ecosystem services and the resulting business risks and opportunities, and incorporate into business strategies if needed; and
- Monitor global policy trends and collaborate with policy makers and others when appropriate.
Looking Forward on Ecosystem Services
Below are a few highlights of where ecosystem services could be heading in the future.
–Strengthened science-policy interface. The creation of the new UN-led Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services may improve the links between emerging scientific knowledge and policy action at multiple scales.
–Integrated decision support tools and regulatory/policies. Further development and refinement of tools for Environmental Impact Assessments, Strategic Environmental Assessments, Life Cycle Assessments and NEPA analysis.
–Large scale restoration. An ecosystem services framing will help make the case for scaled up ecosystem restoration based on the benefits they provide to people.
–Public-Private Collaborations. Many businesses already work to adapt to ecosystem and climate change but the magnitude of change will require collaboration at an impactful and sustainable scale.
–Further proliferation of market based incentives. The world’s largest payments for ecosystem services market is in China, mostly for the agricultural sector. In the United States, the Department of Agriculture is fostering such markets, for example in nutrient trading for the Chesapeake Bay.
–Innovation. More innovative products and technologies will help sustain and enhance ecosystems along supply chains and product markets. Examples among consumer products include detergents that require less water and agricultural seeds that are drought tolerant.
To learn more, below are some of the numerous efforts occurring on an international, national, and regional scale.
- World Economic Forum
- Organization for Economic Co-operation and Development
- Millennium Ecosystem Assessment
- Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services
- United States Department of Agriculture
- United States Environmental Protection Agency
- World Business Council for Sustainable Development
- Business for Social Responsibility
- National Ecosystem Services Partnership
- World Resources Institute
Part II of this article series will focus on the agricultural sector.